The amount of money businesses are investing in themselves has risen significantly over the past year, suggesting increasing confidence among small firms about their prospects.
Research conducted by the Institute of Directors (IoD) found that business investment rose by 7.2 per cent in the first quarter of 2004, compared with the same period last year.
The IoD said that its members have experienced a marked improvement in investment intentions, which was now being backed up by an acceleration in actual business investment.
The survey suggests that the rise in optimism is now bearing fruit, with small businesses confident that the economic downturn is now behind them.
Other research has shown that recruitment intentions are also rising sharply, although the lack of workplace skills is hampering many businesses wanting to take on new staff.
However, the IoD said that there was a large disparity between the investment levels of the services and manufacturing industries.
While services investment rose 9.3 per cent over the past year, the ailing manufacturing industry invested 6.9 per cent less than in 2003.
Graeme Leach, chief economist at the IoD, welcomed the figures.
“Today’s figures show that for the service sector we can now expect a sharp recovery in business investment in 2004, but there remains considerable uncertainty about the outlook for business investment in manufacturing.
“IoD member surveys suggest that business investment in both services and manufacturing will accelerate this year, but in manufacturing it will start later and be more subdued,” he said.
