By Daniel Hunter

The fourth Sage Business IndexInternational Business Insights - shows the UK bucking a near-universal global decline in confidence in local economies since the last report in March 2012.

Polling nearly 11,000 small and medium sized companies in 15 countries, Sage Group's research found that on a global level, business owners’ confidence in their local economies fell nearly five points, from 47.26 in March 2012 to 42.47 this time.

However UK business owners’ confidence in their local market actually grew from 44.91 to 45.44. Furthermore, the 1,350 UK respondents were among the most optimistic about their individual business’ prospects over the next six months (58.46) recording the highest levels since the Business Index began in 2011 and overtaking Germany for the first time. Since March 2012 confidence in Europe’s biggest economy has fallen by four percent to 57.81.

With the UK predicted to move out of recession for the first time since 2008*, Sage’s research has revealed that the majority of UK business owners changed to meet the challenges of the current economic climate.

Over four in five (81%) of UK business owners believed that they had successfully adapted — second only to businesses in Switzerland (85%) - which benefit from operating in one of the world’s most stable economies. Interestingly, 80 per cent of businesses in Ireland, whose economy experienced one of the most aggressive budgets in 2009, believed that they had adapted to the challenges of the current economic climate.

Eurozone in focus

Looking at the impact of the continued economic uncertainty in Europe, 67 per cent of businesses globally say that the Eurozone crisis has had an impact on their business. In the UK, just over half of firms (51 per cent) noted an impact on their business, compared with 90 per cent of companies in Spain and 93 per cent of companies in Portugal. The research also highlighted the economic reverberations beyond Europe with 73 per cent of businesses in Brazil and 38 per cent in the US reporting that the crisis had impacted their business.

When asked about the future of the Eurozone, just 11 per cent of UK businesses predicted that it would remain unchanged — compared with more than 1 in 4 (28 per cent) owners in Ireland, who were most confident of business continuing as usual in Europe. The majority of business owners globally (40 per cent) believe that the Eurozone will fall into a ‘two speed system’ and just seven per cent envisage a complete dismantling of Eurozone altogether.

Reasons to be cheerful

The latest instalment of the Business Index points to positive signs around revenue and employment. In the last six months, 69 per cent of UK respondents said revenue had either increased or held steady while one in four businesses (26 per cent) said that they are planning on hiring new staff in the next year.

“While it remains an incredibly challenging environment for businesses around the globe, the fact that UK business confidence levels have overtaken those in Europe’s largest economy is a significant milestone," Brendan Flattery, CEO of Sage UK and Ireland, commented.

"It remains to be seen whether the UK is technically out of recession, but with over two thirds of respondents reporting solid revenue performance ahead of what is the most profitable time of year for many, the signs are encouraging.”

Businesses call on governments to do more

Regardless of government initiatives across the world to better support small and medium sized companies, the businesses themselves are clearly not feeling the benefits as yet. Almost 7 in 10 feel that their government does not provide sufficient support for their business (69 per cent). Singapore was the only country to disagree — with 57 per cent thinking their Government is providing sufficient support.

What these businesses are really calling for is a reduction in bureaucracy (43 per cent), business tax (36 per cent) and more opportunity for skills development (31 per cent). And the worst areas of bureaucracy were cited as labour law and tax law, although UK businesses also cited health and safety legislation far more negatively than other countries.

*According to FY12 Q3 UK GDP growth estimates from the Ernst & Young ITEM Club and the National Institute of Economic & Social Research (NIESR) forecasting 0.7% and 0.8% growth respectively.

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