One in five SMEs shrunk in third quarter reveals Zurich

The economy in the UK might be in a state of recovery but more than a fifth of small businesses shrunk in size during the third quarter, according to Zurich.

The firm’s quarterly SME risk index suggested confidence in the economy remained low between August and October as two-thirds of SMEs added that they did not expect the situation to improve during the final quarter of the year.

That marks an increase of 12% across the last three months, possibly suggesting a slowdown in the momentum of the UK recovery.

Some 34% of the businesses questioned said they face a medium-to-high risk of going out of business in the next 12 months.

Despite this, the situation has improved considerably since the Risk Index was first carried out in 2012, while the past three months saw a score of 39.92 points in October, down from 42.17 points in July.

Previous research from Zurich also identified a two-tier approach whereby businesses who were taking control of their individual situations were performing better.

This means that adequate risk planning was in place and companies with confidence were not afraid to push performance levels to ensure better results.

For businesses concerned about their activity and growth it is always advisable to take immediate action, as business rescue procedures and management could change the fortunes of a company.

Acting quickly can reduce the impact of any issues that have been identified and can boost the likelihood of a successful recovery in the long term.

Improved business regulation and compliance may be one factor which is helping to ease concerns – falling by 10% since July – but other issues are now presenting themselves to SMEs.

Of the decision makers who were questioned, 22% said they had worries relating to supply chain exposures while 37% expressed fears about workforce challenges, such as talent availability.

Given that a third of SMEs fear going out of business in the next year, the impact of financial issues for small businesses can also not be underestimated.

By Phil Smith

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