Manufacturers are among the most confident SMEs in terms of their prospects coming into the New Year, according to research by the Federation of Small Businesses (FSB).
The FSB’s Voice of Small Business Index for the fourth quarter 2010, based on a survey of more than 1,500 businesses, found that confidence among manufacturing SMEs was up 15.8% compared to the previous quarter. This was beaten only by the education and financial sectors.
Conversely, when all sectors are taken into account collectively, confidence fell by 13.2 per cent. The least confident sectors are those directly reliant on consumer spending, including leisure and social based industries, transport and retail.
John Walker, national chairman of the FSB, said: “A number of pressures on small businesses are beginning to come to a head, such as the increase in VAT and fuel duty, placing more strain on cash-flow. This combined with the severe weather at the end of 2010 has meant that small firms are not as confident about their prospects in 2011.
“With inflation above target and the labour market still weak, small firms cannot rely solely on the consumer for growth in 2011. So it is imperative that the Bank of England base rate is kept at 0.5 per cent, as once the impact of the VAT rise is excluded, inflation is relatively low.”
SMEs collectively also expect slightly negative employment prospects in 2011. While 77.7 per cent of small firms expect to keep employment levels the same, 12.4 per cent expect they will have to thin out their payrolls. This is up from 10.4 per cent in quarter three.
The confidence manufacturers report though is consistent with recent figures from the Office for National Statistics and the Chartered Institute for Purchasing and Supply’s Purchasing Managers’ Index which showed hearty boosts to output and New Orders in December.