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SMALL BUSINESSES SHOWING INCREASED CONFIDENCE
Small businesses look set to continue helping economic growth, as confidence reaches record levels By John Allan
OUR latest Small Business Index (SBI) reveals that small businesses are in a robust mood. Small business confidence has picked
up markedly in the second quarter, with growth and investment intentions reaching new highs since the index began in 2010. With few negatives in the overall picture, the latest survey readings on job creation, productivity and investment all bode well for small businesses sustaining the economy’s growth through 2015. Findings in this latest research show
that businesses view their prospects for the coming months very positively. Nearly two thirds (65.3%) of small businesses aspire to grow moderately or rapidly in the next three months – the highest figure ever seen in the SBI.
of firms planning to invest in their business. Nearly one third of businesses (32%) plan to increase capital investment over the next 12 months. The balance of firms that have employed new staff in their firms has risen to 8.9%, a sharp increase from 2% reported 12 months ago. While the overall mood of businesses
shows confidence steadily returning to the economy, the survey results continue to suggest that the recovery is not taking grip equally across the country. The South East continues to dominate
in business confidence, followed by the West and East Midlands. Wales has seen a fall in confidence, with a fall in employment, and confidence figures are also lower in Scotland than the UK as a whole.
While the overall mood of businesses shows confidence steadily returning, the survey results continue to suggest that the recovery is not taking grip equally across the country
As a result of their desire to grow,
productivity is increasing compared to the wider economy. This should be encouraging to policymakers, who have been grappling with the issue of low productivity growth for some time. Our Productivity Index shows that
annual output per hour for workers rose by 1.4% year-on-year in the fourth quarter of 2014 among small firms, compared with 0.3% in the economy as a whole, the latest period for which comparable data are available. The levels of spare capacity – an important factor in interest-rate decisions – have dropped from a balance of 47.7% to 40.7%. In further good news, this quarter’s SBI shows the highest ever number
July 2015 Businesses also remain concerned
about the cost and availability of workers with the right skills, with 35.4% saying this is a barrier to growth. Other key findings include:
t Confidence levels remain steady at +37.9, up from +28.7 in the first quarter of 2015 although slightly down from the all-time high reading of +39.7 12 months ago. t Small businesses’ revenue and profits are on the rise. A balance of 24.1% of firms report increased revenues and a balance of 17.4% reported higher profits. t Small business wage increases are now in line with the economy overall, with an average increase of 1.9% – the
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highest ever recorded in the SBI. t There has been a reported rise in small firms who are exporting – 28.6% report, this quarter, to be exporting, up from a consistent 25%. t The index finds the chances of being approved for credit increase as business size increases. In total, 63.3% of small businesses with over 50 employees were successful compared with 45.8% of sole traders applying for credit. The results of the second quarter’s
SBI are very positive and show the major role that small businesses play in the growth of the UK’s economy. It is critical the new government
continues to develop the right environment to support businesses planning to grow, invest and take on new staff in the next 12 months. In the Budget and its upcoming
Enterprise Bill, ministers should prioritise supporting small business growth, simplify business taxes, raise skills and tackle poor payment practices. CCR
John Allan is national chairman of the Federation of Small Businesses
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