Business confidence among smaller companies is returning, with falling costs and an improving economy taking the pressure off entrepreneurs, research has found.
The Federation of Small Businesses said that owner-managers increasingly had the confidence to take on new staff, grant pay increases and approach banks for finance to expand.
The employers’ group said that its Small Business Index had grown by more than 11 points to 28.7 over the past quarter. Although this is slightly lower than during the same period last year, the FSB said confidence was “robust”.
The study found that low inflation appeared to be providing a boost to companies’ bottom lines, with the proportion of businesses reporting a year-on-year increase in costs at a five-year low.
Despite growing confidence, smaller companies are still struggling with skills shortages. More than one in three (37 per cent) of businesses said that an inability to find people with the right skills was proving to be a barrier to their growth, up from only a quarter who said the same thing 12 months ago.
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In a blow to the government’s aspiration to get more companies trading overseas, the FSB warned that increasing exports was proving difficult because of muted confidence in Europe amid fears over the Greek debt crisis.
However, John Allan, national chairman of the FSB, noted that “nearly all the major indicators [are] heading in a positive direction”.
For example, the number of companies that successfully applied for a banking facility over the past three months has increased to 57 per cent, up from 45 per cent a year ago.
Mr Allan said: “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.”
A separate report last week revealed that Britain had pulled ahead of France and Germany in terms of start-up rates and business aspiration.