By Max Clarke

Managers of British SMEs are divided in their views on business prospects for 2011 between those forecasting a better or worse year than 2010

35% of respondents in a poll of decision-makers in 500 small and medium-sized businesses commissioned by TheCityUK, the independent body promoting UK-wide financial and related professional services, see their business prospects for 2011 as broadly similar to their experience of 2010.

29% of respondents see 2011 as more promising than 2010 (24% slightly better and 5% much better) while 34% see 2011 as less promising (26% slightly worse and 8% much worse).

Respondents in the Midlands were most optimistic, with 37% predicting a better year than 2010 compared with 29% nationally. Respondents in the North of England are most pessimistic with 40% forecasting a worse year in 2011 compared with 34% nationally. 16% of respondents in the East of England predict a much more difficult year compared with 8% nationally.

Separately the survey reveals that pressure on profit margins and this month’s increase in the top rate of VAT to 20% are seen as the biggest threats to business prospects for 2011. 43% of respondents saw reduced margins and profitability as an issue, with 17% seeing it as the key risk. Higher VAT concerned 39% of respondents, with 15% considering it to be the key risk.

Chris Cummings, CEO of TheCityUK, comments:”Our survey findings reveal ongoing uncertainty for small businesses in the UK after a difficult 2010. The Government’s pledge to reduce corporation tax and the increased availability of bank finance go some way to relieving the pressure but the performance of the underlying economy remains a significant concern for a vital sector which employs over 13 million people.”