The latest Smith & Williamson Enterprise Index confirms that confidence in the economy is on the up.
With a benchmark of 100 on 1 January 2013, last year saw the Index drop as low as 90.1 in the second quarter, rising to 103.3 in the third quarter and ending the year at 97.4. The latest Index, recorded in the first quarter of 2014, jumped to 108.7, well above its initial benchmark.
Entrepreneurs expect the economy to improve over the next few months and are optimistic about their prospects
Our latest Enterprise Index reveals that over 90% of respondents expect the UK economy to improve over the coming 12 months.
The results correlate with recent economic growth data reported by the Office of National Statistics that show that the UK economy grew by 1.7% in 2013, with growth in the last quarter of the year at 0.7%. Index respondents expect this improvement to continue throughout 2014.
This quarter's Index results also revealed that over 80% of respondents are optimistic about their prospects for the coming year.
Is the current Government policy supportive of private enterprise?
When asked whether Government policy is supportive of private enterprise, less than 30% of respondents gave negative feedback. These results are encouraging when compared to a recent Ipsos Mori survey, which indicated that 87% of business leaders from the UK's firms thought politicians had a poor understanding of business.
The past few years have seen the Government introduce various schemes and funding to support business, such as GrowthAccelerator and Growth Vouchers. These changes, as well as those to tax reliefs for investors under the EIS and SEIS schemes, illustrate that the Government clearly believes that innovation and entrepreneurship are the drivers of economic growth.
Access to funding
35% of our Index respondents felt that access to funding is not improving and an additional 30% indicated that it had neither improved nor deteriorated.
This result seems to confirm early 2014 news reports suggesting that since the introduction of the Government funding for lending scheme (FLS), loans to businesses have actually fallen by £2.3bn. For a variety of reasons, bank lending appears to be trending lower.
Housing bubble
This quarter's Smith & Williamson Enterprise Index indicates that 61% of respondents are concerned that the scheme could create a housing bubble in the UK. Our economy and the housing market have undoubtedly experienced a strong improvement since the FLS was launched. Mark Carney, Governor of the Bank of England has recently said that "given the access to credit for households now ... it would no longer be appropriate or necessary for us to have our foot on the accelerator. It's better to shift into neutral."
Employment pool needs better training
Only 40% of respondents to the survey think that the employment pool is adequately educated or trained.
The UK Commission for Employment and Skills recently found that the number of job vacancies in England has returned to pre-recession levels. In addition, they found that "skills shortage vacancies" – where businesses cannot find recruits with the requisite skills – are growing twice as fast.
These findings have caused the British Chambers of Commerce to speak out, arguing that failure to equip young people with the skills that employers need could be a risk to future UK prosperity.
The UK's immigration policy and economic growth
Some reports have suggested that tighter immigration controls could result in a loss in GDP of up to approximately £60bn by 2050 due to the shortage of resources and talent that this would present to businesses.
Our Index participants were asked if they thought that the UK's current open EU immigration policy was hindering economic growth and the majority (72%) said that it was not.
From 2003 to 2013, the number of non-UK EU-born citizens in employment in the UK more than doubled from 762,000 to 1,647,000. Our Index results suggest that businesses value the skills and knowledge that migrant workers bring into their workforce and recognise their importance for business growth.
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