The Federation of Small Businesses' (FSB) measurement of business confidence has slipped by 2.2 points between Q2 and Q3 2021, falling to 16.4, the second consecutive quarterly fall of the small business index (SBI).
Among businesses looking to grow, the majority cited the state of the domestic economy as the main potential barrier to growth (54.6%), with 69.5% reporting higher costs compared to Q2.
Just under half of businesses said resources used to create goods and services were the main driver of rising costs, while 37.3% reported fuel and utilities as the main contributors.
This and rising National Insurance and dividends taxes, as well as a 6.6% increase in the national living wage, may cause one in four to recruit less or reduce existing worker hours.
In a joint statement, Mike Cherry and Martin McTague, chair and vice chair of the FSB, said policymakers need to act now "if we're to avoid a third straight quarterly decline in small business confidence".
At a recent speech at the CBI conference, Prime Minister Boris Johnson suggested his Government will be able to tackle the problems businesses currently face, saying:
"I'm not going to pretend everything is going to be plain sailing, but don't forget it was only last year [economic forecasts] were saying we would see an unemployment crisis on a scale not seen since the early 1980s ... we [now] have the number of people back at work at pre-pandemic levels."
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