The majority of SME decision makers are concerned about the UK’s current economic climate, with 38 per cent very concerned. A further 84 per cent say they are not confident that the economic situation will improve in the next quarter, and more than two thirds are still not confident when looking ahead to next year.
If the 11 per cent figure for those who have thought about shutting up shop is stretched across the UK’s 4.5 million SMEs, it paints a gloomy picture of their current business confidence.
Despite the gloomy outlook, Britain’s SMEs are starting to fight back with many actively reviewing their business models and looking for new opportunities. When asked which three things they currently see as the biggest opportunity for their business, business innovation came out top, followed by cost and expense reduction and exploring web-trading and online marketing. Furthermore, in the last three months over half have expanded activity to target new customers and one-third have diversified their business offering.
The uncertainty and instability within the Eurozone is adding to the pressure. Nearly half of SME decision makers believe the Eurozone crisis will hit UK consumer confidence and spending, with a knock-on, detrimental impact on Britain’s SMEs. 41 per get of SME decision makers say that, if their business was seeking more finance, they would be likely to use investment of the owners/ partners’ personal capital to finance their businesses. Combined with the recent, excessive rainfall, which has had a detrimental impact on nearly a third of SME businesses, this vital pillar of the UK economy is under real pressure.
Encouragingly, despite Eurozone concerns, the SME Risk Index shows that 22 per cent of British SMEs are looking to expand overseas through low-cost and virtual models, such as web-trading and internet sales, overseas joint ventures and overseas distribution partnerships. Only 10 per cent plan to increase their physical presence overseas.
Richard Coleman, Director of SME, Zurich, comments: “It is clear that SMEs are feeling the strain of an uncertain economic environment. Our research shows their confidence has been hit and they are concerned about the future.
“While it’s encouraging that SMEs are looking for new opportunities to ease the pressure, there are considerable risks associated with development and expansion, particularly when owners are using personal capital to fund such activity.
“This makes it vitally important that SMEs have a complete understanding of the risks present in such a fragile environment, and are fully capable of taking the appropriate steps to mitigate this risk and minimise the impact of external pressures.”