By Marcus Leach

As we enter 2012 many of us will be hoping for a prosperous start to the New Year, but sadly for most businesses the reality is somewhat different.

Hilton-Baird Financial Solutions’ latest biannual Small to medium sized enterprise (SME) Trends Index, which questioned 417 business owners and finance directors last October, has shown most respondents enter January 2012 more apprehensive about the future than they were in April 2011.

With late payment rife, order books down and the challenges involved in accessing traditional funding well-documented, it is no surprise that only 31% of respondents are expecting their business to expand over the next six months. Meanwhile, a worrying 20% predict it will contract. Yet there was an underlying theme amongst respondents that the national media is largely to blame for the length and depth of the downturn due to its constant negativity.

Further analysis of the data confirmed that confidence is crucial, as one respondent summarised: “It would be helpful if all types of the media stopped spreading negative news. It is so depressing when it is all doom and gloom. If people feel there is hope, everyone can face the future with a more positive outlook. Now there is never any good news — everything is talked down.”

Such negativity can become a self-fulfilling prophecy that has a detrimental impact on businesses and their future investments and outlook. Given that the independent Office for Budget Responsibility has downgraded its economic growth forecast for 2012 to just 0.7%, the chances of grim vision becoming a reality look increasingly likely.

This mindset has therefore resulted in business owners opting to horde their cash rather than invest in their future, as one respondent reveals: “We should be recruiting more staff, but the economic outlook is so uncertain that we are holding back on all major decisions. If confidence is boosted, I expect strong growth for our company, if not we could be in for a very rough ride and all bets are off.”

The blame does not lie solely with the media however, with others instead highlighting limited access to funding - which is required to overcome businesses’ cash flow challenges - as a reason for the sustained downturn: “There is not enough money circulating,” explained another respondent. “Businesses are relying on bigger and bigger overdrafts where previously none were required. Small businesses cannot carry the financial burden of non-payment of bills while the banks are not prepared to facilitate credit to the level it is required.”

Managing Director of Hilton-Baird Financial Solutions, Evette Orams, therefore urges businesses to take a thorough look at the wider options available to them.

"“It is clear that UK businesses — and small to medium sized enterprises (SMEs) in particular — are suffering from a distinct lack of confidence currently. This inevitably leads them to at least think twice, if not defer any decisions regarding investment in their business’ growth,” she said.

“The difficulties firms have faced in accessing traditional sources of bank finance has served to exacerbate issues, but, by exploring other options available, owners can give themselves the best chances of growth and take measures towards safeguarding their long-term stability.

"Our survey found that 50% of invoice finance users expected their business to expand in the next six months, demonstrating that by securing a more flexible and targeted cash flow solution businesses can set themselves up for growth.”

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