Small business confidence on the up

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Confidence among small businesses in the UK is on the rise once again, new figures have revealed.

According to the Federation of Small Businesses (FSB), confidence is back up to the levels reported prior to the EU referendum in June.

This means that the number of small businesses feeling optimistic about their prospects outweighs the number that feel the opposite way.

Mike Cherry, national chairman of the FSB, said he is "delighted" with the bounce back, as it has effectively wiped out the fall that took place in the run-up to the referendum and in the months after the Brexit vote.

"The current economic outlook seems brighter and UK small businesses are ambitious and want to make the most of it," Mr Cherry commented.

"Small exporters continue their strong rise, as UK goods and services become more competitive overseas and small businesses go out to find new markets and new customers."

However, Mr Cherry stressed that while the overall picture looks positive, small businesses still face many challenges, as rising costs are putting pressure on their margins.

For instance, he said the falling pound is pushing up the price of imports and rising oil prices are leading to a surge in fuel costs. 

"These inflationary pressures and price competition are hitting the bottom line hard, with the majority of small firms seeing their profits continue to fall," Mr Cherry stated.

He went on to state that small businesses are aiming to maximise their opportunities in light of the current positive economic climate.

"But with costs rising, they will need support for their confidence to translate into new economic growth and jobs," he stressed.

Mr Cherry has therefore urged policymakers to be ready to act if trading conditions deteriorate in the coming months, as they are already looking to small firms to "contribute to the UK's economic success".

He added that Chancellor of the Exchequer Philip Hammond must issue a "full-throated pro-business Budget" on March 8th, as measures such as an increase in the Employment Allowance would help small firms boost job creation.

Figures from the FSB show that job creation among small businesses has gone up for two quarters in succession, with a net balance of almost ten per cent of firms expecting to increase their headcounts in the coming quarter.

However, increased confidence levels and an upturn in hiring intentions are not being reflected in profitability, as it has dropped for two successive quarters.

Similarly, FSB figures show that investment intentions are still "subdued" and are lower than they were a year ago, due to the rising cost of doing business.

The organisation has warned that this "must not be allowed to threaten future business activity".

Another cause for concern could be that while the headline figure shows an increase in confidence levels among small businesses, there are some notable regional variations throughout the UK.

For example, small business confidence was still found to be in negative territory in Scotland and London, putting them out of step with the rest of the country.