UK small business profits reach seven-year high

Small businesses in Britain are achieving turnover and profits last seen before the financial crisis in 2008.

As UK living standards return to pre-crisis levels, small businesses are also reporting their best performance since 2008.

Britain’s small firms have increased turnover, raised profits and expanded workforces over the last 12 months, according to the latest survey from the government, with businesses forecasting this positive trend to continue in 2015.

Four in five (78 per cent) reported a profit or surplus in the last 12 months, which is back to levels last seen in 2007 and 2008 and up six per cent on 2012. It comes as an Institute of Fiscal Studies report shows average household earnings in the UK are also back to pre-crisis levels.

The Small Business Survey also shows 40 per cent of small businesses have increased turnover in the last year, although one in five (18 per cent) said this fell. More than half (51 per cent) say they expect to grow turnover over the next year.

One in five firms recruited more staff last year but this is also set to improve in 2015 as one-third of small businesses plan to raise headcounts this year.

Belt-tightening continues, however, with the number of small firms seeking finance falling from around one in four in 2012 to one in five last year.

Business Minister Matthew Hancock said the data shows the government is on course to making Britain “the best place in the world to start and grow a business”.

He added: “Small businesses are leading our economic recovery and we have thrown our weight behind them, like never before.”

The minister pointed to the more than 850,000 small businesses that have benefitted from the government’s Employment Allowance, while efforts to improve exporting have also paid off.

“We’ve cut back £10 billion of burdensome red tape and last year UKTI helped nearly 48,000 businesses export more than £49 billion of goods overseas,” said Mr Hancock.