The RBS Small Business Recovery PMI survey found that firms are seeing the strongest upturn in output in more than four years. Optimism now stands at its highest level for over eight years.
However, the report also found that cost pressures for small businesses across the UK have hit a ten-year high due to pandemic disruptions and Brexit trade frictions.
The survey shows small firms in the construction sector are enjoying particularly strong growth, with output rising at the fastest pace since June 2001. Service sector companies also recorded the steepest rate of activity growth for three years in March as they enjoyed a surge in forward bookings and improved confidence as roadmaps out of lockdown were published.
Small businesses also upped their employment levels in March for the first time since the pandemic began.
Stephen Blackman, RBS’s principal economist, said the report highlighted how the service sector should be a key driver for the economy in the months ahead.
“With the advent of spring and the hopeful prospect of higher temperatures, this bodes well for a further improvement in small business activity in the second quarter and beyond,” he said.
“Overall, the outlook for the UK economy is brightening and with the International Monetary Fund recently upgrading its forecast for UK growth, this suggests lost output in the UK will be recovered sooner than previously expected, possibly in early 2022.”