The UK economy saw zero growth in the fourth quarter of 2019; now business groups are calling for a spring Budget that supports the UK's small firms.
Commenting on the news, Tej Parikh, chief economist at the Institute of Directors (IoD), said: "The UK economy ended 2019 in a funk, and despite a recent rise in optimism, businesses will be looking for a significant boost from the chancellor next month.
"It's likely that political uncertainty and unwinding stockpiles caused the economy to flag at the end of last year. However, firms entered 2020 with more of a spring in their step. Confidence has shot up, while hiring plans and investment intentions have also risen a notch, but the post-election bounce may tail off."
A number of key business surveys in 2020 have seen a surge in optimism among small firms. The latest poll, from Hitachi Capital Business Finance, has found that two in five small business leaders (39%) predict growth by 31 March - the highest level for 18 months.
The findings show a rise in growth outlook in most sectors, with a significant upturn of growth projections in real estate (49%), IT and telecoms (49%), legal (47%) and media (46%). Regionally, small businesses in the East (43%) join London (47%) and the North West (45%) as having the most businesses with a positive outlook for the months ahead.
However, Tej Parikh has warned that uncertainty over the next stage of Brexit negotiations as well as other potential "hiccups in global growth" - including the fallout from the Coronavirus - could put the brakes on the economy. He said: "This makes the Budget a crucial moment to get the economy moving. The chancellor must clear the way for entrepreneurs to create jobs and drive up productivity, by unleashing investment in start-ups, slashing business rates and revamping our skills system."
Mike Cherry, national chair of the Federation of Small Businesses (FSB), said: "Small firms right across the country will be looking to the upcoming Budget as a chance to turn things around and create a pro-business environment that encourages growth and success.
"For too long, small firms have been in the doldrums with business confidence in negative territory for the entirety of 2019. This negative confidence has seen small firms hold back on investments, exports and hiring intentions … The Budget next month is a chance for the chancellor to illustrate his support for small firms that he committed to during the general election campaign."
Written by Rachel Miller.