Small UK business owners are eyeing up revenue, jobs and export growth this spring, a new report has found, helped by lower inflation and progress on Brexit.
The latest Federation of Small Businesses (FSB) Small Business Index (SBI) found that more than seven in ten firms expect their performance will either improve or remain the same over the next three months. Only 27 per cent lack confidence about the coming quarter.
The quarterly measure reached +6 in the first quarter, up from -2.5 in the fourth quarter of 2017. The SBI fell in every quarter of 2017, dropping into negative territory for only the second time in five years during the final three months of the year.
More than two thirds of firms, 67 per cent, reported that their revenues are either stable or increasing. The proportion of firms planning to increase investment hit a two-year high at 33 per cent with half of small businesses expecting to expand operations over the coming 12 months.
International traders also remained bullish, with the share of small exporters expecting global sales to increase over the coming three months at a one-year high of 42 per cent. Small firms are also continuing to hire with the proportion reporting a steady or increased headcount at its highest since summer 2016.
Manufacturers and professional services and scientific firms were the most confident with retailers and accommodation and food services businesses the most pessimistic.
“After a 2017 dogged by spiralling prices and political uncertainty, it’s good to see small business confidence back in the black. The resilience of the small firms and self-employed entrepreneurs that make up 99 per cent of UK businesses has lifted economic forecasts for the coming 12 months,” said Mike Cherry, FSB National Chairman.
“We’ve campaigned for an end to the £14bn late payment crisis, reform of the regressive business rates system and an overhaul of VAT, so it was good to see the chancellor address these challenges at the Autumn Budget and Spring Statement.
“Positive commitments from the chancellor, along with agreement on a Brexit transition period and falling inflation, should make it easier for small business to plan, invest and grow in the months ahead.”
Cherry admitted however that the picture was “mixed” with consumer facing firms still trying to keep their heads above water after a year of customer belt-tightening and business rates hikes.
“As a labour-intensive industry, small firms in the retail sector will disproportionately feel the impacts of a rise in the national living wage and auto-enrolment contributions next month,” he warned.
Indeed, the domestic economy remains the biggest barrier to small business growth, with more than half of firms raising it as an issue. Consumer demand, the regulatory burden and labour costs were the other most frequently flagged barriers to growth among small firms.
Cherry added: “As Brexit negotiations progress, the government needs to remember that it’s economic growth, consumer demand and labour costs here at home that are on the minds of small business owners day to day.”
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