Stronger profit expectations and an anticipated improvement in orders has boosted confidence among Yorkshire’s small and medium firms, according to a new survey today from Lloyds TSB Commercial.

But increased confidence is not expected to lead to major employment or investment growth as many firms remain cautious, says the latest Business in Britain survey.

It shows that regional firms are more confident due to a more positive outlook for Europe, and are hoping for better business activity during the first half of 2013.

Meanwhile, the head of a regional finance body which has supported several Bradford companies has called for more cohesion of business funding provision.

Alex McWhirter, chief executive of Finance Yorkshire, said this was necessary to encourage more small and medium firms to invest and grow.

The twice-yearly Lloyds TSB report, based on feedback from 1,800 UK businesses including 96 firms in Yorkshire, shows that optimism is at its strongest level since the economy came out of the initial recession in 2009.

The survey’s Business Confidence Index tracks expectations of likely sales, orders and profits for the coming six months and balances positive against negative opinions.

The index increased to 19 in Yorkshire, from a balance of 18 in July, 2012, due largely to a rise in expected sales and orders.

However, employment and investment expectations increased only moderately.

Lloyds TSB Commercial regional director Leigh Taylor said: “It is good to see that businesses in Yorkshire have managed to work through the tough economic headwinds of the last couple of years and have a rather more positive outlook for 2013. However, many firms are still cautious and are not investing in increasing their headcount or on key capital projects.

“Although this is understandable given uncertainty, many more could consider investing now.

“Investing now could pay dividends for companies’ profit margins in the future. Despite the good news that businesses are feeling more upbeat about trading in 2013, weak domestic demand is still a major concern for businesses in Yorkshire.”

Mr McWhirter said Finance Yorkshire was looking to increase the level of gap funding it provides to companies in 2013 after growing total investments over the last two years to £32, 5 million, which had created or safeguarded more than 5,000 jobs. Among companies helped last year was Keighley-based Arvensis, a sustainable plastics packaging manufacturer supplying leading retailers such as Morrisons, which was granted a £150,000 loan to boost working capital and fund expansion. .

Mr McWhirter said: “There are numerous sources of finance available to owner managers, but this landscape of funding lacks cohesion and faced with such confusion, they tend to approach the likes of banks and friends to secure finance. This must change in order for the UK economy to grow.”