Small business confidence in the UK has plunged to its lowest point outside of the Covid-19 pandemic, as revealed by the Federation of Small Businesses’ (FSB) Small Business Index (SBI) for Q4 2024.

According to a report on Asset Finance Connect, the SBI confidence reading dropped to -64.5 points, a decline from the previous quarter’s -24.4 points.

This 40.1-point drop marks the lowest confidence level since Q1 2020 when the pandemic caused a steep decline to -143.4 points.

The reduction in confidence was observed across all major sectors, with none reporting a positive outlook.

The accommodation and food services sectors recorded a historic low of -111 points, with the wholesale and retail sectors standing at -94.2 points.

Meanwhile, entities in the professional, scientific, and technical activities sectors were the least pessimistic, with a reading of -40.1 points.

The construction sector experienced the most significant decline, dropping from -26.6 points to -76.8 points between Q3 and Q4.

The report highlighted that the domestic economy remains the top barrier to growth, as cited by most respondents.

Tax burden emerged as the second most significant challenge, with more than 43% of small businesses identifying it as a major concern.

Labour costs were a more pressing issue in the UK (42%) compared with London (31.5%).

Consumer demand, typically ranked second or third, slipped to fourth place, cited by 28% of small companies.

The FSB report predicted ‘subdued’ growth, with more than 43% of small businesses expecting growth in the next 12 months, down from over half in the previous survey.

As reported by CityAM, FSB policy chair Tina McKenzie said: “The fourth quarter blues reported by small firms underline how urgently the government’s growth push is needed.”

She noted that small businesses are understandably nervous about their prospects as 2025 begins, highlighting the Employment Rights Bill as a significant concern.

A previous FSB report indicated that 90% of small companies were worried about the Employment Rights Bill.

McKenzie emphasised that the Spending Review, concluding in June, should prioritise programmes that promote small business growth.

She explained: “[This bill will] bring together the different strands of support and reform needed to give people dreaming of starting their entrepreneurship adventure the confidence they need to go for it, and to help people running small enterprises and in self-employment to expand and fulfil their potential.”  

She also suggested that the King’s Speech later this year should include a Small Business Bill.