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SME confidence remains below the UK average

Scotland's hard-pressed small businesses are less optimistic than their counterparts south of the Border, despite a rally in confidence in the SME sector this year.

The latest UK Small Business Index from the Federation of Small Businesses (FSB) shows small firms are displaying a greater level of confidence as 2012 ends compared with the same point in recent years.

The index for the last quarter fell by 1.1 points against the previous quarter, but it is close to 20 points higher than at this point last year.

However, small firms in Scotland are still less confident than their counterparts in most of England, with confidence only lower in Wales, Northern Ireland and London.

The research, which gathers information from more than 2500 firms, shows that UK industry sectors which rely on discretionary spending are struggling as incomes remain squeezed.

Almost two-thirds of UK respondents cite the weak domestic economy as a block to achieving their growth aspirations.

The index also shows that fewer small firms applied for finance in this quarter than in the last, but of those that did a higher proportion managed to secure the finance they sought (49.3%, up from 42.8% in the third quarter).

The FSB said it welcomed the improvement, while warning that fewer than one in 10 respondents considered credit to be easily available.

It said the fact, investment was a priority for around one-third of firms in the coming 12 months was encouraging, and the Chancellor's move to increase firms' capital allowances could give investment plans a further boost.

Andy Willox, the FSB's Scottish policy convenor, said it was important that firms were much more optimistic than they were at this time during the last two years. But he added: "It is concerning that Scottish small business confidence is lower than the UK average."

Mr Willox said: "While a higher percentage of small firms have secured finance in this quarter than previously, it is clear from our research that others continue to struggle.

"Previous recessions have shown demand for finance is at its highest during the recovery stage. The planned state-backed small business bank should inject much needed additional competition into the small business banking market – especially in the concentrated Scottish market."

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