The last month has seen a host of encouraging statistics emerge on the state of the UK economy, but to what extent are the effects of the recovery reaching UK SMEs? According to results published this week by the Confederation of British Industry, economic growth reached an eleven year high in May, as a net balance of 35 per cent of businesses reported improved trading conditions.
Alongside this positive news, the British Chambers of Commerce also raised its 2014 growth forecast this week, predicting the UK economy will expand by 3.1 per cent over the course of the year, up from a previous estimate of 2.8 per cent. “Britain is leading, rather than following, other major economies when it comes to short-term growth, which is great news,” attested BCC director general, John Longworth, announcing the change.
“What's encouraging is that growth is becoming more broad-based, with solid increases in business investment over the past year,” added CBI deputy director general Katja Hall, concluding, “This bodes well for the year ahead.” Representing the small business community, the Federation of Small Businesses’ most recent survey also reports confidence is returning for British SMEs, with 62.3 per cent stating they expected to grow their business in the second quarter.
In particular, 25 per cent of small firms hoped to increase investment within the next twelve months in order to take their business to the next level.
Despite these indicators, not all small business interest organisations take such an optimistic view, with several suggesting it will take more time for SMEs to really feel the impact of macro-level economic shifts.
In particular, access to capital continues to represent a major challenge for many SMEs, constraining investment plans. Bank of England figures show lending to small businesses fell by £700 million in the first quarter, as SMEs remain cautious about approaching banks for funding.
“The litmus test for the Funding for Lending scheme has always been whether young and fast-growing businesses are able to get the finance they need to expand and drive the recovery,” comments Longworth, adding, “Unfortunately many of these firms remain frozen out of the market.”
Aldermore invites UK SMEs to share their thoughts with the Bank on Twitter on whether the recovery is reaching small businesses, and which barriers still stand in the way of growth.
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