Encouraging outlook shows potential for growth in 2014, says FSB

THE  UK’s small firms are showing increasing optimism about the economic outlook for 2014. Latest research suggests that small businesses want to grow and are finding access to finance a little easier, according to the Federation of Small Businesses’ (FSB) Small Business Index.

Small businesses are looking forward in 2014

For the fourth consecutive quarter, the Small Business Index measure of confidence among small firms has grown year-on-year, up 27.2 points from -5.6 in Q4 2012 to +21.6 in Q4 2013. Encouragingly, this optimism is also replicated in every region of the UK and in each business sector.

This increased confidence means more small firms are planning to invest in and explore the global trade market. New data shows businesses expect to see rapid or moderate expansion in the next 12 months. Alongside this, one in 10 businesses report running above capacity while a third are running at full capacity – both the highest figures since the Small Business Index began in 2010.

Feeding into expansion plans, capital investment intentions continue to rise with almost a quarter (23.1%) expecting to invest in the next year. Businesses also want to take on more staff – perhaps ahead of the Employment Allowance which comes into force in April 2014. And, with FSB members polled prior to the Autumn Statement, where a further incentive to take on young people was provided, more could be set to invest in new staff.

Encouragingly, the number of firms refused their credit application is the joint lowest share since the start of 2012. While only 16 per cent of respondents had applied for credit in the quarter, reported rises in turnover and profitability, as well as stronger growth aspirations, means businesses could be paying for investment out of existing sources of capital.

Those businesses accepted for finance continue to report cheaper interest rates being charged, a direct result of Funding for Lending (FLS). The FSB hopes the re-allocation of FLS funds to SME lending will mean the banks make finance available to more small firms.

David Knowles Leak, Thames Valley Regional Chairman, Federation of Small Businesses, said:
“Confidence has been in positive territory for a full year, giving economic growth solid foundations moving into 2014. Small firms are creating more jobs and investing in their business and there are encouraging results behind the headline figures, with promising trends evident across the main areas of expansion, investment and employment.

“Government must not be complacent – helpful initiatives were announced in the Autumn Statement, particularly on business rates. This, alongside the refocusing of Funding for Lending should continue to keep small firms in the spotlight. However a sustained recovery is perhaps some way off as the worldwide economy remains uncertain.”