Small firms expect growth in the new year

Tuesday 16 December 2014

Small businesses are feeling positive about growth going into the new year. For limited companies and people who are thinking about setting up a business, it appears that 2015 could be a good time for them.

According to research from the Federation of Small Businesses (FSB), 62 per cent of small firms think their business is going to grow during 2015.

It seems that, overall, businesses are less confident than they have been in previous quarters. The Small Business Index from FSB held at 17, which is lower than previous quarters although still a positive result. In spite of this, small businesses say they do intend to hire more staff, increase their exports and grow their business during the first three months of next year.

Supporting this positive outlook is the growth in productivity that has been seen. During the second half of 2014, productivity among small firms went up. By the fourth quarter of the year, it was rising by 1.1 per cent.

FSB stressed that this movement is good for the economy and also for workers as increases in productivity tend to link to wage growth.

During the last three months of 2014, 16 per cent of small businesses hired more staff while ten per cent reduced the numbers that were employed.

The sector that showed the strongest level of confidence was IT. Meanwhile, confidence rose fastest in health and social work and transport.

It was in London, the West Midlands and Eastern parts of England where confidence grew most compared to the last quarter of 2013.

National chairman of the FSB John Allan said: "All the signs show that as we head into the New Year small businesses are expecting to grow and take on new staff. But to achieve these positive ambitions small firms will need certainty in the domestic economy including interest rates."

There are still some barriers to growth and it appears that the issue of finance if getting worse. The FSB found that 22 per cent of businesses saw the cost of finance as a barrier to growth, which is up from the ten per cent recorded during the final three months of 2013.

It noted that the cost of finance was a more acute issue for the smallest businesses and that only 11 per cent of firms with no staff said that they find credit affordable. Within companies that have 51 or more staff, 44 per cent said that credit is affordable.

The FSB suggested that this shows a need for the government to continue support for small businesses, such as through schemes like Funding for Lending.

Mr Allan added: "There are signs that more support could be needed. The perception of increasing cost of finance, and further warnings of a downturn on the continent, demonstrate that Ministers need to continue to do all they can to support small firms. Building on extensions to schemes like Funding for Lending, the Employment Allowance, and recently improved business support programmes are crucial to this."

By Victoria McDonnell

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