Small businesses across the UK are increasingly confident about economic prospects, according to the Federation of Small Businesses Voice of Small Business Index. The index rose to 15.9 in Q2 2013, its highest level since Q1 2010 and a fifth consecutive year-on-year increase. The rise in confidence has been felt across the UK as a whole, with the Small Business Index for every region now standing in positive territory, and higher than in the same quarter a year ago.
In line with this growing confidence, firms became increasingly optimistic about turnover prospects. A positive balance of firms expect turnover to improve over the next three months, after it remained largely stable in the last quarter. More small businesses are looking to grow over the coming year, and fewer are expecting to downsize. Although small companies reported reducing staff levels over the past quarter, a positive balance expect employment to increase over the next three months.
The improvements in economic sentiments are not universal however. Small retailers, in particular, continue to struggle and although firms report that credit is cheaper now than a year ago, many are still struggling to access finance. Fewer firms applied for credit this quarter than the same time a year ago, and the success rate for applications has fallen.
Charles Davis, Head of Macroeconomics at Cebr, said: “Good news for the UK’s jobless came as small businesses expect to increase their staffing levels over the coming three months. If the planned expansion is realised, this job creation will help to offset planned cutbacks in public sector employment in 2013.
“In addition, capital spending growth is projected by a greater balance of small businesses, which could help to provide a sustainable investment-led recovery and help the UK economy reach the Office for Budget Responsibility’s (OBR) investment growth forecast of 1.9% in 2013.”
John Allan, FSB National Chairman, said: “Taken together, the overall picture is improving but as the report makes clear, risks do remain for the economy and our members. As the report shows, inflationary pressures are continuing, squeezing margins. While these pressures are not as high as those seen in late 2011 and early 2012, pressures have nonetheless slowly risen from Q3 2012. Alongside utility costs, labour, rent and input costs (due to the weak sterling exchange rate) are all higher now than 12 months ago. And while most sectors have picked-up, it is noteworthy that retail businesses continue to struggle compared to other sectors, confirming the high street still faces considerable challenges ahead.”
For more information and a copy of the report, please visit the FSB website.