Despite more than half of Britain’s small businesses voicing concerns over then current economic climate, new research reveals that business risk is at its lowest in four years.
Business risk in the UK is now sitting at 36.72 points, according to Zurich’s SME Risk Index, a decrease of 9% in the last six months.
This is also the lowest level of risk to the UK’s small and medium-sized enterprises (SMEs) beginning of the index in the third quarter of 2012.
The results from the survey of over 1,000 SME owners and decision makers come despite the fact that almost half (45%) believe their business faces more risk now than compared with 12 months ago. Yet, the number of businesses that have considered closing down are at their lowest ever level since the inception of the SME Risk Index (7%).
This may be because SMEs are feeling some relief in key areas other than economic concern, which are contributing to the success of their business.
Anne Griffiths, head of SME proposition at Zurich said: “Small business has been through the mill over the past four years, due to a changeable business environment of fluctuating political and economic concern.
“There appears to be light at the end of the tunnel for small businesses, though. Workforce challenges and concerns over business risk are at a four year low and businesses are growing at twice the rate they are shrinking in the UK. The SME community has long been the economic heartbeat of the United Kingdom, and while fixing the economy remains the highest priority, the wider picture is one of success, prosperity, and most importantly, optimism.”
Workforce challenges and red tape, which were seen as the most concerning issues just six months ago, were the greatest fallers among areas of business risk. Workforce challenges are now considered a concern by less than a third of small businesses (32%) compared with almost half (44%) just six months ago; a fall of more than a quarter. Red tape is now also considered a roadblock by less than a third of businesses (30%), compared with almost two in five (39%) 6 months ago.
The general reduction in business risk has seen a positive knock-on effect throughout a number of significant business operations. Nearly a quarter fewer SMEs have had to reduce prices in the last financial quarter (15% of SMEs), and more than a quarter less have had to make staff cuts (9%) compared with 6 months ago.
Perhaps most encouraging was that twice as many SMEs reported business growth in the last quarter (36%) than reported a reduction in the size of their business (18%). While the business environment remains uncertain, more than a third of businesses appear confident that the current economic situation will improve in the next financial (35%) and more than two in five see it improving over the course of the next 12 months (42%).