More than a quarter of small businesses “only just surviving”

Directors see no signs that trading conditions will improve

More than one in four small businesses have admitted that they are “only just surviving” – with many forced to make cuts and rationalise operations.

Over 4,450 UK business owners and directors were polled for the Bibby Financial Services Business Factors Index, which found that 27% of small and medium-sized businesses are hardly able to maintain operations.

Subsequently nearly two thirds (59%) of firms are planning on cutting costs, and half intend to work more closely with suppliers to prepare for further economic challenges.

Trading conditions worsen

This  state of affairs is necessitated by recent trading conditions, which 24% of respondents said were poorer than a year ago. Worse still, more than a third (35%) predicted that the UK economy will not recover for at least three years – painting a grim picture of business confidence in Britain.

However the impact of the euro-zone crisis in the second quarter of 2011 on business activity and confidence has yet to impact on turnover levels, with the Index reading slipping just fractionally to 96.7, from 96.8 in the previous quarter – showing Britain’s small businesses are mostly stagnant.

Barriers to growth

Almost a quarter of business leaders stated that the most significant move to stimulate economic recovery would be a loosening of bank lending criteria. Yet, more than three quarters of the businesses polled had not applied for any external funding in the last 12 months.

Edward Rimmer, UK chief executive of Bibby Financial Services, said of the findings:

“With murmurs of an impending second ‘credit crunch’ rife, UK businesses are still in for a bumpy ride…and…there is a danger of negative growth turning into a backwards slide towards recession.   “However despite the perceived ‘doom and gloom’ our second quarter research shows 39% of businesses across the UK are hopeful for the future. Our regional breakdown shows levels of optimism rising as high as 70% in East Anglia and around the 50% point for many areas.”

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He added: “If we are to counteract the effects of economic uncertainty, it is imperative firms have access to the necessary funds to maintain a healthy cashflow and invest in growth, and it will be up to the finance industry to work with businesses through these challenging times.   “While the government has pledged its support, through initiatives such as Project Merlin…to help the country get back to pre-recession levels of business turnover and profitability, I would like to see more businesses investigating other funding options such as invoice finance, which releases cash against unpaid invoices, as a first choice solution.”


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