Confidence rises as sterling falls

Small business confidence has returned to levels last seen before June’s referendum, reversing the negative sentiment that followed the vote to leave the European Union.

Small business confidence is rising but one survey found declining faith in the government.

The Federation of Small Businesses said small exporters in particular were enjoying a “strong rise” as a weaker pound made their goods and services more competitive overseas.

The group’s Small Business Index for the final quarter of 2016, a survey of more than 1,245 companies, also revealed a decline in the number of businesses operating below capacity and more organisations expanding operations and boosting their workforce. The index returned to positive territory, reflecting a balance of respondents feeling positive about their prospects.

However, the FSB warned that profitability had dropped for the second quarter in a row and that investment intentions remained subdued. Mike Cherry, its national chairman, said that inflationary pressures and price competition were “hitting the bottom line hard”.

A separate study by Smith & Williamson, the accountancy, also found rising confidence among smaller companies, but noted declining faith in the government. Its Enterprise Index found that the proportion of companies that believe the government was supportive of private enterprise had declined for the third quarter in a row.

Guy Rigby, of Smith & Williamson, said: “[Small businesses] have taken a number of hits over the past 12 months and are expecting to face even more over the coming year. Reforms of business rates, the apprenticeship levy, the national living wage, [pensions] auto-enrolment and changes to the way dividends are taxed have all had an adverse financial or emotional impact.

“It’s not that all small businesses regard these changes as negative, but the flow of new initiatives has been relentless. Like buses, they’ve all come at once.”