The latest Small Business Index from the Federation of Small Businesses has revealed a North-South divide in business confidence.
The FSB Small Business Index for Q4 2015 shows a growing gap in confidence between businesses in Scotland, North East England and Wales and those in the Midlands and the South of England.
While there is good news for the UK as a whole in terms of job creation, increasing revenues and improving productivity, firms in the North East of England, Scotland and Wales risk being left behind according to the FSB.
In Wales, confidence has dropped into negative territory for the first time in two years. In Scotland, confidence levels are at their lowest levels since the start of 2013. Elsewhere the FSB reports that confidence levels have remained stable, supported by the technology and business/professional sectors.
John Allan, FSB national chairman, said: "A clear divide in confidence is now emerging across different parts of the UK, with businesses in the South and in sectors like technology and professional services feeling more positive about 2016. The recent flooding is likely to further weigh on business confidence in the North."
However, overall confidence across the UK remains in positive territory standing at 21.7 points, 4.1 points higher than Q4 2014. Nearly two-thirds (59%) of businesses anticipate growth relatively unchanged from the last quarter, with 24% reporting a growth in revenue in the past three months, the highest since 2010.
The Small Business Index has also highlighted the main concerns that small firms face in 2016. These include the rollout of auto-enrolment, the new National Living Wage and changes to taxes on dividends.
Allan said: "Members are also deeply worried about proposed mandatory quarterly tax reporting, which in its current form will add to the administrative burden of small firms and the self-employed."
He concluded: "Although confidence is patchy across the UK, small businesses continue to show they are resilient, leading the way on employment growth and productivity."