The feel-good factor was spreading across all parts of the UK and most sectors in Q2 this year, the FSB found in its quarterly Small Business Index survey.

An FSB spokeswoman said: “Despite recent output contractions in manufacturing, small firms in that sector are more optimistic about their prospects, suggesting that conditions are improving.

“The chancellor is due to deliver the spending review later in June and the FSB believes he must use this opportunity to build upon these positive figures with initiatives for growth to keep confidence levels high for both businesses and their customers.

“Following another quarter’s results which show four in 10 firms that applied for finance were refused, the FSB wants to see the spending review set a clear plan to improve competition in the banking sector and to help advise small firms on alternative finance providers.”

The increase in confidence levels broadly echoed growing optimism in print, according to the BPIF, which also called on the government to step up its focus on stimulating the business sector.

Chief executive Kathy Woodward said: “It is pleasing to see a general increase in confidence and anecdotal evidence shows printing companies are experiencing better trading. But there is still a high level of caution particularly as there does not seem any significant improvement in the retail sector.

“It is important government continues to focus on stimulating the business sector. The BPIF and other trade associations have written to the chancellor to caution cuts in the coming departmental budgets that will detract from stimulating investment in both skills and technology.

“The government must work to ensure that our energy and trade policies place the UK on at least an even playing field with competitors in Europe and the Far East. Initiatives around financing arrangements still have a long way to go.”

Other FSB findings included more firms expecting their turnover to rise in the coming three months while more aimed to grow their business in the coming year. Meanwhile more firms expected to increase staffing levels in the next quarter, and more small firms reported rising exports.

FSB national chairman John Allan said: “After five consecutive quarters of year-on-year growth, confidence is moving in the right direction. Small firms want to employ more people and grow their business. They want to export and expect turnover levels to increase.

“This is all good news but we must not be complacent. The chancellor must use the spending review to build on this optimism. While there are positive signs, inflation and not being able to access finance will affect how quickly, and how much, small firms can grow and create jobs.

“We know inflation is likely to remain high for the coming 12 months, largely due to rising energy costs. This is why reform of the sector is so important and why it must provide transparency for small firms to choose the best tariff for them.”