John Allan: Small businesses are driving innovation within the service sector

The UK's service sector has outdone itself in recent months, with the latest forecasts predicting a rather more impressive end to 2015 than previously expected. Our economy is rounding out and is in good health despite shocks from China and a sluggish eurozone.

Much of this optimism can be attributed to the small businesses that are seeking out ways to innovate the service sector. The latest figures from industry analyst Markit suggests the UK will see steady growth in the fourth quarter due to the sector's strength. This comes despite earlier fears that deceleration was just over the horizon for the nation's economy.

Growth across the UK's service sector hit a four-month high in November. The announcement that the Purchasing Managers' Index hit 55.9, rising from 54.9 in October, beat the expectations of economists at Reuters who predicted the PMI for the month would come in at 55.0.

What is behind this growth? No doubt there are many factors at play but the role of small businesses cannot be overstated.

The figures speak for themselves: small companies account for 99.3% of private sector businesses in the UK. They also employ almost half of the total amount of private sector workers and account for around a third of private sector turnover, adding up to £1.75tn (€2.41tn, $2.63tn). Evidently, small businesses have become the lifeblood of national economic recovery because they have so successfully managed to reshape the face of the service sector.

The service sector is a broad one, ranging from banking to hairdressing, and is characterised by the dynamic businesses that populate it. The recent figures prove it is these small businesses that are helping strengthen the UK's economy and employing the population. Indeed, the latest ONS statistics put the national unemployment rate at its lowest since before the global financial crisis.

Small businesses have created waves in the service sector because they have the flexibility to react quickly, drive innovation and achieve change in this highly demanding sector. Unencumbered by cultures resistant to modernity and endowed with inquisitive talent, they are embracing the world around them and churning out striking results.

Technology is at the core of helping businesses of all sizes reach new heights. For small businesses, technology is incredibly useful because it allows them to boost their existing operations and access new markets at a relatively low price.

Take fintech, which is one of the fastest-growing sectors within the UK economy because it has successfully seized upon London's time zone advantage and the proximity of the capital's financial, political and tech clusters. The growth of innovative fintech is due to the ability of teams to work in incubators, remotely and at home to avoid the capital's exorbitant commercial rents.

By finding ways to do business outside of the conventional parameters, fintech demonstrates how the next generation of movers and shakers in the tertiary sector will be born of innovative ideas, and not just of exclusive business schools.

The ability of small businesses to adopt and adapt to technology means they are able to find cost-effective ways to overcoming challenges. Rent is an obvious one but think about how instant messaging cuts phone bills and how digitisation of records reduces admin costs.

Being able to embrace technology means saving money and increasing the capacity to deliver innovative services. Small businesses are not only rising to the challenge but are thriving off it.

According to Markit's chief economist, Chris Williamson, the UK's economy is on course to grow by 0.6% in the fourth quarter of 2015, up from 0.5% in the three months to September. The UK is looking at a continuation of economic growth and low inflation, also known as the much sought-after "Goldilocks principle".

This growth needs to continue and the International Festival for Business in 2016 will be a great platform for small businesses to meet with delegations from overseas and expose their businesses to the global marketplace. The festival is the largest of its kind in the world, and takes place over a three-week period in Liverpool in June.

I am delighted to be an ambassador for the International Festival for Business 2016. FSB has a major role to play. We are looking to host a major moment in the festival to capitalise on all this optimism, tap into the new energy and creativity of small businesses, and help them break into global markets and supply chains. Around the festival, FSB will talk to policy makers about how to make trade agreements work for small firms, not just large corporates.

It is the proliferation of small businesses, their entrepreneurial spirit and their freedom to act that can be credited for these welcome "steady growth" figures. From gaming apps to recycling initiatives, small business are challenging well-established institutions, boosting the UK's economy and becoming global leaders in their own right.

The steady growth of the service sector is leading the UK in the right direction, and if the manufacturing and construction industry can be jolted into action in 2016 then the UK economy has a great future ahead.

John Allan is national chairman of the Federation of Small Businesses and an ambassador of the International Festival for Business 2016.