By Daniel Hunter

Small business confidence remains robust and firmly in positive territory, according to the Federation of Small Businesses (FSB)'s Small Business Index in 2015.

Lower business costs and current economic conditions are relieving pressure for firms, giving them the confidence to take on new staff, reward staff with pay increases, and successfully access finance from their banks to invest in and build their business, the index showed.

Businesses are increasing the number of people they are hiring for work, figures for the last three months show, twice as strong as 12 months ago. Many businesses are also finally able to reward staff with improved pay packets, which the results suggest have been supported by rising productivity growth, with the highest pay increases in the accommodation and food, and manufacturing and construction sectors.

The FSB said that low inflation is helping businesses’ bottom lines with the lowest-ever proportion of businesses reporting a year-on-year increase in costs, as well as putting more money in consumers’ pockets to spend in these businesses thereby boosting confidence.

Against a very positive set of results, businesses continue to struggle with skill shortages, which are hampering growth. Thirty seven per cent of businesses said that employing someone with the right skills is a barrier for them to grow their business. This number is on the increase, a sharp rise from 25.4% recorded 12 months ago.

Increasing exports against tough trading conditions in Europe is also proving to be difficult for businesses, according to the survey. Despite these headwinds, they nonetheless remain optimistic about prospects to increase exports in the coming months.

John Allan, National Chairman, Federation of Small Businesses, said: "Our latest results once again paint a positive picture for small businesses with confidence amongst members remaining high, and nearly all the major indicators heading in a positive direction.

"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.

“One of the few areas of concern within the positive picture remains skills. It’s crucial that new and existing small firms have appropriately skilled staff and targeted support at a local level to grow their businesses. Better skilled workers are critical for the UK to close the productivity gap and achieve long-term economic growth; as well as compete with other countries in the G7, such as France and Germany. That is why we must put in place a quality, employer-led apprenticeship system to widen our skills base.”

John Allan continued: “We want to see the next Government build on current momentum and create conditions which promote further growth and rebalance the economy. It is important that a new Government follows through measures outlined in our Business Manifesto to provide a stable environment for small firms, with measures built for the long-term to provide the stability businesses require.”