John Allan: Small-firm outlook brighter, but let's not get complacent

Small Talk: The enthusiasm of small business leaders matches that of any CEO from a large corporation
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The Independent Online

After years of false starts, recent data suggests the British economy is mounting a sustained recovery. The eurozone has also returned to growth, and growth is moving in the right direction in China and the US too, meaning the pressure is easing on UK businesses.

The Office for National Statistics says Britain's GDP expanded 0.6 per cent in the three months to June, with increased output from the manufacturing sector playing a major role in driving economic growth. After a fall in April and May, across-the-board expansion led by the transport sector saw production rates rise by 1.9 per cent, the highest rate since 2010.

Overseas demand has played a pivotal role in driving growth for British manufacturing. Trade with non-EU countries has risen 29 per cent since 2009, helping generate record exports of £78.4bn between April and June.

It's not just big manufacturers that are supporting this recovery. Research by the Federation of Small Businesses (FSB) shows that small ones were more confident in the second quarter of 2013 than a year earlier. Many will be at the heart of the supply chain, providing valuable services driving the manufacturing sector's revival.

Manufacturing in the UK today is no longer simply about "bashing metal" or even precision engineering; it covers a wide range of other sectors such as food and drink production, digital technologies and craft work, to which a whole raft of small businesses contributes.

To sustain growth, international markets must appreciate the diversity, quality and expertise of Britain's manufacturing community. Next year, the UK will host The International Festival for Business, a worldwide expo for business that will celebrate the richness of UK industry, attracting upwards of £100m worth of direct inward investment. It's a key part of the UK's ambition to promote economic growth, rebalance the economy and double exports by 2020.

The expo will comprise more than 100 events during 50 days in June and July, bringing together potential investors from key sectors to provide unparalleled opportunities for international collaboration. This is just what small businesses need, and something the FSB is proud to be backing. Our nationwide study found confidence among the UK's small business community reached a three-year peak in the last quarter, matching the encouraging statistics put forward by the ONS. Just as encouraging was the news that confidence among Britain's SMEs extended beyond London and the South East, and was spread evenly through the country.

These positive findings should make welcome reading for the Government, which has placed great stock in the ability of small businesses to grow, invest and compete with international rivals. Our research on employment intentions is equally upbeat, finding that the majority of small firms want to expand their workforce.

Anyone who works closely with SMEs would tell you that the enthusiasm and drive of the UK's small and micro business leaders matches that of any CEO from a large corporation – they are the heartbeat of industry, providing the engine room for broader economic recovery. With sustained confidence, the future is looking bright for the UK's small business community. But there can be no room for complacency. The level of UK output is more than 3 per cent below its pre-recession peak in 2008 while the manufacturing sector still faces major challenges.

I often hear from our members that accessing finance continues to be a barrier to growth. Despite the positive figures reported by the ONS, the costs of utility, labour, rent and input are all higher today than 12 months ago, while improving access to funding remains a challenge.

Increasing small businesses' direct engagement with international markets will help remedy this impasse. All this will provide greater opportunities for SMEs to connect with new partners and generate increased income. But British firms must be actively encouraged to do so.

Events like next year's Festival for Business will play a major role in connecting British SMEs with international businesses and will provide a platform for these ambitious businesses to expand. The UK's small business community has a wealth of innovators and entrepreneurs capable of sustaining economic growth – it's time we let the rest of the world know just how strong our reserves really are.

John Allan is national chairman of the Federation of Small Businesses and ambassador for the International Festival for Business 2014

Small businessman of the week: Responding to calls for an answering service

Ed Reeves, co-founder, Moneypenny

I founded Moneypenny with my sister Rachel Clacher in 2000. I had been running a graphic design business and was using an answering service. One day, a call came in from a client who wanted to place an order, but the answering service said it couldn't help and I lost the business. I just felt there had to be a better way, where the person handling the call felt accountable for the way it was handled.

We launched our answering service business on a budget of around £10,000 but we've spent millions developing our software over the years, always funding from cash flow. There is no shortage of answering services offering a model built on off-the-shelf call-centre-style software, but it's not very good, and we wanted to build something bespoke. We recognised from the start that if we set up as business run out of a back bedroom with a handful of employees, we would stay that way.

After a year or so, we decided to target clients on a national basis, rather than locally, using direct mail. It was a real step change for us – we began picking up hundreds, rather than tens of new clients each month.

We're now twice the size of our nearest competitor but we know we need to stay on the treadmill, and the company now has three arms. There's the original PA-style answering service, as well as an outsourced reception service we launched for larger companies four years ago. And we've just launched Penelope, which offers an array of automated services to the smallest businesses.

"Penelope has really taken off – it already accounts for 60 per cent of new business, and we have exciting plans to take it into overseas exports. The platform on which it is based has also helped us win a Queen's Award for Enterprise.