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May 06, 2011

Confidence up, but gap between small and large businesses increasing

Confidence is creeping up among UK businesses, but the performance gap between large and small firms is getting bigger – and British firms are lagging behind their international counterparts in both confidence and revenue growth.

That’s the conclusion of the annual Regus Business Confidence Index, which found that just 46 per cent of small UK businesses had seen revenues grow in the past year, compared to 65 per cent of large firms.

A far higher proportion of large businesses surveyed (61 per cent) also reported a profit increase in comparison to smaller ones (36 per cent).

Of the 4,000 UK businesses that took part, small, medium-sized and large firms all expected that revenues would increase over the next 12 months with 77 per cent of UK firms forecasting a rise in turnover.

But while the UK reached a confidence score of 108 (up from 100 in October 2010), it remains second bottom of a table of 14 countries. This is well below the global average, which has risen from 98 to 125 in the past six months.

“That business confidence is returning is good news for the UK economy, as is the fact that so many companies are reporting rising revenue and profit,” said Ceri Donne, Regus’ regional director. “Although the business tracker highlights the extent to which small business is bearing the brunt of the weak economy, it’s encouraging that their profit expectations are as buoyant as their large counterparts.”

However, British Chambers of Commerce economist Steve Hughes thought it was inevitable that smaller firms would find it harder to recover from the recession. “Small businesses are at the end of the supply chain and the end of the payment chain,” he said. “They face more difficulty accessing finance and they tend to have less expertise in-house to deal with things like regulatory changes. As a general rule, they also have less access to a diverse marketplace.”

Donne said the Index suggested that growth would be unlikely to pick up real momentum until 2012. Hughes agreed that 2011 would be “a difficult year”, but said there were positive signs for small businesses which had had to become more competitive to survive the recession.