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Small firms show strong growth but lack government support

Small businesses have recorded a third year of solid growth but there is widespread dissatisfaction with governments over what is seen as a lack of support for SMEs, according to an international study.

The survey of 4,000 firms in the UK, Europe and the US shows two-thirds have increased their revenue in the past year - a record high. Large numbers of firms also reported growth in their customer base and stronger order books, indicating further growth ahead.

The report found a widening gulf between the biggest and smallest companies. Eighty-five per cent of firms with a turnover in excess of £10m recorded increased revenue, up from 70 per cent the previous year. Yet only three out of five firms (61 per cent) with sales of £100,000 or less reported revenue growth.

The majority of British firms have "shrugged off" the impact of the Brexit vote, the survey found. More than half said the UK's decision to leave the EU will have no impact on their business, although a significant minority - 31 per cent - saw it as a negative.

Across the six countries studied, only 28 per cent of SMEs said their government is supportive of entrepreneurs. In the UK, the figure has fallen from 45 per cent to 35 per cent. More than half of UK small business owners - 51 per cent - said the taxation system does not favour someone wanting to set up their own business, up from 47 per cent a year ago.

The survey, which was carried out by insurance firm Hiscox, found that bank funding remains in short supply for small firms, with 22 per cent saying finance has become more difficult to access - up from 19 per cent a year ago. One in six entrepreneurs said they are using their credit card to help fund the business and one in 10 are contemplating turning to crowd funding and peer-to-peer lending sites in the coming year.

Recruitment fell this year, with the proportion of firms taking on new staff dropping from 21 per cent to 13 per cent, while one in 10 have cut staff levels. Nevertheless, 21 per cent are planning to increase headcounts in the year ahead, with only four per cent expecting to reduce staffing.

When asked which country has the greatest entrepreneurial spirit, respondents in five of the six countries surveyed - the US, France, Germany, the Netherlands and Spain - put America top. The exception was Britain, where they picked themselves.

Bronek Masojada, chief executive officer at Hiscox, said: "Our study provides a unique insight into the mood and financial wellbeing of the small business sector and there is a strongly bullish tone to this year's report.

"It is notable that small businesses in all the countries covered are now enjoying a positive growth phase, with several indicators pointing to another good year ahead. The findings mirror what we are seeing among our 366,000 small business customers worldwide, who have collectively generated double-digit growth for the two consecutive years. SMEs are the engines of growth and it is vital their interests are taken into account by policymakers."

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