SMEs face crisis of confidence

Robyn Hall

July 12, 2011

The Aviva Pulse identifies that confidence among SMEs in 2011 is lower than ever.

When questioned, only 13% of SMEs thought the UK economy would see any sign of improvement in 2011, leaving the vast majority predicting difficult days ahead.

This represents a 5% drop since autumn 2010, when 18% believed the economy would start to improve in early 2011.

Over one third (37%) have found trading conditions tougher than they expected so far this year, a trend that has continued from autumn 2010, when 39% experienced similar trading conditions.

This figure increases to 43% among owners of shops and salons, the highest of any other business type.

More than one quarter (28%) of SMEs questioned still believe there is a real danger of a double-dip recession – and this has not changed since last autumn.

On a more positive note, over a third (35%) of restaurants have actually found conditions easier than expected in 2011, the highest of any business type. This is markedly up from 2010, when just 21% expressed such optimism in this sector.

The summer months will provide a vitally important trading period for SME’s, with 28% predicting a difficult summer. And 6% claim this period alone will determine whether they can continue to do business into the rest of the year.”

Taking action

The Aviva Pulse also identifies some positive and proactive steps being taken by SMEs to combat the prolonged difficult business conditions.

In terms of steps that have already been taken, almost one quarter (24%) of those surveyed have reduced prices in the last six months – and 1 in 5 have recently diversified their businesses, either by offering new products or targeting a new audience.

David Bruce, commercial product manager at Aviva, said: “It is evident that the tough trading conditions we saw last year have continued into 2011.

“Confidence among SMEs is as low as it has been since the onset of the recession and many feel they are in real danger of losing their businesses should the economy fail to improve this year.

“The recent spate of failures on the high street confirms that the consumer-facing economy is feeling a particular squeeze at the moment as discretionary spending falls.

“Despite this, it’s heartening to see an improvement in sentiment from restaurateurs compared to last year.

“Looking ahead, there seems to be little change in the tactics that will be employed by small business owners to improve trading – we can expect further discounting, increased efforts to diversify into new product and service lines, and regrettably a reduction in staff numbers.”

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