Confidence amongst the UK’s SMEs it at its highest since 2004, according to findings released by an accountancy this week.

KPMG’s latest survey of UK businesses with turnovers between £5 million and £500 million revealed a sharp rise in the number that are optimistic about their sector’s prospects in the next 12 months.

Almost two in three (64%) of the respondents have a positive outlook for the SME market in the next 12 months, an increase of 14% on the previous survey.

They were even more optimistic for the future of their own businesses, with 76% confident about their prospects in the next 12 months - the highest figure since KPMG’s first survey in 2003.

The research also showed that UK businesses are more positive about their prospects overseas. Almost three quarters (74%) of those questioned felt that small to medium-sized UK businesses were either ‘competitive’ or ‘extremely competitive’ in Europe.

KPMG’s UK head of the mid-market, Mel Egglenton, said the people who answered these questions are businessmen, not economists. “Therefore, the rationale for their answer is based not on some detailed analysis of macro-economic trends but the health of their order book. So, to see these businesses in confident mood and with healthy order books surely bodes well for the future.”

Egglenton could not define what prompted this upturn in confidence but said there could be a connection with SMEs struggling with to rising energy costs not so long ago. “Many had to look hard at ways to improve their efficiency, and perhaps as a result they are now left with businesses that are more robust than they would have been otherwise. So it appears that those who felt the pinch over the last year or two have now steadied the ship and are looking forward to the next 12 months with a renewed sense of optimism.”

The report claims that part of the reason for this rise in confidence may be due to 58% of respondents believing that the economy was on an upward curve, whereas in previous polls opinion on the economic cycle had been fairly well spread out.