Why SMEs must keep a watchful eye on the economy

Changes to the economy are often sudden and with drastic results, which is why small businesses must keep a watchful eye on the situation.


These changes could potentially have a negative impact upon trading figures and disrupt the running of the company.


Office for National Statistics (ONS) figures showed an increase in retail sales volumes of 6.4% in 2014, the highest year-on-year increase since May 2004.


Higher than expected figures for November were significantly above predictions – boosted by Black Friday and other promotional days – but despite the positive figures a significant factor in the increase in sales relates to a fall in inflation which reached a 12-year low of just 1% in November.


Real time wages are also slowly increasing and this is encouraging people to increase their spending – but firms are being encouraged to proceed with caution.


The price of oil is a particular concern as sudden changes could disrupt economies across the globe and cause a sudden change in the rate of inflation. That in turn could lead to interest rate changes which could place strain on any businesses that are unprepared for it.


As a result, many small businesses need to keep a close eye on the economic situation so that they can react quickly should a rapid change occur.


Cutting unnecessary costs and streamlining the business is one way of ensuring some additional finance is available.


Seeking professional assistance from insolvency specialists is one way of making sure a company is prepared for any eventuality.


An interest rate increase is expected at some point in the first half of 2015, although there has been little indication from the Bank of England as to when it will actually occur.


Given the potential for an increase in costs and a fall in demand, many small businesses will want to ensure that they can limit any negative impacts that a rate change may bring in the New Year.


Preparation from an early stage is essential and it gives SMEs the best chance of prospering in 2015.


By Phil Smith


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