Confidence levels among small businesses is rising at the fastest pace in 25 years, in the clearest sign that the economic recovery is not just helping the country’s biggest firms, according to the Confederation of British Industry.
The boost in confidence comes as Business Secretary Vince Cable arrived in Russia on a trade mission to increase exports to the country as part of the Government’s plans to lift exports to £1trn by 2020.
In the three months to October, the CBI found that optimism among small companies in the sector rose to 35 in the quarter, up from 9 in the three months to July – the fastest rise since records started in 1988. This time last year the index was as low as -12.
The business lobby group also found that the number of firms willing to spend more on buildings was up 5 per cent, while 11 per cent more wanted to invest in plants and machinery. Around 15 per cent more SMEs believe output will rise in the next three months.
Stephen Gifford, the CBI director of economics explained: “Optimism about the general business situation has improved and is now at a record high, and there is evidence of a general thaw in investment intentions for the year ahead.”
The confidence was driven by domestic orders from manufacturers, which rose at their fastest rates since January 1995, and follows on from the Office for National Statistics’ data which found that GDP grew 0.8 per cent between July and September. Manufacturing grew 0.9 per cent and construction by 2.5 per cent
Meanwhile, a survey by Barclays of 500 small firms also suggests many have more scope to boost their exports than they realise. It found that four in five small firms that had expanded overseas found the experience as they hoped or easier than they expected.
Almost half said that they wish they had started exported sooner and that what had been holding them back was a psychological, rather than a practical, barrier.
The positive trends come as Vince Cable took 31 small businesses with him to Russia where he will reveal that exports of goods and services to Russia have grown by more than 75 per cent from £4.3bn to £7.6bn.
Russia is the fourth largest export market for the UK, after the US, China and EU.
During the trip he will launch a new $50m (£31m) fund to help small businesses export to Russia after the CBI found that total UK export orders rose at their fastest rate since April 2011.
He said: “British small and medium sized businesses are the lifeblood of our economy. Many are doing incredible things and selling their services and products abroad. But too many do not realise their global potential.
“Unlike China or India, Russia does not manufacture a great deal, so there are real opportunities for UK firms to export there, particularly with the upcoming Winter Olympics in Sochi next year and the 2018 World Cup.”
However, despite the registered improvement in sentiment picked up by the CBI, most small firms are still not securing lending from banks.
According to the most recent Bank of England figures, lending to SMEs fell by another £400m in September.