Confidence among small and medium businesses has bounced back strongly, according to the latest Sensis Business Index (SBI).

The report found confidence levels among small and medium sized businesses (SMEs) rose 16 percentage points following a steep decline recorded in the May survey.

The SBI, based on research of 1,000 small and medium enterprises (SMEs), revealed 53% of small businesses are confident about the year ahead, up from 47% in June. Only a quarter of businesses are worried about their prospects. Encouragingly, the SBI shows that businesses are feeling more positive about the economy overall.

Sensis Chief Executive Officer John Allan said: “Confidence levels have almost returned to the February 2014 level although they remain below the post-election peak recorded last year.

“Businesses that were confident reported that they had a solid customer base, good profitability and a steady pipeline of new business. The report found that a lack of work or sales is the most pressing problem faced by small business.

“There’s a real sense people aren’t spending and there’s increasing concern about competition. We’re seeing more and more businesses looking for help in finding new customers using a range of marketing tools.”

The economic climate, competition, bureaucracy and cash flow were among other challenges that businesses reported.

The finance and insurance sector recorded the highest confidence level. Confidence was also above average in the wholesale trade and health and community services sectors. The lowest confidence level was again recorded in the manufacturing sector. Transport and storage sector confidence is also well below average.

There was a sharp rise in the proportion of SMEs reporting increased wages over the last quarter, with this indicator now at its highest level since July 2012. However, SMEs recorded only marginally stronger performance results last quarter for key indicators such as profitability and sales. Employment declined with more SMEs reporting decreased than increased employment levels.

With economic expectations for the year ahead improving, the next 12 months look positive on key indicators. SMEs are more likely to be expecting increases in sales, employment, wages, prices, profitability and capital expenditure than in the previous quarter.

The report also found support for the Federal Government among SMEs remains soft, despite a five percentage point increase over the last quarter. SMEs in the manufacturing sector and businesses in the ACT were the most critical of Federal Government support.

Mr Allan said: “Business owners are supportive of the Government’s aims to reduce debt, red tape and boost the economy. However, there are perceptions that the Government is more focused on big business, that there is too much bureaucracy, and that their policies are affecting consumer spending.”

Similar results were echoed across the country for State and Territory Governments, with 22% of SMEs believing their State or Territory Government was working against small business.

SMEs’ perceptions of the current state of the Australian economy were neutral or negative in every state and territory with the exception of Tasmania. Those in South Australia were most pessimistic about the current economy, with over one third of SMEs believing the economy is slowing.

For information contact: Darren Behar 0458 001 296 or Julian Liston 0427 689 700.