Member Article

Economic recovery fails to halt potential SME shut downs

More than one in ten (12%) of Britain’s small and medium businesses have considered closing down in the last three months despite ongoing signs of economic recovery and a drop in concern about business risks.

The findings come from the latest SME Risk Index by Swiss insurer Zurich, and highlight a persisting threat that many small businesses face – that although many signs point to recovery, a sizeable number of firms are still teetering on the brink of shutting up shop.

Additionally, one quarter (25%) of the SME decision makers surveyed said their business had to lower their prices over the past three months because of the current economic climate, and more than 1 in 10, (15%) have had to give up a staff member within the last three months.

Domestic competition is a key concern too, with well over a third (39%) of SMEs listing it as one of the top market threats to their business.

Despite these figures, concerns about overall business risk have fallen over the past 12 months, down from 43.41 points in July 2013 to 42.17 points this month.

This drop could be related to a decrease in worries expressed by SMEs in other areas of risk.

Less than half of the SMEs surveyed, (47%) are now worried about maintaining good cash flow within their business, a 6%drop on July 2013 and less than a quarter, (24%) are concerned about their debt levels, a 5% drop on July 2013.

25% of those surveyed say their business uses technology but they don’t face any risks from it, for instance hacking or data loss. Likewise 25% say regulation poses no challenge to their business at the moment.

Richard Coleman, director of SME at Zurich, comments: “Our research demonstrates that while concern about risk amongst SMEs is falling, the risks themselves are still very much there.

“That the number of companies considering closing down because of the economic climate has remained consistent over the past twelve months, suggests that serious financial difficulties are still on the agenda for many.

“While it’s great to see that SMEs are feeling better about the risks their businesses face, the findings suggest to me that the recovery isn’t affecting all firms equally.

“It appears there remain at least two ‘tiers’ of SMEs, with a reasonable number still struggling as the recovery gains pace. We have often found a link between strong companies and a strategic approach to risk, so with the economy improving all the time, the winners will be those business owners who take control and gain peace of mind through better risk planning and advice.”

This was posted in Bdaily's Members' News section by Clare Burnett .