Small Business Index Shows Optimism for 2013

FSB Small BusinessIndex Q4 2012Research from the Federation of Small Businesses (FSB) shows that UK SMEs are more confident than this time 12 months ago about the year ahead.

The FSB’s Voice of Small Business Index measures confidence in the SME sector and the figure for Q4 2012 is down on Q3 of 2011 when the UK entered a double-dip recession.

However, this year the FSB’s Small Business Index for Q4 of 2012 shows a rise of 18.8 points over Q4 of 2011.

The FSB’s Small Business Index has apparently proved to be a good indicator of GDP so, coupled with recent reports of slow growth forecasts for 2013, the fact that UK small businesses are "cautiously optimistic" is a positive start before the new year.

Underneath the headline of a slightly beneficial small business attitude there are still some causes for concern.

Income is still being "squeezed" and this is affecting the domestic economy. Lacklustre consumer spending is cited as a barrier to business growth for two thirds of SMEs polled in the Small Business Index.

Small Business Banking

Small business finance is also a sticking point as fewer firms apply for loans, however, the silver lining to that issue is that a greater proportion of applicants are being accepted.

In Q3 of 2012 the number of small business loans being approved was 42.8%

Q4 of 2012 sees that figure rise to 49.3% meaning that either lenders are more willing to provide funds to SMEs or that small businesses are getting better at meeting the lending criteria.

Fewer than 10% of respondents to the FSB’s Small BUsiness Index say that commercial credit is easily available. This has prompted the FSB to say that they want the new British Business Bank to invigorate competition in the SME banking sector.

John Walker, National Chairman of the Federation of Small Businesses, said of the measures:

"While more small firms have been accepted this quarter, it is clear from our research that others continue to struggle. Previous recessions have shown that demand for finance is at its highest during the recovery stage."

12 Months of Investment

Walker also used the intro to the "Voice of Small Business" Index to praise the Chancellor, George Osborne’s, Autumn Statement, particularly the cancelling of the January fuel duty increase and the raising of the Annual Investment Allowance.

Walker stated that finance is an absolute priority for UK small businesses if they are to get ahead in the coming year and by allowing small firms to invest up to £250,000 in their ventures without paying tax should be enough of an incentive to spur SMEs to bring forward or draw up new investment plans.

The FSB’s caveat for 2013 still remains – there needs to be certainty for small businesses in the year ahead, especially for road-users and that inflationary pressures still remain as a threat to wages, consumer spending and energy prices.

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