By Daniel Hunter
The latest FSB Small Business Index (SBI) reveals that small businesses are in a robust mood. Small business confidence has picked up markedly in the second quarter, with growth and investment intentions reaching new highs since the Index began in 2010. With few negatives in the overall picture, the latest survey readings on job creation, productivity and investment all bode well for small businesses sustaining the economy's growth through 2015.
Findings in this latest research show that businesses view their prospects for the coming months very positively. Nearly two thirds (65.3%) of small businesses aspire to grow moderately or rapidly in the next three months - the highest figure ever seen in the SBI.
As a result of their desire to grow, productivity is increasing compared to the wider economy. This should be encouraging to policymakers, who have been grappling with the issue of low productivity growth for some time. The FSB Productivity Index shows that annual output per hour for workers rose by 1.4% year-on-year in Q4 2014 among small firms, compared with 0.3% in the economy as a whole (the latest period for which comparable data are available). The levels of spare capacity, an important factor in interest rate decisions, have dropped from a balance of 47.7% to 40.7%.
In further good news, this quarter's SBI shows the highest ever number of firms planning to invest in their business. Nearly one third of businesses (32%) plan to increase capital investment over the next 12 months. The balance of firms that have employed new staff in their firms has risen to 8.9%, a sharp increase from 2% reported 12 months ago.
While the overall mood of businesses shows confidence steadily returning to the economy, the survey results continue to suggest that the recovery is not taking grip equally across the country. The South East continues to dominate in business confidence followed by the West and east Midlands. Wales have seen a fall in confidence, with a fall in employment, and confidence figures are also lower in Scotland than the UK as a whole.
Businesses also remain concerned about the cost and availability of workers with the right skills with 35.4% saying this is a barrier to growth.