By Max Clarke

Over half of British SME owners see tough economic conditions as the main threat to their business continuing for the next two years, according to Scottish Provident’s Business Protection report.

According to the survey, the second biggest threat to SMEs (small to medium enterprises) (20%) between now and 2013 is the impact of climate change on the environment. Just one in ten view cash flow issues such as late payments as their biggest threat to survival, while just one in a hundred SME owners see red tape as their biggest burden.

While SME owners are most worried by these external threats, some realise there are also internal threats which could cause problems. Over one in five believe that there is a fairly high chance (at least one in three) of losing one of their key employees to a serious illness before retirement which will keep them off work for six months or more, showing that the threat of losing a key worker is a worry for many firms.

Furthermore, 56 percent of small business owners have also stated that the death of a key employee would have a very severe or serious impact on their company, while a similar number stated that there would be severe problems for the business if a key employee contracted a serious illness that put them out of work for six months or more.

In spite of this, just one in four SMEs have key employee or keyperson insurance in place. A slightly greater number hold partner/shareholder protection products, while just over one in five SMEs (21%) have a form of business loan protection.

Susan Barclay, Head of Marketing, Scottish Provident, said: “While small businesses are showing concern about losing a key worker to a critical illness or death, precious few seem to be acting to safeguard their company in that eventuality. The statistics are frightening — in a business with four key male employees, there is a 29% chance one will die before retirement and a 68% chance that one will have a critical illness.”

In terms of why small business owners do not have key employee protection products in place, one in five said that they had never thought about taking out a policy. One in seven have no idea why they haven’t taken out such a policy, while six per cent felt that key employee protection is too expensive.

Susan Barclay added: “Our research shows that small business owners need to upskill their knowledge of how to protect their business and their employees, in case illness or death should occur. Price should not be a limiting factor, as key employee protection cover has fallen in price considerably over the past decade, and therefore provides small business owners with an affordable option that gives them peace of mind.”