Small businesses struggle to grow in wake of financial crisis

Small businesses are struggling to grow in the wake of the financial crisis, as the volatile nature of the UK’s economy has meant that SMEs no longer have the “resources or morale” to take advantage of opportunities that could potentially bolster their operations.


The findings from a study conducted by the Economist Intelligence Unit (EIU) revealed that Britain’s slow-moving economy, which has stagnated since the economic downturn started in earnest in 2008, has led to the “biggest behaviour shift in a generation”. Many businesses have avoided risk for fears that upsetting the status quo may leave them vulnerable in the current economic climate.


In fact, that research showed that the desire for risk in small businesses in no greater than it was two years ago.


Conservative attitude takes hold


Instead researchers argued that businesses have now adopted a “notable conservatism”, which they argue could be hampering their growth prospects.


The EIU also found that more than half of small businesses spend more time on risk management and analysing their strategy than before the start of the financial crisis. Small businesses are now taking “a longer-term view on financial planning, debt, business continuity preparation and building reserves” than they were previously.


Commenting on the findings, Richard Coleman, a director at insurance firm Zurich, which commissioned the research, said: “It’s great to see the increased sophistication and long term view of many SMEs but for [small employers] to drive growth, we need them to regain their appetite for controlled, calculated risk-taking.


“In the face of such a challenging environment however, some are understandably reluctant to do so.”


In contrast to the report findings, research conducted at the start of the year by insurer Aviva revealed that nearly half of start-ups (48%) who started operations within the last two years are planning to expand in 2013.


If your business is struggling to grow, you may want to consider seeking professional advice on business recovery options.


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