SMEs ‘pessimistic’ over market outlook
The first quarter of 2010 has failed to douse financial flames
spreading across SME offices as research reveals many are fearful
for the year ahead and await the general election before altering
their outlook.
According to insurer Aviva, 60% of SMEs expect conditions to
"remain difficult" for the rest of 2010 and a further 32% believe
there is a "real risk" of a double dip in the economy. By contrast,
only 14% were optimistic that green shoots would appear during 2010
and only 9% had seen their prospects actually improve during the
first three months of the year.
But fortunes could change for better or worse following one of
the most hotly contested general elections for a generation, as 70%
of SMEs believe the result will have a "significant impact" on the
business environment.
"Officially, the recovery started towards the end of 2009, but
for many businesses green shoots have yet to appear," commented
David Bruce, Commercial Product Manager at Aviva. "Small business
owners remain resolute and resourceful, but they continue to need
support and advice.
"With the Election just a few weeks away, many will no doubt be
looking for further clarity on the key policy pledges that will
have a tangible effect on their bottom line."
Until that time there are still a number of issues blighting the
SME market. Top of the agenda is cash flow, as 33% claim their
biggest worry for 2010 remains sourcing additional revenue.
Declining sales, 28%, and widespread concerns over potential
changes in VAT, 17%, are also muting market optimism.
On the plus side, the proportion of SMEs reducing staff pay or
hours has fallen over the past six months from 18% to just 11% at
present. Similarly, the proportion reducing temporary staff numbers
has fallen from 17% to only 6%, and the number reducing permanent
staff has dropped from 10% to 8%.
However, alarmingly SMEs seem to be hording cash where possible
by terminating commercial insurance agreements, with 15% admitting
cancelling cover in the past six months.
"The same problems that small businesses have been facing for 18
months still haven't been solved since our last survey in October
2009," added Mr Bruce. "However, it's encouraging to see evidence
of more businesses retaining staff and ending the policy of
reducing pay and hours.
"Though, it makes little commercial sense if these measures are
being funded in part by companies cutting back on their insurance
policies. Not only could this be illegal as some insurances are
compulsory but owners are putting their livelihoods on the
line."