'Cooling confidence' among small firms

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Confidence appears to be waning among some UK SMEs

The Federation of Small Businesses (FSB) has published its latest Small Business Index and in it has revealed that confidence among the nation's smaller firms may be waning at present.

Recent quarters have highlighted a burgeoning level of confidence among UK small to medium-sized enterprises (SMEs), but the latest results for the three months to the end of June show something of a downturn in this sentiment at present.

Overall, the Small Business Index delivered a result of +20.3 for the second quarter of the year (down from +37.9 in the preceding three months). The + denotes a 20.3 per cent positive disparity between those who feel economic conditions will likely improve in the next 12 months against those that feel the situation will worsen.

This represents a marked reduction in confidence regarding the economic outlook for UK SMEs, with far fewer business leaders stating they will be looking to expand during the remainder of 2015.

An initial boost in confidence was delivered in the wake of the general election result earlier this year, but this positive sentiment now appears to have melted somewhat, with fewer businesses believing the future is bright for their forward-looking prospects (although the positive result still shows there is impressive levels of confidence in many parts of the country).

However, following the publication of the government's Summer Budget, the FSB believes this announcement created a variety of challenges that UK small businesses are now having to overcome and this, in turn, has resulted in weaker positive sentiment.

Furthermore, 36 per cent of respondents stated their belief that skills shortages could be holding back growth in many sectors, although, encouragingly, the data did reveal that access to finance continues to improve for many small businesses at present.

Responding to the results, FSB national chairman John Allan commented: "Changes to tax treatment on dividends will affect many small business owners with modest incomes, while small employers also face steep increases in the National Living Wage just as they are preparing to bear the cost of pensions auto-enrolment.

"The reaction to these changes is reflected in the evidence we present today, which shows confidence levels amongst members cooling markedly.

"Despite confidence levels slipping back, our members remain steadfast in their intentions to grow, to create jobs and to export. The government must, however, seek to reassure small firms and create the right environment for them to flourish."

Mr Allan concluded that delivering enhanced confidence among SMEs should be a top government priority for the coming months, as doing so will be necessary for a lasting economic recovery to take hold to the benefit of the whole of the UK.