FSB: Confidence up among SMEs

Tuesday 17 March 2015

Small businesses appear to have gone into 2015 feeling confident, according to the first quarter results from the Federation of Small Businesses' (FSB) Small Business Index.

Indeed, limited companies, sole traders and other small business owners have seen the benefits of a number of movements in the economy. Current economic conditions are good and business costs are lower, which small firms are using as an opportunity to hire more staff and invest more money.

The Small Business Index shows that confidence levels are 28.7 points up, which is 11.1 up on the last quarter. Although confidence is robust, it is slightly lower than the same period 12 months ago when the index measured at 35.7.

More small firms have been increasing their headcount, resulting in a net balance of 4.2 per cent having done so over the last three months. This is up from a net balance of 2.1 per cent, which was recorded a year ago.

What's more, businesses have been able to reward staff by raising their pay. The results suggest that this increase in pay packets has been aided by rising productivity growth. Accommodation and food, manufacturing and construction are the sectors where pay has risen most.

Low inflation levels have also helped businesses' bottom lines. Results show that the lowest ever proportion of businesses are reporting a year on year increase in costs. Currently, this proportion is 44.4 per cent, which is down from 60.3 per cent during the first quarter of last year.

This low inflation has also encouraged more consumers to spend with these businesses as they have more money available to do so, which has helped to boost confidence.

In spite of these positive results, businesses do still face some challenges. For example, the skills shortage is one areas that continues to hamper growth. Thirty-seven per cent of respondents said that employing someone with the right skills is a barrier to growth for their business. This figure is up considerably from 12 years ago, when a figure of 25.4 per cent was recorded.

Additionally, exporting is an area that is proving challenging for small businesses as trading conditions in Europe remain tough. In spite of this issue, businesses are still feeling optimistic about their prospects to increase exports over the coming months.

Commenting on the results of the latest FSB Small Business Index, national chairman of the FSB John Allan said: "Our latest results once again paint a positive picture for small businesses with confidence amongst members remaining high, and nearly all the major indicators heading in a positive direction. The Small Business Index shows that lower business costs are enabling employers to hire new staff, showing the substantial impact small firms are having on growing the UK's economy. It is also incredibly encouraging to see the banks approving more credit for small firms, suggesting we may have finally turned a corner on this front."

Mr Allan said that the skills shortage is a concern as staff members with the right skills are crucial. He said that these workers are "critical" for getting the UK to close the productivity gap.


By Victoria McDonnell

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