Confidence fall may herald hard times for small businesses

A poll of small businesses has shown a fall in confidence levels – a potential sign that many enterprises could be struggling to stay afloat.

The Federation of Small Businesses (FMB) survey for the final three months of last year recorded a sentiment reading of -24.5, the lowest in the short history of the index – which started in 2010 – and 15.2 points down on the third quarter of 2011.

Issues recorded as being of concern include inflation, higher utilities bills and falling consumer spending, all of which could depress income.

And for companies that are struggling, this could leave some seeking insolvency advice.

However, the FMB position is not one of complete doom and gloom. It has pinpointed falling inflation in the months ahead as being a factor that will help to boost consumer spending and while 12.6 per cent of small firms expect the economic situation to worsen in the next three months, it is upbeat about the longer term.

However, it suggested, a key issue is for the benefits of some positive developments to feed through as quickly as possible. The organisation has backed government measures in the Growth Review and Autumn Statement to bolster small firms, such as increased bank lending and the seed enterprise investment scheme, changes to planning controls and more access to government procurement contracts.

For the small business sector, there is a race against time to ensure these benefits are felt, according to FMB national chairman John Walker.

He said: "The government needs to quickly put in place the actions that it has promised. Small firms have heard what the government has to say but are still waiting to see implementation."

Following the publication of the survey, the FMB announced its research also showed 6.5 per cent of its members intend to cut jobs this year. This led to Mr Walker suggesting that swift action by the government – such as cutting red tape – can help underpin the sector. This comment also prompted shadow minister for small businesses Toby Perkins to argue the familiar Labour view that government cuts have "choked off" the recovery and caused higher unemployment.

But whatever the rights and wrongs of the political arguments, the key for some small firms could be to survive the next few months before better times emerge later in the year. But for many, that recovery could come too late.