By Daniel Hunter

New research from the Federation of Small Businesses (FSB) shows confidence is creeping up for small businesses in the North West.

According to the FSB’s ‘Voice of Small Business’ index — the measure of confidence in the sector — firms in the region are displaying cautious optimism heading into the New Year, compared to the same period of 2011.

Overall, the FSB’s Small Business Index in the North West rose by two points, from -5 in 2011 to -3.

This compares favourably to small business confidence in London, which fell significantly from +2 to -12; in Scotland, which increased slightly from -11 to -10; and in the West Midlands, which remained stagnant at -6. Firms in the East Midlands recorded a score of +1, but this was down from +5 in 2011.

Regions with the same level of small business confidence as the North West were the South West (rising from -9 to -3) and Yorkshire (-4 to -3).

Areas with the lowest confidence levels overall also recorded the sharpest year-on-year increase. These were Northern Ireland (-65 to -49) and Wales (-25 to -16).

Small business confidence in the East of England went up from 0 in 2011 to +2, and in the South East the increase was from -2 to 0.

The North East recorded the strongest confidence levels, rising from +4 to +11 year-on-year.

Nationally, quarter four confidence fell by 1.1 points against quarter three to record a score of -5.6 — but was 18.8 points higher than the same period last year, when the economy entered into double-dip recession.

Overall, fewer small firms applied for finance in the quarter, but of those that did a higher proportion were accepted — 49.3 per cent, up from 42.8 per cent in quarter three.

The FSB believes this is a move in the right direction, but in total fewer than one in 10 respondents consider credit to be easily available. The FSB wants to see the new business bank improve competition in the sector and promote alternative sources of finance — freeing more businesses to bring forward investment decisions.

Investment is a priority for around a third of firms in the coming 12 months. The FSB hopes that the increase in capital allowances announced in the Autumn Statement means this number will increase. Allowing small firms to invest up to £250,000 in their business without paying tax will hopefully provide enough of an incentive to bring forward investment plans.

Despite this cautious optimism, the FSB is warning that the environment in 2013 looks to remain challenging as inflation and energy prices will continue to affect both households and small business cash flow.

The cancellation of January’s 3p fuel duty increase will help businesses, but the FSB believes that road-users need greater certainty over what their overheads will be from one budget to the next.

“The FSB’s Voice of Small Business index has been a good indicator of GDP. With recent forecasts indicating that growth will continue to be slow in 2013, this slight optimism will provide some welcome news," John Allan, Chairman of FSB Merseyside, West Cheshire and Wigan and national Vice Chairman said.

“However, weighing against it are the cost pressures which still face small businesses. Sectors that rely on discretionary spending are struggling as incomes remain squeezed. Almost two-thirds of respondents cite the weak domestic economy as a barrier to achieving their growth aspirations, showing that this optimism comes with a health warning.

“Whether sole traders or smaller employers, high street shops, firms in leisure and tourism, manufacturers, hi-tech businesses and all firms across the North West badly need a real plan of action for 2013 and beyond to capitalise on this fragile confidence.

“History shows that significantly easing the burden of tax on entrepreneurs is how to achieve the rapid growth we need. Measures on tax in the Autumn Statement were welcome but they do not go far enough to boost business cash flow and free firms to invest and create jobs.

“It is during periods of recovery that firms are in most need of growth finance -but one area where confidence remains low is the broken relationship between small businesses and the banks.

“Increasing numbers of alienated small business are turning away from major lenders. The new business bank must fill this void. Alternative, innovative and less risk-adverse lenders must be given the support they need to compete, but so far details of how the bank will operate have been scarce.”

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