The Small Business Index: Let’s dig a little deeper

Gloom mongers begone: last week the Federation of Small Businesses reported that its Small Business Index (SBI) is showing the highest levels of confidence in three years. The SBI, a weighted index, is derived from responses to the question: “Considering your overall business performance, and ignoring any normal seasonal variations at this time of the year, how do you view business prospects over the next three months, compared with the previous three months?” 

The share of firms reporting “much improved” are given the following weightings: much improved +2, slightly improved +1, and so on; the SBI is then calculated by maths whiz-kids and statisticians to produce an overall assessment: and it’s good! The best in three years! The figure is +15.9 for the second Quarter 2013, up from +6.3 for January to March.

Of course, this is just a measure of business sentiment, not actual or projected orders. Still, economists think it comes from people with more to lose than managers of large firms, so it carries more weight, coming, as it were, from the horse’s mouth. The problem is that the FSB makes little attempt to identify which businesses are saying this. All we re told by way of a sector break down of the figures is that the main positive sentiment is driven by a perception that the threat to the euro zone is receding; that, say the report’s authors, is good news for the financial sector and estate agents. Because these sectors are grounded in the capital, London is thus cited as the crucible of this burgeoning national confidence.

Not if you’re in Belfast though. Closer inspection of the figures shows that although positive, the weighted index of small business confidence in Northern Ireland is just +2 (admittedly better than the -6 the province recorded a year ago.) But wait a minute; there is some sector detail; retail is apparently only expecting -10 index-worth of upturn. What’s going on here Brokers and estate agents think there’s jam tomorrow, while retail is gloomy as hell” They can’t both be right. Yet, the results are clear: the highest degree of business confidence since Q1 2010.

All the more depressing then to find that, in the words of the Ginger Crooner Mick Hucknall, money’s still too tight to mention. A report out this month tells how our banks (yes, our banks) are still failing to lend to smaller businesses, which every on-message politician will remind you are the secret weapon for delivering economic recovery.

The report by the British Bankers” Association found that appeals against loan rejections are upheld 40 per cent of the time, and that small firms are at times judged “harshly?. One example given by the author, Russel Griggs described a borrower refused £20,000 for his hospitality business; turned out he d once bought a car through a broker whose credit searches had tarnished the applicant’s creditworthiness. 

But Prof Griggs who used to head the CBI’s small business council said banks couldn?t be blamed for a computer says no” attitude to assessing their smallest business customers; his view is that there is no other way for banks to stratify their businesses. Well, I don’t agree. Why can’t experienced bankers offer tutorials to the younger managers handling small clients, with weekly drop-ins to pool know-how. Otherwise, this country is going to struggle to get investment in the very sector that’s expected to pull the rest of the economy back into the black.

Meanwhile, I can report a tiny level of progress on the Great Cabinet Economic Growth Implementation Committee Scandal. This was the much-trumpeted initiative launched almost a year ago, chaired by the (Tory) chancellor and backed by the (Lib-Dem) Secretary for Business, aimed at implementing strategies to bring economic growth.

What are these strategies I wondered Has the committee met” What’s it doing then” Tell us tell us! I got as far as one Niken Wresniwiro, a government press-fielder, who left me a delightfully Yes Minister-ish message on my phone, to the effect that ?we don’t provide, um, running commentary on these, er, initiatives don’tyeknow?. (OK I made up that last bit). The tiny progress” My MP, Mike Crockart, has promised to put a squib up their skirts and get a proper response for you, lovely readers, so watch this space.

Bruce Whitehead’s column on Real Business explores the latest political developments and their effects on UK businesses.

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