Optimism among Scotland’s small firms jumped in the last quarter as the latest survey from the Federation of Small Businesses (FSB) showed they are now considerably more bullish than their counterparts south of the Border.
The FSB’s Voice of Small Business Index, published today, revealed that while small business confidence is growing across the UK, an average firm in Scotland is feeling even more upbeat than its counterpart in England and Wales.
The analysis also showed that recruitment intentions are at their highest level since the research began in the first quarter of 2010, as spare capacity in small business drops away.
The FSB’s Scottish policy convener, Andy Willox, said that while it was nice to see Scottish small business confidence climb above the UK average, more significant was the continued rise across the UK.
He added that the fact that one in five businesses plans to increase capital investment this year would further aid the recovery.
“More businesses placing orders with suppliers means more full order books, more materials to be sourced and more staff to be hired,” he said. “That is the key to rebuilding our economy.”
But Willox warned that none of that investment would happen without finance being available.
He said: “Although the position has improved since this time last year, it has hardly moved in the last three months. We’ll need to keep a close eye on this trend and ensure things don’t start to slip back. Having worked so hard to build a recovery, we can’t have it stifled by a lending market which lacks our members’ ambition.”
The survey found that just 13 per cent of firms rated the availability of credit as “good”, while only 23 per cent said credit is affordable.
The FSB’s measure of small business confidence rose eight points to +44 in the second quarter of 2014. This time last year, the index stood at just +9. Across the whole of the UK, the index rose from +35.7 to +39.7.
Meanwhile, a survey of the UK’s mid-market companies shows they are now growing faster than their counterparts in Germany, France and Italy.
GE Capital’s latest report showed that the average UK mid-market company – defined as a firm that posts annual turnover of between £15 million and £800m – is set to grow sales by 6.1 per cent in the next 12 months. That equates to projected UK mid-market revenue growth of £133 billion over the year.
An estimated 326,000 jobs are set to be created by the sector – more than twice as many as in Germany. As well as the projected sales growth necessitating extra capacity, many firms said they were considering bringing previously “off-shored” jobs back to Britain.
However, the report comes as the CBI warned that medium-sized businesses are being held back by the UK’s tax system.
Publishing a study carried out alongside Grant Thornton, the business body said the tax system is acting as a brake on growth for medium-sized firms, disrupting their cashflow, absorbing management time and dampening export ambitions.
CBI director-general John Cridland said: “Medium-sized firms are not able to benefit from the incentives that small firms do, and at the same time most cannot afford to have an army of tax consultants on speed dial to help them wade through the complexities of the system.
“The [UK] government must urgently review rules around research and development investment, and international tax requirements, and take steps to stop medium-sized firms from being treated like large companies when it comes to corporate tax payment.”