Small firms predict increase in demand

SCOTLAND'S small firms are confident of an upturn in demand this year despite warnings that the UK could be plunged into a double dip recession, according to research from the Bank of Scotland.

Nearly half of SMEs, which account for 99 per cent of Scottish companies, foresee a recovery in product and service orders over the next 12 months, the survey reveals. This represents a significant improvement in optimism levels expressed at the same time last year when just 20 per cent of small firms expected better trading conditions.

Four out of ten SMEs are planning to take on extra staff to cope with the recovery, while almost 30 per cent of the 200 firms surveyed said they were eyeing expansion this year. In the 2009 survey, almost half of small firms north of the Border had introduced a recruitment freeze, while a third were actively laying off staff.

The research coincides with the launch tomorrow of a series of Bank of Scotland roadshows to help SMEs prepare for the recovery.

However, concerns remain about the price and availability of finance to help small Scots firms take advantage of a potential upturn this year. Last week, Scottish Engineering accused the banks, in particular Bank of Scotland, of hiking arrangement fees and interest rates, and interfering in the running of businesses.

Colin Borland, public affairs manager for the Federation of Small Businesses in Scotland, said there was still a chasm between what the banks say they are lending, and at what rate, and what firms are experiencing on the ground. The FSB is pushing for the creation of a Financial Intermediary Service to produce more credible statistics on bank lending.

Borland said: "There is a mass of contradictory figures coming out. We do need to get to the heart of this issue so that we can move forward."

Commenting on the survey results, Donald Kerr, commercial banking director at Bank of Scotland, now part of Lloyds Banking Group, said: "At the height of the recession, many of Scotland's owner managers were forced into battening down the hatches to protect their business from the worst effects of the downturn. However, with brighter economic prospects on the horizon, it is encouraging that business owners are now looking to take the necessary actions to prepare their business for an upturn."

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: "Speaking to businesses up and down the country, it is clear that Scottish firms are in a much better position than they were a year ago. Many are looking forward to 2010 with a great deal of optimism and we are finding evidence of plans to invest for the future."

However, fears are growing that Britain will experience a double dip recession this year after figures last week showed the UK government was forced to borrow 4.3 billion in January – the first time it has been in the red in January since records began in 1993.