by Roger House, Federation of Small Businesses chairman, Kent and Medway region

Small firms across the south east are showing increasing optimism for 2014 as businesses remain positive about the economic outlook. Latest research suggests small firms want to grow their business and find access to finance a little easier, according to the FSB Small Business Index.

For the fourth consecutive quarter, the Small Business Index measure of confidence among small firms has grown year-on-year, up 27.2 points from -5.6 in Q4 2012 to +21.6 in Q4 2013. Encouragingly, this optimism is also replicated in every region of the UK and in each business sector.

In Kent, the FSB Small Business Barometer, a straw poll of members to track economic performance trends in the county, revealed small businesses were forecasting a bright future, 86% expect the same or improved prospects in 2014, four in five (80%) report sales up on 2012 and more than one in five (23%) have increased their workforce.

This increased confidence means more small firms are planning to invest in and explore the global trade market. New data shows businesses expect to see rapid or moderate expansion in the next 12 months. Alongside this, one in 10 businesses report running above capacity while a third are running at full capacity – both the highest figures since the Small Business Index began in 2010.

Feeding into expansion plans, capital investment intentions continue to rise with almost a quarter (23.1%) expecting to invest in the next year. Businesses also want to take on more staff – perhaps ahead of the Employment Allowance which comes into force in April 2014. And, with FSB members polled prior to the Autumn Statement, where a further incentive to take on young people was provided, more could be set to invest in new staff.

Encouragingly, the number of firms refused their credit application is the joint lowest share since the start of 2012. While only 16 per cent of respondents had applied for credit in the quarter, reported rises in turnover and profitability, as well as stronger growth aspirations, means businesses could be paying for investment out of existing sources of capital.

Those businesses accepted for finance continue to report cheaper interest rates being charged, a direct result of Funding for Lending (FLS). The FSB hopes the re-allocation of FLS funds to SME lending will mean the banks make finance available to more small firms.

Confidence has been in positive territory for a full year, giving economic growth solid foundations moving into 2014. Small firms in Kent are creating more jobs and investing in their business and there are encouraging results behind the headline figures, with promising trends evident across the main areas of expansion, investment and employment.

Confidence has been in positive territory for a full year, giving economic growth solid foundations moving into 2014.

Government must not be complacent – helpful initiatives were announced in the Autumn Statement, particularly on business rates which we welcome. This, alongside the refocusing of Funding for Lending should continue to keep small firms in the spotlight. However a sustained recovery is perhaps some way off as the worldwide economy remains uncertain.

Here in Kent we are feeling increasingly buoyant in general outlook but there is an underlying sense of caution that for the very micro sector there is still very much a sense of the knife edge and no room for easing up. Real issues such as cashflow and the increasing on costs of rates and energy coupled with the access to retail centres for motorists are still with us. Local Authorities are playing their part in encouraging the economy but Government must ensure the underlying economy supports this trend.

The FSB will continue to fight the small business corner and I end on a quote from The Economist in December which described us as “the increasingly influential Federation of Small Business...”.