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Small businesses display cautious optimism for 2013

Small businesses are more confident heading into the New Year than they were this time last year, research from the Federation of Small Businesses (FSB) has found.

According to a quarterly report from the FSB, small business confidence dropped to -5.6 in the last three months of 2012 - a fall of 1.1 points from the third quarter. While the index remains in negative figures, confidence shows an improvement of 18.8 points compared to the final quarter of 2011 - just as the economy entered a double-dip recession.

Although the optimism is good news for businesses, the FSB said that growth would remain slow in 2013 with small firms and households under pressure from increasing energy prices and inflation.

Almost two thirds of respondents said that weak domestic economy was hindering business growth, with consumer demand, fuel costs and access to finance also important factors.

Other findings revealed that:

  • fewer firms applied for finance in the quarter although a higher proportion were successful - just under half of loan applications were accepted, up from 42.8 per cent in the third quarter. 
  • investment is a priority for around a third of firms in the coming year, helped by the recent announcement of a tenfold increase in the tax-free annual investment allowance (AIA) to £250,000.

National chairman for the FSB, John Walker, said: "There's no doubt that it is still a tough environment and the Autumn Statement highlighted that it's going to be tougher for longer. However, small firms want to get on, grow their business and invest."

"However, there is still more to do - especially around accessing finance", he added.

The FSB now wants the Government to address the need for a new business bank to improve competition in the sector and promote alternative sources of finance particularly as many businesses bring forward their investment plans.