A fifth of small businesses plan cuts in next six months

Only 19% of firms expect to boost investment


Less than one in five small companies expect to increase their levels of investment in the next six months – while 21% plan cuts.

That is according to a new survey by Lloyds TSB, unveiled today, which shows that the overall level of investment by small firms has dropped from -1% at the beginning of the year to -2%.

The survey shows that the general outlook within the business community remains extremely cautious. Just 15% of companies expect profits to rise over the next six months – well down on the 18% recorded in the equivalent survey a year ago.

Problems

When questioned by the Lloyds TSB survey, 23% of businesses admitted feeling restricted by a lack of available finance and 19% by excessive regulation (19%).

Meanwhile, the pressure exerted by higher energy bills and material costs has compelled 36% of firms to raise their prices in the last six weeks, even though profit outlooks “remain weak.”

And perhaps most significantly, the domestic market remains a problem; in fact, 56% of the companies surveyed stated that sluggish domestic demand was the biggest threat to their business. However there appears to be some hope in the overseas market.

Of the survey’s respondents, 46% expect to see a rise in foreign sales in the next two quarters – while only 8% predict a fall in orders.

John Maltby, managing director of Lloyds TSB Commercial, said: “With domestic demand in the doldrums, and confidence still muted, it is understandable that firms are worried about investing for the future.”

However he expressed concern about the implications of these results for the economy at large, adding:

“The fact is that if businesses do not invest, it could damage an already fragile recovery, and result in even slower growth.”

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