Lack of funding hampers growth at smaller firms

Britain’s small and mid-cap quoted companies are feeling increasingly confident and are looking to recruit staff – however, they are still being hampered by a lack of funding.

The latest sentiment index published by accountant BDO found that firms’ optimism about their prospects increased substantially in the last quarter, and confidence in the UK economy is at its highest level since the survey began 18 months ago – although the latter is still below the level that would indicate an expectation of growth.

The survey found that 56 per cent of small and mid-cap companies expect their full-time employee numbers to increase over the next 12 months.

However, both firms and advisers reported that all the main sources of funding are becoming more difficult to access.

Scott Knight, a partner at BDO, said: “The critical issue at present is the availability of capital. Companies have auspicious prospects, but need capital to convert these into growth.

“A liquid capital market is a prerequisite for the small and mid-cap sector to remain as the crucial engine for UK growth.”