Financial services sector leads way as confidence among small businesses hits highest level in three years

The financial services sector is leading the way as confidence rises among small businesses, latest data has suggested.

Confidence rose across all parts of the UK and in most sectors to reach its highest level in three years, according to the Federation of Small Businesses (FSB).

Its regular Small Business Index climbed to 15.9 points in the second quarter; 9.6 points higher than at the start of 2013 and the second highest reading since the Index began in 2010.

Firms in the financial services sector reported the highest confidence levels for business employment and overall prospects, in line with the FTSE 100's recent peak.

And small manufacturers were more optimistic about their prospects despite recent output contractions, suggesting that conditions in the sector are improving.

Confidence is increasing in the property sector as house prices rise steadily in 2013. The 'Help to Buy' scheme announced at the Budget could help this situation improve further in the coming months.

With Chancellor George Osborne due to deliver his Spending Review later this month, the FSB urged him to use it as an opportunity to build upon these positive figures with growth initiatives to fan confidence levels among both businesses and their customers.

And, following another quarter's results which show refusals for four in 10 firms which applied for finance, the FSB wants to see the Chancellor set out a clear plan for the Business Bank to improve competition among banks and to help advise small firms on alternative finance providers.

The FSB identified problems in the supply of finance from Funding for Lending for more businesses - but it said the rates offered are becoming lower.

Confidence is moving in the right direction after five consecutive quarters of year-on-year growth, said the FSB's national chairman John Allan.

Small firms want to employ more people and grow their business and they want to export and expect turnover levels to increase, he said.

However the rate of inflation and access finance will affect how quickly, and how much, small firms can grow and create jobs.

Inflation is likely to remain high for the coming 12 months, largely due to rising energy costs, so reform of this sector is important and must provide transparency for small firms to choose the best tariff for them, said Mr Allan.

"This is all good news, but we must not be complacent," he warned.

"The Chancellor must use the Spending Review to build on this optimism."

Copyright Press Association 2013