Mid-market businesses are preparing to expand as confidence surges to a score of 9.3 from -0.3 since September 2011, according to the latest Commonwealth Bank Future Business Index.

The bi-annual analysis indicated the index showed companies have recorded a confident outlook for business conditions over the next six months and citing strong expectations for increases in revenue.

Consistent with recent reports, performance across sectors and States remains patchy however all areas recorded positive increase from the September Index but retail still remained to be one of the sectors to post the weakest results at -1.0 in comparison to business services (20.0) and health & education (18.7).

According to Symon Brewis-Weston, Commonwealth Bank’s executive general manager of corporate financial services, the latest findings were a clear sign that confidence was returning to the market.

“Appetite for investment is on the way up; the fact that businesses are looking at this over a six month time horizon also shows they have more conviction about the direction they want to take. This shift in attitude comes against the backdrop of continuing change in financial markets and at a time when cost pressures remain relatively high,” he said.

“What this means is they are prepared to look at expansion despite the challenges that are still confronting them. Many mid-market companies have been sitting on sizeable cash reserves for some time and it’s clear they are now re-visiting original investment plans that had been put on hold.”

Almost half (49 per cent) of businesses expect their revenue to increase over the coming six months, with a similar figure (44 per cent) indicating this will flow on to an associated increase in profits.

Despite seeing a 6 per cent drop from September 2011, rising energy costs (69 per cent) remained the biggest factor impacting organisations, followed by fuel costs (65 per cent) and rising wages (59 per cent). Increased domestic competition was also front of mind, with concerns rising 8 per cent for 47 per cent of business saying this will impact their organisation over the next six months.

Also, 70 per cent said they had implemented initiatives to enhance efficiency and/or productivity in the last six months. Companies identified the main driver (44 per cent) as the need to consolidate their financial position, followed by 19 per cent which said it was to strengthen their position in the market and 15 per cent which did so to measure against market uncertainty.

“This piece on productivity is extremely important and it’s clear that businesses are getting smart when it comes to counteracting outside market forces,” Brewis-Weston said.

“The Index also shows a slight increase in those businesses looking to diversify their strategy. This, combined with efficiency and productivity, will be key moving forwards. In the face of slower market conditions it is these sorts of companies that will set themselves apart from the broader market and continue to thrive.”

The Index is an analysis of the views of financial decision makers in companies with a turnover of $10m – $100m, measuring their outlook for business conditions, investment plans, business challenges, projected revenue and how prepared they are to navigate future volatile conditions.