West Midland small businesses have beaten economic predictions with 47 per cent reporting increase in sales this summer – the best result in the UK.
After a poor year of results, only 13 per cent of the region's firms reported declining sales according to research by the Small Business Research Trust (SBRT).
The West Midlands outperformed in what was already a successful season for small firms with 40 per cent reporting sales increases across the UK. Only the North-East and Northern Ireland saw a dip in sales.
Investment in the West Midlands was also up, but employment fared less well. Whilst 14 per cent of SMEs claimed employee numbers were up, 21 per cent said they were down.
Despite strong sales expectations only seven per cent thought there would be more jobs in the final quarter and ten per cent thought there would be less. But firms were confident investment would increase during the fourth quarter.
Nationally, sales in small business, with ten to 49 employees, and medium-sized businesses, with 50 to 249 employees, were particularly strong.
More than 40 per cent more medium-sized companies and 19 per cent of small businesses reported sales rising rather than in declining – a sharp improvement over the second quarter.
Micro businesses, which have up to nine employees, did not perform so well, but also increased sales after four quarters in which they had declined. In the third quarter, seven per cent more micro businesses said sales were up rather than down.
Employment growth was also strong among medium-sized businesses, with 42 per cent reporting an increase in jobs and only eight per cent a decrease.
Just three per cent more small businesses said they were creating jobs rather than cutting them. But about one per cent more micro firms said that employment was down rather than up, a trend that has continued since the beginning of 2004.
All sizes of business expect sales, employment and investment to grow in the three months ending the year. The highest level of optimism is shown by the medium-sized businesses, with nearly 60 per cent more companies expecting increases rather than decreases in sales.
The difference between those micro businesses expecting increases in employment and investment, compared with those who are pessimistic, is less than ten per cent. But Mark Beresford-Smith, chief economist for HSBC Bank, warned the upbeat outlook may not continue.
He said: "With a positive balance of 13 per cent of smaller firms reporting an increase in their turnover, this is the strongest result since the third quarter of 2004, just prior to the onset of the last downturn.
"It is only in this latest survey that smaller businesses shared some of the fruits of an economy which has grown at, or slightly above, its long-term trend rate for a year.
"Unfortunately, the further strengthening of optimism among respondents may be misplaced.
"Interest rates have increased twice in the past three months, and a further rise cannot be ruled out. The pace of overall growth is, therefore, likely to slow once more during 2007, implying that trading conditions will become somewhat tougher again for smaller firms."
The survey was commissioned by the independent SBRT and supported by the Forum of Private Business (FPB).
Brian Wolfe, the SBRT’s Chairman, said: "In spite of good news for small businesses, other factors suggest they would be unwise to be sanguine about the future.
"Results from the next quarter’s SBRT survey will be crucial in determining if current optimism for growth will be maintained."