Small firms in service sector hit hardest

Nia Williams

February 16, 2011

This is according to an ONS article published in the February Economic & Labour Market Review. However in the manufacturing sector the opposite happened, with large firms suffering more than small and medium-sized ones,

Turnover data showed that for the services sector, small firms (those with fewer than 50 employees) suffered a peak-to-trough drop of 38% in the downturn. Medium firms (those with 50 to 249 employees) saw their turnover drop by 19%. Large service sector firms saw only a 3% drop peak to trough.

A very different pattern emerged in the manufacturing sector: there was less variation in performance between the different sizes of firm, but large manufacturers were the worst affected, with a 14% drop in turnover peak to trough. Both small and medium-sized manufacturers saw a 10% drop.

ONS statistician Tullio Buccellato said: “The difference between larger and smaller firms in the service sector may reflect different patterns of activity, with smaller firms concentrated in the provision of specialist services that are especially vulnerable to a fall in discretionary demand – and larger firms in areas where demand is more stable.

“Large firms may also have shown greater resilience to the downturn due to the advantages of scale and diversification that result from being big. For example, large firms are less likely to be dependent on selling to a particular regional or country market. By contrast, manufacturing smaller firms operating in niche markets may have been able to absorb the crisis better than larger, more globally orientated producers such as car makers.”

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