The green shoots of economic recovery have made small businesses more confident about their future than they have been for three years, new research has revealed.
The Federation of Small Businesses’ Voice of Small Business Index, which is published today, shows that four-in-10 businesses have recorded a rise in turnover over the last quarter.
Despite this, fewer than a third of firms (31%) saw profits rise.
In fact, some 34% of companies actually saw profits fall, with one-in-four firms highlighting rising business costs as a problem.
Scottish firms also cite falling levels of spare business capacity, although the research suggests that this is not yet resulting in increased recruitment intentions.
The FSB in Scotland argues that this underlines the need to deliver the right support to help the smallest businesses get hiring where conditions allow moving away from Government schemes designed to put particular client groups into jobs and instead focusing on giving those businesses with most recruitment potential the advice and support they need.
Firms are also predicting increased profits in the next quarter, with three-in-10 businesses also planning to increase their level of capital investment spending.
This is significant as, the report states, business investment is a key driver of sustainable growth.
FSB Scottish policy convener Andy Willox said: “Today’s figures suggest a fledgling Scottish small business recovery is under way.
“Increased revenues and reduced levels of spare capacity suggest that firms are busier than they have been for a long time, but their profits and growth prospects continue to be put under threat by rising overheads.
“While FSB lobbying resulted in the UK’s big six energy companies abandoning automatic contract rollovers, there’s still a lot to be done to ensure that small businesses reap some of the benefits from all of their extra effort.
“Similarly, if we’re to turn busy small businesses into growing small businesses, we need to ensure that we have a package of business support that’s easy to access and understands small firms’ needs.”
The FSB’s findings were mirrored by increased confidence among small and mid-cap firms.
These are small to medium businesses that are quoted on the stock exchange.
The OCA/BDO Small and Mid Cap Sentiment index found confidence had reached a two-year high, with 67% of these firms optimistic about the prospects for the UK economy over the next 12 months, compared to only 8% at the same point last year.
Tim Ward, chief executive of the Quoted Companies Alliance, said: “Small and mid-cap companies are beginning to motor.
“The pickup in the economy appears to be translating into real-economy results, which suggests that those companies who previously expected their turnover to fall now see an improvement in their prospects. The engines of growth are on the move.”