Confidence among Gloucestershire small businesses has risen to the highest level in over a year despite spiralling business costs, according to the latest Federation of Small Businesses.
The strong recovery has been spurred by increased international trade. A net balance of 15.6% of small firms report a rise in export activity during the past three months, with a net balance of 30.5% expecting international sales to increase over the next quarter. Both figures are at their highest level since the SBI began.
Mike Cherry, FSB National Chairman, said: “It’s hugely encouraging to see our small businesses trading more overseas, driving an exports-led recovery. We know small firms that export have higher turnovers than those who rely on the domestic market, so it’s crucial that the Government maximises cross-border trade opportunities for small firms.
The recovery in the headline SBI comes despite a surge in the cost of doing business.
A net balance of 64.5% of small firms report an increase in operating costs over the past quarter, the highest proportion since the summer of 2013. Fuel (36.8%) and labour (35.9%) are cited most often as the main causes of this increase, with the exchange rate (26.9%) also frequently flagged.
The average FSB employer will face £2,600 in additional employment costs over the coming year as a result of the rise in the National Living Wage, resulting National Insurance contributions and auto-enrolment. These cost pressures are being exacerbated by rising inflation. The Consumer Price Index (CPI) rose above the Bank of England’s 2% target to 2.3% in March. Firms are struggling with increased prices when buying supplies, products and services, but the rise in inflation will also impact other bills, such as business rates.
Mike Cherry continued: “At a time of unprecedented political and economic uncertainty, small firms are being hit from all sides by mounting cost pressures. This month alone many have had to absorb a hike in business rates and the National Living Wage. Added to this are costs that have steadily risen, such as fuel, which our members are increasingly pointing to as a major cause of higher outgoings.
The net balance of small businesses intending to increase employment over the next three months is also up, to a near two-year high of 11.3%. However, the balance of small firms reporting higher headcount for the last quarter has fallen from 2.9% in Q4 to 2.1% in Q1.
The SBI now stands in positive territory across most UK regions. Scotland is the exception, having posted negative confidence for five straight quarters, though its Q1 figure (-10) is the highest since Q2 2016. The East Midlands reports the highest confidence levels for this quarter (39.3) while London has rebounded from -1.7 in Q4 to 24.5 in Q1.
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