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SME index shows significant business services boost in Q1

The latest Business Factors Index report from invoice finance specialist, Bibby Financial Services, reveals business services activity leapt year-on-year by 14.2 points.

The report tracks business activity amongst Bibby Financial Services’ 4,000 UK clients, against a base point of 100, across the five key sectors of manufacturing, construction, business services, wholesale and transport.

A first quarter business services peak of 100 was achieved in 2012, but after falling by almost 20 points year-on-year to 80.2 in the first quarter of 2013, the sector has made a strong comeback reaching 94.4 for Q1 2014.

The overall level of the Index for Q1 2014 is higher than any previous first quarter since 2008, suggesting small and medium-sized businesses enjoyed the strongest level of activity, year-on-year, for six years.

David Postings, UK chief executive at BFS, said, “The Business Factors Index provides a clear indication of the rate of recovery being felt by UK businesses.

“The business services sector has shown a real return in terms of growth and activity, following a period of fluctuation, which makes this quarter’s results very encouraging.”

The report found 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.

Bibby Financial Services recently revealed the number of businesses looking to recruit is rising at its highest rate since the deepest point of the recession, with a quarter of SMEs planning to hire this year.

Milton Keynes recruitment business LS Contracts Ltd has just taken on three new staff.

Director Jane Eggleton said, “After the mini peaks and deeper troughs of the past three years at last we’re seeing true growth. Many businesses feel that a 6 to 10 per cent increase in staff this year is realistic.

“It was a bumpy ride and businesses had to create stronger relationships with customers and suppliers. This meant that credit terms were extended and profit margins were suppressed.

“But much confidence and positivity has come about from the strengthening and maintaining of close business relationships and supporting each other.”

Findings of the Bibby report are released in the wake of the latest net lending figures from the Bank of England showing that loans to businesses contracted by &pound500million in the three months leading to February.

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

He said, “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.”

According to the Asset Based Finance Association (ABFA) sales turnover for businesses using this form of funding in 2013 increased to &pound275bn, year-on-year growth of 10 per cent.

Postings said, “This type of finance offers real flexibility for businesses, which is what they need right now. The Business Factors Index figures are a sign of the vital role non-bank lenders play in enabling firms to grow with sustainable cashflow.”

Business Factors Index, Q1 2014 - readings set against a base point of 100:

Business Factors Index

Manufacturing

Construction

Wholesale

Transport

 Services

TOTAL

Q1 2014

131.2

79.7

112.3

97.4

94.4

101

Q1 2013

116.2

102.6

101.5

100.8

80.2

93.5

Q1 2012

114.2

93.6

107.2

97.3

100

100.3

Q1 2011

113.8

96.3

108

99.9

86.1

96.8

Q1 2010

107.8

98

90.6

90.3

82.1

92.1

Q1 2009

87.6

76

79.8

78.6

79.1

78.1

Q1 2008

96.4

78.5

89.7

92.6

89.9

90.4

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