The British economy is due to shrink in 2023 according to the International Monetary Fund, the only major economy in the world to do so. And this negative outlook is shared by small businesses across the North West and Cheshire.

Confidence of small businesses plummeted to similar levels of the COVID lockdown during the last quarter of 2022.

The Small Business Index (SBI)'s headline confidence figure in Q4 of 2022, fell to -46 points, which was a fall from -36 for Q3, which was the lowest finding since Q4 2020.

Darren Shaw, the FSB Cheshire and Warrington Area Leader said "There's no way to sugar-coat these figures – small businesses' confidence is at its third-lowest level since we started tracking it nearly a decade ago. But business owners are resilient and where there is a will, we will find a way through."

Some sectors confidence was worse than others however, with retail businesses and hospitality companies both registering low scores in confidence.

And Mr Shaw believes this is because of a multitude of reasons which are catching up on companies. He said "clearly, falling consumer spending, inflation, and high energy bills are all taking a toll, and poor results after the golden quarter are particularly disappointing."

However, he was bullish about some of the opportunity and role that small businesses have. He said, "This should also be a time to grasp the nettle and be decisive in finding more ways for the economy to grow, which is why we have drawn up a plan of action for the Government to implement."

It wasn't only business confidence, which was affected however, with small businesses reporting a drop in revenues (43%) than companies reporting profits (33%). Their outlook for the next quarter, reflected the current poor outlook, with 44% expecting to see a drop in revenues.

There was some positivity for employment. One in seven small businesses believed that they will be increasing their workforce, with one in ten, anticipating a fall in staff levels.

Mr Shaw added "Small businesses are always the engine room of any economic recovery. The more rapidly small firms pull through, the more rapidly we can all recover. Helping more people into work, tackling late payment, driving energy efficiency, powering R&D and getting more people to start up on their own are all initiatives that will make a real difference to the economy – just as small business owners individually will continue to demonstrate the ingenuity they showed during the pandemic to find new markets and new ways of working. Small firms are a fantastic national resource of innovation and creativity – especially if given the right conditions to flourish. These results are incredibly worrying, yes, but they are not the final word."

Inflation continued to take a toll on small businesses, with nearly two in five saying costs were significantly higher (38%) than in the same period a year prior. Utility bills, including energy, were cited by over three in five small firms as a driver of their change in costs (61%).

Late payments are still holding back a significant number of small firms, with three in ten small businesses (30%) saying their payment situation had worsened over the previous three months.