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Press Room

Economic Conditions Improve For Small Businesses
(09 December 2003)

Britain's small firms have reported a better than expected results this quarter and confidence about prospects for next quarter has also risen, according to the latest NatWest Quarterly Survey of Small Businesses in Britain. The survey shows that sales turnover (+15%), average employment (+2%), investment (+7%) and selling prices (+25%) are all up on last quarter's figures.

Small firms in the hotel and restaurant sector are leading the recovery, with 37% reporting an increase in sales and over half stating that they have increased their selling prices in the past year, perhaps trying to restore profit margins following the price cuts in 2001/2002.

Encouragingly, small firms are optimistic about the future. Over 40% said that they expect their turnover to be higher in the next quarter, which is unusually high for this time of year. Almost a fifth also expect to increase the number of people that they employ, suggesting an underlying improvement in confidence, particularly in the hotel and restaurant sector.

Current economic conditions are still very much at the forefront of the minds of Britain's small businesses, with 18% stating that this was the most important problem facing their business. Red Tape still seems to be causing concern, despite a slight fall last quarter, and 15% are again reporting it as their biggest problem. Firms with ten or more employees (19%) are suffering under the burden of government regulations and paperwork.

Interestingly, the proportion of small firms indicating that their main problem is cashflow or the late payment of debts has dropped significantly from 11% to 6%, moving it from the second-ranked problem last quarter to the seventh-ranked problem this quarter.

Not enough hours in the day to do what they need to do is also becoming more of a concern for small businesses, with 10% stating that this is their biggest problem - making it the third biggest concern for small business owners.

Jeremy Peat, Chief Economist at NatWest, said: "It is heartening to see such a positive set of responses from the UK small business sector this quarter. The fact that companies are more confident about the outlook for the coming three months also bodes well. Though interest rates in the UK appear to be on the turn, rates are likely to remain low by historic standards against a background of low inflationary pressures, and the global economic recovery should provide small businesses with positive opportunities as we head towards 2004."

Other problems highlighted by the survey are shown in the table below:

Exchange rates1%
Interest rates1%
Other costs1%
No problems2%
Marketing problems3%
Sector specific demand/problems9%
Lack of skilled employees/high pay9%
Total tax burden9%
Lack of time/capacity10%
Government regulations and paperwork15%
General Economic Climate18%