Broadband go-slow threatens to derail SME revival

Confidence is returning slowly, research suggests. But the Government's 'fast' broadband plan won't help.

Last Updated: 31 Aug 2010

SMEs are now more optimistic than they’ve been for 18 months, according to a study by Continental Research – apparently firms have not felt this positive about the state of the economy since before the run on Northern Rock. So business owners are starting to see a few positives – and with operating costs also on the slide, they’re also starting to feel a bit more confident in their own chances of survival. Indeed, the thoughts of some are already turning to the recovery – and they’ve been distinctly underwhelmed by the Government’s plan for Britain’s glorious digital future…

This quarter, for the first time since 2007, the 300 SME owner/ managers participating in Continental’s omnibus survey were on balance more optimistic than pessimistic about the economy – in fact, there was a swing of more than 50 points from the previous quarter, which just shows how quickly times have changed. Managers’ optimism about their own company’s prospects also saw its biggest quarterly rise for over a year. Larger SMEs (i.e. those with at least 11 employees) were the most confident, but even the minnows of the sector were in positive territory, for the first time in 12 months. ‘The outlook is finally improving,’ says Continental’s Shiona Davies – and these figures certainly suggest as much.

In some respects this isn’t surprising. There’s been so much talk of ‘green shoots’ in the last month (at least until the last few days, when we’ve had some gloomy data on unemployment and public borrowing) that you’d expect a bit more optimism in the air. And although SMEs still face serious issues – notably reduced demand and lower lending – it’s also true that running a small business has got cheaper lately. 1.4% cheaper to be precise, according to More Than Business, which attributes the fall to lower labour, advertising, materials and vehicle costs. So that’s helped.

But can we bounce back in style? That was certainly one aim of the Government’s much-hyped Digital Britain report – but small firms aren’t impressed by the plan to deliver a universal broadband service of 2mbps by 2012 (funded by a levy on land line users). As the Federation of Small Businesses points out, a third of small firms theoretically have this already, but are still struggling to maintain a decent connection. And with countries like Japan already offering 90mbps broadband, it looks as though British firms will find it hard to compete internationally for online spend. The plan ‘lacks ambition and shows the UK is in a time-warp,’ moans the FSB.

Looks as though the Government has missed a real opportunity to boost SME confidence about our future prospects...

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