By Claire West, Fresh Business Thinking
The vast majority (84%) of senior decision makers from British small and medium-sized businesses (SMEs) say they are concerned about the current economic climate, with three in five businesses (60%) not confident that the economy will improve over the next year. This is according to the latest quarterly SME Risk Index from global insurer, Zurich, and polled by YouGov, surveying over 500 senior SME decision makers.
This anxiety at the current state of the economy is highest amongst SME decision makers in the construction industry (93%), closely followed by manufacturing businesses (88%) and retailers (85%).
Such pressures have culminated in over one in ten SMEs (13%) stating they have considered closing down their business in the last quarter – up from 11% in the quarter before - with this rising to a quarter (25%) for those in the construction industry (vs. 15% the quarter before). It’s no surprise then that more than half of SMEs (53%) feel that the current business environment is more risky than this time last year, compared to only 11% who believe the level of risk has fallen.
Unfortunately, even the much hoped-for London 2012 ‘business bounce’ didn't materialise with over three quarters (79%) of respondents saying that the Games had no impact on their business. Only 6% of respondents agreed they had a positive impact.
It is clear that worries over the economic climate could be having a big impact on employment and day-to-day business operations, with 63% of SMEs concerned about current revenue and income stream generation today. One in six (15%) SMEs have had to reduce staff numbers in the last financial quarter and over one in ten (12%) have had to reduce wages whilst maintaining staff numbers. In addition, almost one third (32%) of British SMEs say they have had to reduce prices in the last quarter; with 63% saying that management in their company are currently concerned about profit and margin levels.
However, encouragingly SMEs are fighting back with innovative measures, with over half (56%) saying that they have expanded business activity to target new customers. Moreover, 31% of respondents are seeking to diversify their business offering through methods such an expanded product range and services. When asked to list three opportunities for their business, 23% of respondents said web-trading, 22% business innovation such as teleworking, and 19% access and expansion to overseas markets and customers.
Richard Coleman, Director of SME, Zurich, comments:
“British SMEs are clearly facing a huge amount of risk in the current climate, with narrowing profit margins, tighter operating environments and uncertain revenue streams.
“However, their focus on web-based solutions and innovation to cut costs shows a positive sense of direction and ambition to move forward. And a fifth have invested in business assets and operations over the last quarter.
“The fact that the majority of British SMEs have expanded their business activity to target new customers is reassuring. This demonstrates the agility of British SMEs; they are taking forward their own measures and diversifying their business to navigate through this difficult climate.”