The Business Factors Index, which follows Bibby Financial Services’ clients across manufacturing, construction, business services, wholesale and transport, rose to its highest quarterly average since it began in 2007 pointing to a significant surge in performance in the third quarter.
The quarterly figure of 105.3 was substantially higher than the previous peak of 101.1 at the end of 2007, and only the third time since its inception that the Index has risen above the 100 mark that represents the level of activity in July 2007. It is also significantly higher than the figure for Q2 which was 96.7 and Q1 at 96.8.
The turnover increase highlighted in the Business Factors Index echoes the latest GDP figures released on 1st November, which show the economy grew by 0.5 per cent over the same period.
The report indicates that companies not only shrugged off the impact of the collapse in both confidence and asset prices in the financial markets in the wake of the renewed eurozone crisis, but may even have benefitted as productivity levels have evidently increased. The large majority of firms are also now taking action to insure against any future downturn according to the latest Index, by cutting costs, improving supply chain management, implementing a growth strategy or even increasing prices.
An additional survey of 450 small and medium-sized businesses which runs alongside the Business Factors Index shows that the number of companies describing current conditions as ‘very tough’ has risen since June. Nine out of 10 firms said they believed that the economic recovery would not be fully secure for at least another year and possibly three.
Edward Rimmer, UK chief executive of Bibby Financial Services, says: “The results from Q3 are a welcome shot in the arm for small and-medium-sized businesses as the first two quarters of this year had returned disappointing performance across the sectors.
“The increase in activity we have seen serves to underline just how important the role of the small to medium-sized business is in rebooting the UK economy. If the performance we have seen in Q3 continues, or even improves, it can only have a positive impact on the wider economic picture and areas such as consumer confidence.
“However something of real concern is the time businesses are spending chasing unpaid bills. “Almost one in 10 firms spend more than a week in every month pursuing debts and another seven per cent are putting aside four to five days on this task.
“This is a real issue for smaller businesses but there are some solutions to help deal with the late payment issue and free up cash flow. Invoice finance is one solution, which not only frees up cash flow but takes away the burden of chasing late payment and allows owners and managers to focus on other important core aspects of managing and growing their businesses.
”It is an issue we will continue to monitor and is certainly one that executives should look more closely at as they continue to manage their way through today’s volatile economy.”
Kate Sharp, chief executive of the Asset Based Finance Association (ABFA), says: “There are some really positive findings in the report which points to an increase in performance that is remarkable given the backdrop of the turbulence of recent months.
“Funding remains a key issue for small and medium-sized enterprises, so it is encouraging to see how many are preparing for a possible second downturn by investing in growth strategies, improving supply chain management and cutting costs.
“But clearly confidence is still a factor and we need to ensure the encouraging performance during Q3 is not overshadowed by talking up the spectre of a double dip recession.”
