Small firms still struggle to grow amid lack of finance

Weakness in the domestic economy and rising fuel and utility bills were also cited as barriers to growth, according to a quarterly survey of more than 2,500 small businesses, reports The Telegraph.

The research, conducted by the Federation of Small Businesses (FSB), found that general sentiment improved in the first three months of 2013 compared with the previous quarter.

However, already muted investment intentions fell again and fewer businesses said they expected to grow this year. The survey also found a decline in the number of companies approaching their bank for funding as well as a fall in successful applications.

However, there were signs that the Government’s Funding for Lending scheme may finally be beginning to bear fruit for some small businesses – those that did secure finance reported that the costs of borrowing have fallen.

The FSB said that George Osborne, the Chancellor, must use next week’s Budget to improve access to finance, particularly for the smallest businesses.

It called for a “firm plan” to be put in place for the £1bn Business Bank, a planned public institution that will support the development of alternative forms of finance to reduce the reliance on giant banks.

The FSB wants the Business Bank to focus on “microbusiness financing [and] longer term and higher risk loan applications and advice”.

John Walker, national chairman of the FSB, said it was “great news that confidence is beginning to edge up and is back in positive territory”.

However, he said the struggle small businesses continued to face when raising finance “must be addressed” by Mr Osborne.

“A clear plan for the Business Bank must be put in place to help ease access to finance and to boost competition in the sector, both through encouraging non-bank lenders such as peer-to-peer lenders to join the market and through new ‘challenger’ banks entering the arena.”

The organisation also wants to see the tax system simplified and an existing temporary relief for small firms from business rates made permanent.