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Small companies perform strongly in Q1 2014
The Bank of England’s Monetary Policy Committee has upgraded its forecast for growth in the UK

Small business output during the first quarter of the year is the highest since 2008, according to a leading business index. 

The Business Factors Index score of 101 is higher than any previous Q1 period since 2008, suggesting small and medium-sized businesses in the UK enjoyed the strongest level of activity, year-on-year, for six years.

Bibby Financial Services (BFS) has tracked turnover data of its small business client base as part of the quarterly Business Factors Index report since the lowest point of the economic downturn, across five key sectors of manufacturing, construction, transport, wholesale and business services.

David Postings, UK chief executive at BFS, says that the index provides a clear indication of the rate of recovery being felt by UK businesses.

'We have seen already that the Bank of England’s Monetary Policy Committee has upgraded its forecast for growth in the UK during the first quarter, and we would expect the official estimate of GDP on April 29 to reflect the positivity the Index has highlighted,' he adds. 

The report finds that manufacturing SMEs not only recorded the highest level of activity for a first quarter, but the second highest for any quarter going back to the start of the index, with a score of 131.2, compared to 114.2 in Q1 2012 and 116.2 in Q1 2013.

However, with a score of 79.7, the construction sector did not fare as well, and shows the lowest level of activity since the first quarter of 2009, reflecting what could be a growing unease about the longevity of government schemes designed to stimulate the sector.

The first quarter ended with a surge of activity in the sector for the month of March, coinciding with Chancellor George Osborne’s announcement that the Help to Buy scheme would remain in place for the rest of the decade.

Findings of the report are released in the wake of the latest net lending figures from the Bank of England showing that loans to businesses contracted by £500 million in the three months leading to February.

Postings says that more and more businesses are using invoice finance to fund their businesses and has called for owners to review their funding methods while banks continue to reduce finance available.

He adds, 'The banks obviously provide a vital service to the UK economy but too often businesses are pushing against closed doors when applying for finance.

'At this stage of recovery, we need to nurture and stimulate activity – not prevent it.'

Further reading on small business performance

See also: Small companies 'benefiting from Olympics'

Related topics: Entrepreneurs

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