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Small businesses "feeling more confident"

Confidence among small businesses has soared to its highest level in three years, a new report has revealed.

According to the Federation of Small Business (FSB), optimism is up across all parts of the UK and in most sectors.

Its Small Business Index reached 15.9 points in the second quarter, a rise of 9.6 points on the figure recorded at the start of the year and the second highest reading since the Index was launched in 2010.

The highest confidence levels were reported by financial services firms, which is probably a reflection of the recent peak in the FTSE100.

And despite recent contractions in the manufacturing sector, small manufacturers are feeling more positive about their prospects.

The report also found that more companies expect a rise in turnover over the next three months, while a large number of respondents are planning to increase staffing levels over the coming months.

Rising exports have been reported by more small firms and despite slow world trade growth; export growth is set to go up during the next quarter.

John Allan, national chairman, Federation of Small Businesses, said that confidence is moving in the right direction.

"Small firms want to employ more people and grow their business. They want to export and expect turnover levels to increase. This is all good news, but we must not be complacent. The Chancellor must use the Spending Review to build on this optimism.

"While there are positive signs, inflation and not being able to access finance will affect how quickly, and how much, small firms can grow and create jobs.

"We know inflation is likely to remain high for the coming 12 months, largely due to rising energy costs. This is why reform of the sector is so important and why it must provide transparency for small firms to choose the best tariff for them," he added.

The FSB wants the Chancellor to set a clear path for the Business Bank in the upcoming Spending Review to improve competition in the banking sector.

Figures from the organisation found than four in ten firms that applied for finance in the last quarter were refused. It said small companies need more advice on alternative finance providers.

It’s not just the FSB reporting improved confidence either, as the BDO Optimism Index, which measures business performance two quarters ahead, increased for the fourth month in a row to 93.6 in May, up from 93.0 in April.

By Kirsty Hewitt

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