December 23 2014.

Three in five (62%) small firms expect to grow their business in 2015 according to research published by the Federation of Small Businesses (FSB). The FSB's Small Business Index finds that while firms are less confident than in previous quarters, they still expect to hire more staff, increase exports and grow their businesses in the first quarter of 2015.

Small firms' productivity grew year-on-year in the second half of 2014, rising by 1.1 per cent in the fourth quarter of the year. This is an encouraging sign for the both economy as a whole and workers in particular, as wage growth is typically linked to productivity increases.

John Allan, FSB National Chairman, said: "All the signs show that as we head into the New Year small businesses are expecting to grow and take on new staff. But to achieve these positive ambitions small firms will need certainty in the domestic economy including interest rates."

The importance of continued Government support thorough schemes such as Funding for Lending is vital, with nearly a quarter of businesses (22%) reporting the cost of finance as a barrier to growth, compared to 10 per cent a year ago. The situation is most acute for the smallest firms. Only 11 per cent of small businesses without employees report that they find new credit affordable, compared to 44 per cent of those with 51 or more staff.

John Allan continued: "There are signs that more support could be needed. The perception of increasing cost of finance, and further warnings of a downturn on the continent, demonstrate that Ministers need to continue to do all they can to support small firms. Building on extensions to schemes like Funding for Lending, the Employment Allowance, and recently improved business support programmes are crucial to this."

Key Findings:
- The FSB's Small Business Index held at +17 in the fourth quarter of 2014, firmly in positive territory, but lower than in previous quarters.

- 62 per cent of firms expect to grow in the next 12 months.

- Nearly a fifth (16%) of small businesses hired more staff in the last quarter of the year while only one in 10 (11%) reduced numbers in Q4 2014.

- Nearly a quarter of businesses (22%) reporting the cost of finance as a barrier to growth, compared to 10 per cent in Q4 2013.

- London, the West Midlands and Eastern England grew most in confidence compared this quarter in 2013.

- Confidence is greatest in the IT sector, while it rose fastest in health and social work and transport.