Small firms upbeat about 2013 but still not spending

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(This is a guest post)

This year could mark an upturn in the economic fortunes of many smaller firms, and many of those surveyed recently believe that 2013 could see confidence slowly return. Despite that, spending by SMEs isn’t starting to go up again, which may be a sign that any recovery is still some way off happening.

Confidence among SMEs in the UK is at its highest level since 2009 for a variety of reasons. A survey by Lloyds Banking Group of 1,800 firms across the country revealed that many owners of small firms believe that both sales and profits will increase over the course of the year.

Despite the fact that many smaller companies are feeling good about what could happen in 2013, there are a couple of downsides. The first one is that recruitment of new employees is unlikely to improve according to the banking giant, while spending is also likely to remain static for the first six months of the year.

At a time when the economic climate still brings an element of uncertainty to the business world, keeping costs low is something many smaller firms are likely to continue with until they start to return higher profits.

Part of trying to keep costs down may involve looking at individual overheads such as energy bills and looking at how they can be cut in order to provide extra capital. Small businesses may decide to compare business gas & electricity with Make It Cheaper online, but that may depend on how much they spend on energy per month.

It’s estimated that SMEs in the UK are sitting on cash totalling as much as £120bn, an amount which could be put towards increasing spending or recruitment. However, caution is understandable, especially when overall consumer spending remains lower than hoped.

A spokesperson from Lloyds said that, despite remaining cautious, small businesses with surplus cash should consider investing it wisely.

“With optimism coming back, any improvements in competitiveness should help to see firms experience growth and increase levels of competition. Also, investing now could result in greater profits later on, whether it’s in new workers or more equipment”, he said.

The survey revealed that manufacturing companies were among those who felt most upbeat about their prospects, while construction firms were the least confident. Also, it showed that exports to mainland Europe are likely to rebound, although that was dependent on any recovery in the Eurozone’s flagging economic fortunes and.

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