Growing optimism amongst small businesses

Small businesses in the UK are showing signs of growing optimism ahead of the Chancellor's 20 March Budget, a report from the Federation of Small Businesses (FSB) has found.

The Voice of Small Business survey, which questioned 2,686 people in the first quarter of 2013, found that business confidence increased from a negative reading of -5.6 in the final quarter of 2012 to +6.3 in Q1 of 2013.

However, while business confidence has increased, investment intentions have fallen, with the stalling domestic economy and access to finance cited as the biggest barriers to growth.

The FSB said businesses are also exercising 'tentative' caution, with 54 per cent expecting to see growth this year; down by two per cent year-on-year.

Other key findings in the report include:

  • The falling cost of businesses finance: 38.6 per cent of small firms that applied for finance received interest rates of less than four per cent - up from 25 per cent in the same quarter last year
  • Firms expect to marginally increase staffing levels over the next three months
  • Financial and business services firms remain the most optimistic about the business environment, while retailers and manufacturers expect conditions to deteriorate
  • Rising fuel (56 per cent) and utility costs (51 per cent) were cited as the main drivers of increasing business costs. 

John Walker, the FSB's national chairman, said:

"It is great news that confidence is beginning to edge up and is back in positive territory. This bodes well for GDP figures for Q1 and we would expect them to be better than the -0.3 per cent recorded in Q4 2012. However, we know that inflationary pressures are likely to persist in 2013, especially through rising energy bills and fuel costs and this will affect disposable incomes."

The FSB are calling for the Chancellor to use Budget 2013 to put firm plans in place for the Business Bank and create alternative lending channels for smaller businesses.