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March 13, 2015

Small firms invest in people as economy grows

Small firms invest in people as economy growsSmall firms are taking on more staff and paying them more, according to the latest Small Business Index from the Federation of Small Businesses (FSB).

The FSB says that lower business costs and current economic conditions are relieving pressure for firms, giving them the confidence to take on new staff and reward staff with pay increases.

The FSB findings for the past three months show that hiring rates are twice as strong as a year ago. Many businesses are also increasing pay, supported by rising productivity growth. The highest increases are in the accommodation, food, manufacturing and construction sectors.

Thanks to low inflation, the FSB also reports that the Index saw the lowest-ever proportion of businesses reporting a year-on-year increase in costs. At the same time, more SMEs are accessing finance from their banks to support their growth plans.

John Allan, FSB national chairman, said: “Our latest results once again paint a positive picture for small businesses with confidence amongst members remaining high, and nearly all the major indicators heading in a positive direction. It is incredibly encouraging to see the banks approving more credit for small firms, suggesting we may have finally turned a corner on this front.”

However, Allan sounded a note of caution, highlighting two key areas of concern: the skills gap and sluggish exports. “Better skilled workers are critical for the UK to close the productivity gap and achieve long-term economic growth,” he said.

Also this week, the British Chambers of Commerce (BCC) has upgraded its UK GDP growth forecast for the next two years, from 2.6% to 2.7% in 2015, and from 2.4% to 2.6% in 2016, due to stronger than expected growth in household consumption. The latest BCC forecast also predicts growth in 2017 at 2.6%.

However, BCC director general John Longworth described consumer consumption as a “fickle friend”.

He said: “We are upgrading our UK growth forecasts because businesses up and down the country are doing well - despite international and domestic uncertainty. While 2015 has got off to a good start, there is no room for complacency. The UK is still a long way from achieving the great, sustainable, long-term growth we want to see.”

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