Business confidence recovers despite surging costs

Confidence amongst small firms has risen to the highest level in over a year despite spiralling business costs, according to the Federation of Small Businesses (FSB) Q1 2017 Small Business Index (SBI).

The strong recovery has been spurred by increased international trade, with figures reaching their highest level since the SBI began.

– 15.6 per cent of small firms report a rise in export activity during the past three months

– 30.5 per cent expect international sales to increase over the next quarter

Mike Cherry, FSB National Chairman, says:

“It’s hugely encouraging to see our small businesses trading more overseas, driving an exports-led recovery. We know small firms that export have higher turnovers than those who rely on the domestic market, so it’s crucial that the Government maximises cross-border trade opportunities for small firms.

“That includes negotiating an ambitious free trade agreement (FTA) with the EU as part of the Brexit process. The FTA must include a dedicated small business chapter and ensure the easiest possible access to the single market. Our latest Brexit research finds that over a quarter of FSB exporters would be deterred from trading with the EU27 by a tariff of any size. We cannot rely in the long-term on the boost that exporters have received from a weak pound. To maintain export growth, we need to focus on opening up new international markets and getting more small firms exporting.”

At the same time, 64.5 per cent of small firms reported an increase in operating costs, the highest proportion since the summer of 2013.

“At a time of unprecedented political and economic uncertainty, small firms are being hit from all sides by mounting cost pressures,” Mike Cherry continues. “This month alone many have had to absorb a hike in business rates and the National Living Wage. Added to this are costs that have steadily risen, such as fuel, which our members are increasingly pointing to as a major cause of higher outgoings.

“The impacts of the spiralling cost of doing business are starting to show. The percentage of businesses seeking to grow in the next 12 months, although slightly up on last quarter, remains below the levels seen two or three years ago. Higher numbers of businesses also report they plan to downsize or close over the next year.”

And in other news, the British Chambers of Commerce has said Britain’s companies have had a solid start to the year and conditions are expected to improve in 2017.

Domestic and export sales increased compared with the end of 2016, hiring intentions were up and confidence in turnover and profitability was improving, the BCC said.

The results mirrored recent economic indicators that suggested the economy expanded by at least 0.4 per cent in the first quarter. Although that would be slower than the 0.7 per cent achieved in the final three months of 2016, the fastest rate in two years, it would put the UK on course to match or beat last year’s 1.8 per cent annual GDP growth.

Specialist advisers to small and medium sized businesses

At Beavis Morgan, we have extensive experience of providing specialist advice and planning to small and medium sized (SME) businesses and we are on hand to assist you to remain profitable and increase your net worth.

For more information about how we can help you and your business, please contact Steve Govey or your usual Beavis Morgan Partner.