Small businesses look forward

Britain’s smallest businesses are feeling much more confident about the economic outlook for the first few months of 2013, new research suggests, particularly as concerns about the crisis in the Eurozone ease.

Lloyds TSB Commercial, which has been surveying 1800 SMEs twice a year for more than two decades, said the optimism was now at its strongest level since the economy emerged from the first of Britain’s double-dip recessions in 2009.

The bank said that 19 per cent more businesses felt positive rather than negative about likely sales, orders and profits during the first six months of 2013, up from 12 per cent in the last survey. Though the upswing in confidence is relatively modest – and few firms have yet to upgrade plans for investment or hiring – it does represent a potential turning point for business sentiment.

“It is good to see that businesses have managed to work through the tough economic headwinds of the last couple of years and have a rather more positive outlook for 2013,” said David Oldfield, managing director, of SME and mid markets banking at Lloyds Banking Group.

“Businesses are clearly feeling more optimistic about Europe and, after a poor 2012, we should see more demand and orders coming through from the continent over the coming months.”

Much of the increase in optimism has been driven by expectations that revenues will begin to rise over the first half of 2013, though there has also been an improvement in the outlook for profitability.

Almost third of businesses - 32 per cent - anticipate an increase in profits and less than a third - 23 per cent - expect a drop in profits, Lloyds said. The resulting net balance of 9 per cent is up from July 2012 when it stood at minus 2 per cent.

“Policy measures undertaken by the European Central Bank and EU officials are beginning to filter through and businesses show greater optimism about their trading activity over the next six months, especially of exports to the Euro area,” said Trevor Williams, chief economist of Lloyds Bank Commercial Banking.

“These glimmers of hope should lead to a gradual increase in the underlying pace of economic expansion over the forthcoming year.”

By David Prosser, Editor of Freelancing Matters magazine