In contrast to the BDO Stoy Hayward report that some owner-managers want to quit and return to regular employment, a Bank of Scotland survey has revealed that the vast majority of owner-managers are optimistic about the future of their business.

The UK-wide small business economic confidence survey comes from the Bank of Scotland's Business Banking's arm and is the second such survey they have conducted.

What small and medium-sized enterprises (SMEs) say:

• Over three-quarters believe their business will be better off or remain the same in 2003, with almost a quarter planning to recruit more staff.
• Business is doing well; low interest rates & stable inflation are key factors for optimism.
• The top threat to business confidence is fear of an economic downturn, outweighing even a possible war with Iraq.

Optimism

Encouragingly, over three-quarters (80%) of Small and Medium-sized Enterprises (SMEs) are optimistic about how their business will fare over the next 12 months. Just 23% of owner-managers believe their business is worse off now compared to last year.

The top three reasons for business optimism are:

• Their business is doing well (62%).
• Low interest rates (57%).
• Stable inflation (35%).

Wrong direction

Nevertheless, when looking outwards from their business, just 20% of small business owner-managers believe the economy is currently headed in the right direction. That's a 13% downward swing since the Bank's last survey just three months ago (November 2002).

In what could be seen as a stark warning to the Government that its pro-enterprise mantle is slipping, over two-thirds (66%) of the UK's three million SMEs feel the country is going in the wrong direction - a downward swing of 15% in just three months.

Downturn worse than war

Despite the fundamentals of the economy remaining strong and recent official indicators underlining continued economic growth, 85% of small businesses believe a downturn would be a greater threat to their confidence than a possible war with Iraq (75%).

With just 15% of SMEs believing their business will be worse off over the next 12 months, however, the figures may suggest perceptions of a downturn are unfounded.

Tom Abraham, Bank of Scotland Business Banking's Managing Director of Sales and Customer Relationships, said:

"The majority of small businesses remain very positive about their own business' ability to ride any downturn. The spectre of war and fears of a future economic downturn have done little to suppress the optimism of owner-managers and it is encouraging that growing numbers are planning to increase investment in their business and recruit more staff in 2003."