Small firms facing increased pressures
Small and medium sized businesses across the UK are struggling, according to the latest overview of the sector.
Research from the Centre for Economics and Business Research – carried out in conjunction with Clydesdale and Yorkshire Banking Group – suggests the overall health of small firms is at its lowest level for three years.
The index dropped by 9.9 points in the first quarter of 2017 to 46.5, on a scale of 0 to 100 where the latter represents strong health and performance.
From December until the end of March, only two of eight indicators showed any signs of improvement.
It is noted that while employment and business confidence have improved, a rising number of bankruptcies and slowing revenue have caused concern among small businesses.
Companies also reported that they had rising levels of spare capacity during the first quarter, while import costs have increased as the value of the pound has dropped.
The latest index figure represents its lowest level since the first three months of 2014 when the survey was first carried out.
CYBG Chief Executive David Duffy said the prospects of the UK’s small businesses will be critical following Brexit when a strong and competitive domestic economy is needed.
The latest Lloyds Bank Business in Britain report states that confidence is at an 18 month high and points to strong performance in the services, construction and retail sectors.
It is based on expected sales, order volumes and profits for the coming six months and is now at double the level it was following the EU referendum in June 2016.
However, businesses have continually reported a struggle to recruit skilled workers – the number currently facing difficulties is at a six year high.
When coupled with the economic uncertainty surrounding Brexit, the volatile nature of the pound and rising business rates, more SMEs are deemed to be at risk of insolvency.
While a range of alternative financial options exist to assist those facing difficulties, a firm may also wish to review its activity to see if any aspects of its operations can be streamlined.
Such an approach can reduce operational expenditure, leaving more finance available to drive growth, research and sales.
By Phil Smith