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UK SME confidence bounces back in Q1 – but will it last?

Small businesses had a rocky 2015, sensing dark clouds on the horizon in Quarter 3 and preparing for the storm in Quarter 4. In Quarter 1 2016, they appear to be have turned a corner, beginning the year in an unexpectedly bullish manner. With over three-quarters investing in the building blocks of business, such as existing staff, equipment, IT and machinery, SMEs reported that they have set themselves up for success and positioned themselves for growth in 2016.

One example of British businesses’ new found optimism is UK Fire Doors, a Bibby Financial Services’ client. Despite gloomy reports from the PMIs that the outlook for UK manufacturing is weak, UK Fire Doors is growing against the curve and positioning itself for growth in 2016. In March, the provider of bespoke, certified fire doors re-opened the Langley Mill site, a place that has been at the heart of the UK’s door manufacturing industry for years. The business plans to increase its manufacturing capacity of quality timber and invest heavily in new systems, technology and people. With this new capacity, UK Fire Doors will grow its production from 50,000 to 75,000 doors over the next 12 months.

But increasing confidence does not mean that there are sunnier times ahead for all SMEs.  Business sentiment surveys are mixed, showing that although the domestic market is sound, the services sector may not be growing at the rate it should. Although the March Budget included some welcome news for small businesses, making tax systems simpler and cutting business tax rates, more needs to be done to encourage a bullish sentiment. It is clear from our Tracker that SME scepticism remains around the UK’s recovery and growth trajectory, with a quarter citing the “uncertain economic environment within the UK” as the most significant barrier to capital expenditure. Worries remain around competition, red tape and regulations, and rising costs.

While doubts persist about the UK economy and its long-term growth potential, SMEs have their shoulders to the wheels of growth, plugging away at what they do best. Given their bullish manner at the start of the year, their efforts deserve to be recognised and rewarded with a stable environment and government-led initiatives (the Small Business Commissioner for example) implemented to make their working lives easier.

Want to find out how to keep your business moving in 2016? You can download our guide, which includes handy information on the National Living Wage, pension auto-enrolment, exporting and more, here.

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