Small and medium sized companies are increasingly optimistic about future business prospects, but many feel the prolonged financial downturn has had a negative impact on their personal lives, according to two recent surveys.

The latest quarterly Small & Mid-Cap Sentiment Index produced by BDO and the Quoted Companies Alliance (QCA) indicates 67% of small and mid-cap companies are optimistic about the prospects for the UK economy over the next 12 months, compared to only 8% at the same time last year. Similarly, the confidence score of advisers to these companies is at a record high.

Companies' optimism about their own prospects remains on an upturn this quarter, and is now only slightly under the report's highest ever score. The majority (74%) expect turnover to increase in the near future.

More than two thirds (68%) of companies now expect to recruit staff over the next 12 months, up from 57% in April. Advisors' views mirror this, reaching a record high, with almost three quarters (72%) expecting job growth.

Scott Knight, BDO partner, said: 'There are indications of a marked change in attitude amongst small and mid-cap companies. Directors are finally planning for expansion rather than survival and seem prepared to put money where their mouths are. Improved employment intentions alongside the steady growth in confidence are very encouraging signs.'

The one area where there has been no change since the start of the year is the difficulty many companies experience in raising capital, with advisors in particular identifying finance as a key obstacle.

This is similar to the findings of the latest Close Brothers Business Barometer which shows more than a third of SME owners confirm that their biggest worry in relation to their business is managing their cashflow.

This research found that, six years on, 64% of SME owners and senior managers feel their personal lives continue to be negatively impacted by the recession, with 30% believing the situation has worsened in the last year.