Business turnover reaches two year high

Despite a challenging start to the year, the Index for the first quarter of 2010 ended on a high of 108.1 - a level not seen since October 2007.

However, despite positive GDP figures, talk of recovery and other signs of green shoots, almost two thirds (62%) of businesses surveyed do not anticipate real economic improvement for at least a year.

A change in Government (25%) and the loosening of lending criteria (25%) are cited as the two biggest factors that businesses think could stimulate a faster recovery, states the report.

The Index analysed quarterly movements in small business turnover together with qualitative opinion from small business owners. It also reveals:

• A quarter (27%) of business owners feel hopeful for the future, with an additional 10% doing well, having actually benefited from the recession.
• Almost a third feel the UK economy will have fully recovered by the end of 2010.
• However, while sentiment from almost half (47%) of business owners implies that conditions are beginning to stabilise, a quarter (26%) feel trading conditions have worsened.

The Index findings are supported by views from the CBI and the British Chamber of Commerce, both of which have forecasted growth of just 1% by the end of 2010, indicating that, while things may have taken a turn for the better, the economy is likely to remain sluggish throughout the course of the year.

Edward Rimmer, UK chief executive at Bibby Financial Services commented: "January's torrid weather conditions had a negative impact on the output of many UK businesses, and this slowed recovery in the proceeding months. While the latest Index reading matches levels not seen for more than two years, it actually only gained an average of 0.5 points over the first quarter of this year.

"That said, March's rise has bought about a sense of renewed optimism and it is encouraging to see so many firms feeling upbeat about an improvement in trading conditions over the course of 2010.

"Looking forward, the Index does highlight a general feeling towards a tentative recovery, irrespective of whether or not trading conditions have improved. Even more revealing are the factors which businesses believe will help the recovery come sooner.

"The fact that loosening of lending criteria has again been cited as a key issue indicates that mainstream lenders are still not providing the support needed by UK businesses as they look to move out of the recession, an issue which has plagued small and medium-sized businesses throughout the downturn.”