SME confidence hits highest levels for three years

Confidence among small and medium-sized businesses stands at its highest level for three years, says the Federation of Small Businesses (FSB). The Federation’s Confidence Index, which measures responses from 2,000 owner managers on a quarterly basis, found that four in ten had experienced increased revenues during the previous three months, and that confidence was improving in almost all sectors across the UK.

The Confidence Index assesses whether SME business owners say they feel their business prospects have improved or worsened during the quarter. The figure for the third quarter of 2013 was +33.5, beating the previous high of +18 recorded in the first quarter of 2010.

“Optimism, growth and confidence can be used to summarise this quarter’s findings,” said John Allan, FSB national chairman. “Following from the Chancellor’s speech on the state of the economy, small firms are clearly helping the economy gain momentum compared to the same point last year.”

A quarter of firms expect their export sales to grow in the next three months, according to the survey, while a fifth of companies plan to increase their capital investment in the next twelve months – that’s a 100% increase compared to the same quarter in 2012.

Meanwhile, the proportion of firms that said they now planned to expand operations rose to 54.2%, up from 51% in 2012. There are also signs this confidence is boosting the job market, as 3.4% of firms reported increased staffing levels.

Just 3.1% of respondents said they expected prospects to get much worse over the coming three months.

The findings add further weight to the opinion that the UK is returning to sustained growth after the recession, and demonstrate the power of the SME sector in providing further momentum to aid recovery, according to Allan.

“The economy needs to have confident small and big businesses to make sure jobs and wealth are being created for the UK,” continued Allan. But at the same time, businesses need to have confidence in the economy to take the risk to create jobs and invest. “With more firms looking to grow rather than downsize, it’s clear these feelings are returning. Government needs to build on this and the Autumn Statement is the right time to do that.”