UK entrepreneurial spirit under pressure

Article date: 24 January 2012

  • Latest Aviva SME Pulse reveals one in four SME owners are considering returning to the workforce as an employee 
  • A third say they have lost the enthusiasm to run their own business
  • Half say there has been a decline in the money drawn from their business for personal use over the past two years 

A significant proportion of small and medium-sized business owners are losing their entrepreneurial drive and thinking of returning to work with 50% saying it is too tough to be a business owner in the current climate, according to the latest bi-annual SME Pulse from Aviva1

A quarter (26%) of SME owners admit they no longer enjoy running their business, with a third (32%) stating that they have lost the enthusiasm they had when they started their venture up. And as a result, the SME Pulse also reveals that one in four (25%) SME owners are considering returning to the workforce as an employee.

A reduction in the money they take out of their own businesses for personal use may be a contributing factor: half of those (50%) surveyed have reduced the money they draw, over the past 2 years, with restaurant owners suffering the biggest fall. Nearly three-quarters (73%) of those with businesses in the catering sector have seen a marked decline in the amount they withdraw from their business - with almost a third (29%) reporting a drop of between 20-25% and 10% reporting a drop of up to 50%.

The amount of income drop for SME owners

SMEs facing challenging economic times
Aviva’s SME Pulse continues to track economic sentiment among business owners and the survey reveals that SMEs experienced a tough end to 2011. Nearly half (43%) said 2011 was tougher than expected, an increase since June 2011 when over one third (37%) expressed this opinion. This sentiment was particularly prevalent among independent retailers and shop keepers with half of those questioned (50%) saying 2011 was tougher than expected; the highest of any other business type surveyed.  

Looking to 2012, there appears to be little improvement in sentiment. More than one in three (35%) believes there is an increasing risk of an economic "double dip" recession, a further increase compared with 28% when we asked the same question in the last Aviva SME research in June 20112.

A quarter of businesses (26%) expect the first half of the year to be difficult as people curb their spending, with 24% of those surveyed expecting a decline in sales. Less than one in ten (7%) expect good sales in the first six months this year.

David Bruce, commercial product manager at Aviva, comments: “The mood continues to be down-beat about the economy as 2012 begins. Businesses are struggling against a backdrop of consumers spending cuts and many don’t envisage an improvement to the situation in the next six months. 

“In addition, half of the SMEs we surveyed said they had not asked for funds from their bank with the same number telling us they had reduced the money they took from their business, suggesting businesses may be ‘self-funding’ their activities. This could be forcing them to focus more on the day-to-day operations than on planning for the future.

“Entrepreneurship is fundamental to economic growth – the Government last year called for a private sector-led recovery to help stimulate growth3 and yet, our research shows that the entrepreneurial spirit is being challenged, with a significant number of owners thinking about returning to the workforce.”

Government measures having little impact as red tape remains
The Autumn Statement appears to have resonated very little with SMEs with nearly three in four (70%) of those questioned believing that measures outlined in the proposals will have little impact on SMEs. One in five (19%) say that the measures are actually likely to have a negative effect on their business. 

When questioned about the Government’s commitment to cutting red tape, two-thirds (66%) did not believe this was true, with only 19% feeling that red tape measures introduced so far have been effective. Over two-thirds (68%) of SMEs questioned believe that too much red tape hinders the day-to-day running of businesses, while more than half (58%) agrees that it can impact on profitability.

The Pulse indicates one in four (26%) are not confident when it comes to filling in paperwork and this shows an 8% increase when compared with the last Aviva Pulse report in June 20112.

In addition, the survey revealed that one in 10 (10%) SMEs would feel more confident if they had an expert check over legal paperwork before they submitted it.

“We know some businesses feel they would benefit from the reassurance of having a legal expert check over the documents they have created so we have added this important facility to our commercial website, Cut Red Tape,” says Bruce.

“The site was specifically created to help our SME customers, offering online advice on issues ranging from HR to legislation and health and safety to fire protection, along with access to free and discounted document builders.”

Number of SMEs trading without insurance on the increase
Remarkably, the number of SMEs without business insurance has risen from 8% last summer to 20%. One in five businesses admits they don’t have insurance at all and 29% of those who do are not confident they have the right policy in place. One in 10 of those employing between 11-25 staff have said they had no insurance policy in place.

Sectors without insurance in place

Bruce continued: “Businesses know the importance of maintaining a healthy cash flow, keeping staff motivated and limiting unnecessary costs to a minimum but it is also really important for SME owners to be aware of the significance of having the right insurance to protect their business. 

“In some cases it is actually a legal requirement – not having employers liability insurance for example, carries a heavy fine so it is worrying to see that of the 47% surveyed who employ staff one in ten admitted they had no insurance in place.

“If you need to make a claim, that is not the time to find out your insurance cover is inadequate. If you are not absolutely sure then speak to your local insurance broker. They can help to advise you on the most suitable cover to protect you, your business, your employees and your customers.”

-ends–

Media contacts:

David Chambers
Email: david.chambers@hillandknowlton.com
Telephone: +44 (0)207 413 3155

Sally Richards
Email: sally.richards@aviva.co.uk
Telephone: +44 (0)1603 684225 / +44 (0)7789 270677

Notes to editors:

1 Research conducted online by Redshift Research on behalf of Aviva, with 500 SME owners in December 2011

2 Aviva conducted similar online research with 500 SME owners in June 2011. The research was again conducted by Redshift Research on behalf of Aviva.

3 http://www.startupbritain.org/

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We are the UK’s largest insurer with over 14 million customers. Our combination of life, health and general insurance is unique in its scale and breadth in the UK market.  Customers can choose to buy our products through intermediaries, our corporate partners or from Aviva direct and we have become the partner of choice for many of the UK’s biggest organisations.

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* based on gross worldwide premiums at 31 December 2010. 

** at 31 December 2010.

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