UK SMEs report 'tentative' signs of recovery 

The FSB said small businesses had been hit hardest by the credit crunch, but its monthly survey shows the economic outlook is beginning to improve. Examining ten months' of data, the federation said trade is slowly picking up for companies in the UK and consumer confidence is strengthening. 

By the end of last year, up to 40% of small businesses were highlighting the cost of finance as a big problem. Now, 25% cite the cost of finance as a concern, indicating that small firms are seeing a very gradual easing in the flow of credit. 

The early positive signs in the UK may be an indication of things to come elsewhere in the EU. SMEs across Europe continue to complain of the twin challenges of late payments and tightening credit markets, with several countries reporting a deteriorating situation. 

The European Investment Bank has injected €350 million into the economy in a bid to encourage lending to small businesses. However, there have been complaints that this funding is not getting through to those who need it most (EurActiv 8/7/09). 

Over half of small firms in the UK (57%) said they were "quite confident" about the future prospects for their business. According to the latest poll, 68% of business owners are looking to act on a rise in confidence and say they plan to grow in the next six months, with firms looking to invest in new products, more staff and marketing. 

The FSB is urging the UK government to ensure that small firms are at the forefront of tackling unemployment by supporting apprenticeships, short-time working subsidies and increasing the thresholds before income tax and national insurance contributions are payable, which its says would benefit employers and employees alike.

John Wright, national chairman of the FSB, said businesses are not out of the woods yet, but "retailers are seeing increased footfall" and it has become easier to access credit than during the winter months. 

"Small businesses are naturally flexible and innovative in recessions, and these figures show that despite the very many negative forces on them, they are being cautiously optimistic and are looking to expand," he said. 

However, separately, the FSB has warned that the economic crisis threatens to wipe out village shops and pubs in rural areas. Post offices and petrol stations are also at risk, according to the federation, which called on local authorities in the UK to grant 100% relief from business rates. 

The village shop network is losing between 300 and 500 shops each year in the UK, with an average of 13 rural pubs closing each week. Local governments have the discretion to waive certain taxes, but almost half of all rural retailers are currently missing out, the FSB said.