Majority of SMEs think green shoots still hidden
Hopes of an improvement in business conditions for SMEs remain low following the first quarter of 2010 according to new research by Aviva.
When questioned, 60 per cent of SMEs said they expect conditions to ‘remain difficult’ for the rest of 2010 and a further third (32 per cent) believe there is a ‘real risk’ of a double dip in the economy. By contrast, only 14 per cent were optimistic that green shoots would appear during 2010 and only nine per cent had seen their prospects actually improve during the first three months of the year.
SMEs appear to be pinning their hopes on the impact of the General Election to improve their fortunes, with 70 per cent believing that the General Election will have a ‘significant impact’ on the business environment for SMEs in the future.
David Bruce, commercial product manager at Aviva, commented: “Officially, the recovery started towards the end of 2009, but for many businesses green shoots have yet to appear.
“Small business owners remain resolute and resourceful, but they continue to need support and advice. With the Election just a few weeks away, many will no doubt be looking for further clarity on the key policy pledges that will have a tangible effect on their bottom line.”
Growth concerns
Cash flow remains the most pressing item on SMEs’ business agenda with 33 per cent stating that this will be their biggest worry in 2010, rising to over 40 per cent for shopkeepers, salon owners and tradesmen.
Other worries include the fear of declining sales (28 per cent) and concerns of the consequences of any potential rise in VAT to 20 per cent (17 per cent).
A further 10 per cent of SMEs listed the amount of time they spend wading through red tape as their biggest worry.
The research also revealed a significant – and growing – proportion of SMEs admit that they don’t hold any commercial insurance on their business, with 15 per cent of those surveyed admitting they did not have any cover in place compared to 12 per cent six months ago.
Staffing
However, the research does reveal some positive signs. The proportion of SMEs reducing staff pay or hours has fallen over the past six months from 18 per cent to just 11 per cent at present. Similarly, the proportion reducing temporary staff numbers has fallen from 17 per cent to only six per cent, and the number reducing permanent staff has dropped from 10 per cent to eight per cent.
David Bruce continues: “The same problems that small businesses have been facing for 18 months still haven’t been solved since our last survey in October 2009. For example, businesses would still like to cut the amount of red tape they encounter.
“However, it’s encouraging to see evidence of more businesses retaining staff and ending the policy of reducing pay and hours. Though, it makes little commercial sense if these measures are being funded in part by companies cutting back on their insurance policies. Not only could this be illegal as some insurances are compulsory but owners are putting their livelihoods on the line.
Sector specific findings
The research also revealed some interesting sector specific findings:
Tradesmen (such as plumbers, painters, electricians) are most pessimistic about their business prospects in 2010 with 20 per cent expecting it to be worse than 2009, compared to 17 per cent on average.
SMEs operating in the catering and leisure industry are most likely to reduce staffing, pay (26 per cent) and prices (19 per cent) in the coming year, compared to the average of 11 per cent and seven per cent respectively.
Professional services are the sector most fearful about an economic ‘double dip’ (38 per cent compared to an average of 32 per cent).
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