The UK's small and medium-sized enterprises (SMEs) have signalled a more bullish outlook in the first quarter of 2016, according to Bibby Financial Services’ (BFS) latest SME Confidence Tracker.
The research shows that growth expectations rose by twelve percentage points in the first three months of the year, compared to the final quarter of 2015, while the number of small businesses expecting sales to decline fell by over half from 17% to 8%.
Almost half (48%) of the businesses surveyed expect to see sales increase in the first and second quarters, compared to just over a third (36%) in the fourth quarter of last year.
David Posting, global chief executive of Bibby Financial Services, said: "Despite the uncertainties of the upcoming EU referendum and a muted outlook for the UK economy, small business owners started the year in an unexpectedly bullish manner, displaying more confidence than in the second half of 2015."
The figures suggest SMEs were also bullish about their investments, with three quarters investing in infrastructure like office equipment, IT and machinery. Looking ahead to the second quarter, SMEs have signalled that investment will focus on recruitment and technology.
Despite this positive outlook, concerns over the UK's economic environment remain. A quarter (26%) of businesses say this is the main reason holding back investment, while citing increased competition, red tape, regulation and rising costs as top challenges.
Mr Posting added: "having made business-criticial capex decisions and invested in the building blocks of business in 2015, SMEs are looking to position themselves for growth in 2016. However, we aren't out of the woods yet as SMEs still don't believe in the UK growth story and optimism remains far below 2014 levels. We have had three hugely impactful debates in as many years with the Scottish Referendum, General Election and forthcoming EU Referendum.
"Add to this, changes such as the National Living Wage and pension auto-enrolment, it's clear that SMEs crave stability and would benefit from a more simplified operating environment. The Budget nibbled at the edges of SMEs' challenges but much more can be done to get businesses moving in 2016. This should include rebalancing the North-South divide by offering tax breaks to redevelop brownfield sites rather than building on greenbelt farmland."