New research shows that small businesses are more optimistic about the coming year.

Tuesday 12 March 2013

Limited companies and sole traders are among the small businesses becoming more confident about 2013, new research shows.

Confidence has risen across eight regions, according to The Federation of Small Businesses’ (FSB) Voice of Small Business Index. Although businesses in the South East reported a drop in confidence, levels still remained comparatively strong. The winner was by far the North East, which saw a leap to +15 points compared to -9 in the same quarter of the previous year.

Overall, the Index saw a sharp increase in confidence from -5.6 in the final quarter of 2012 to +6.3, while year on year it was the IT and business services industries that saw particular rises.

In contrast, agriculture, hospitality and construction were the chief sectors to become more pessimistic.

Whatever their outlook, though, most face the next few months with a level of caution, since the index showed a drop of two percentage points in the proportion of businesses anticipating growth.

Broader concerns about the state of the UK economy played their part in the fall, as well as the accompanying drop in demand, but one of the key concerns for many small businesses was access to funding.

FSB has noted these worries in earlier statements, having previously said that it hoped to see small businesses placed squarely at the heart of the chancellor’s next budget.

Year-on-year, the report indicated a drop in the number of firms both applying for and being accepted for business loans, with each having fallen by three percentage points.

Companies that could gain credit, however, did so more cheaply. Nearly four-in-ten found interest rates of less than four per cent, indicating that hope may yet be forthcoming from the Department for Business, Innovation and Skills’ Funding for Lending scheme.

Specific industries are reporting more positive outlooks as well. The Chartered Institute of Marketing’s survey on professionals in the marketing industry found that almost four out of ten had more faith in their businesses to meet targets for financial gains and growth than at the same time last year.

Again, nationwide economic worries hampered respondents’ expectations, with consumer spending projected to fall during the remainder of the year. As a result, many companies are opting for lower risk strategies over 2013. Less than half were looking to find new customers, while three out of four said their firms currently preferred to consolidate and upsell to their existing customer bases.

Even so, the report’s findings are far from discouraging, reporting an overall rise of 1.5 index points on its confidence scale since October last year.

Encouragingly for sole traders and limited companies, marketers in the very smallest businesses are much more positive than those in larger firms. In micro and small businesses, 45 and 42 per cent respectively reported increased confidence, compared to a third in bigger businesses.

Smaller business workers also rated their job security and career prospects more highly, as well as having better expectations of their access to funding.

On the whole, although small businesses are under no illusions about the difficulty of their task, they appear to be increasingly confident in their own ability to fulfil the realistic goals they are setting for themselves.

By Victoria McDonnell

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