Small firms hugely underprepared for sudden shocks

The UK's small businesses are woefully underprepared should something go wrong with their operations, new research suggests.

In the wake of the collapse of construction giant Carillion, Nucleus Commercial Finance quizzed 500 SMEs on how long they could survive based on their current cash reserves if they faced a sudden issue to overcome.

Three in ten said that surviving for more than two weeks would be difficult, while 47% didn't think they would make it past the first month.

Some 30,000 businesses were affected by the Carillion collapse, with many being owed money from unpaid invoices and in some cases facing an uncertain future.

Businesses that rely on one or two major customers are especially at risk, as losing one or more would result in a significant hit on revenues.

Meanwhile rising operational costs, the uncertainty surrounding Brexit and the volatility of the pound will also concern many smaller firms.

When quizzed on what would have the biggest detrimental impact on their business, 36% of those polled listed a poor Brexit deal.

Another financial crash was named by 33%, while 28% were concerned over issues relating to their business reputation.

Just over one in five thought that losing a major client would increase their risk of insolvency, while the results also highlight the need for significant financial planning.

Those fearing tougher times may want to consider contingency planning to ensure they have strategies to come with any eventuality.

They may also want to consider means of refinancing as a range of alternative finance options may be available.

Of those polled, 39% revealed plans to seek external finance in the coming months, although that figure climbed to 61% in London.

However, 63% of firms said a failure to secure any finance would damage their business, making sourcing new funding a must.

Business facing financial difficulties are advised to seek advice at the first opportunity, as there maybe solutions available that had previously nor been considered.

By Phil Smith


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