Majority of SMEs think green shoots still hidden

Article date: 21 April 2010

  • Outlook for 2010 remains muted with a third of SMEs fearing a "double dip"
  • SMEs believe election will have "significant impact" 

Hopes of an improvement in business conditions for Small and Medium-sized Enterprises (SMEs) remain low following the first quarter of 2010 according to new research by Aviva1.

When questioned, 60% of SMEs said they expect conditions to "remain difficult" for the rest of 2010 and a further third (32%) believe there is a "real risk" of a double dip in the economy. By contrast, only 14% were optimistic that green shoots would appear during 2010 and only 9% had seen their prospects actually improve during the first three months of the year.

SMEs appear to be pinning their hopes on the impact of the general election to improve their fortunes, with 70% believing that the general election will have a "significant impact" on the business environment for SMEs in the future.

David Bruce, commercial product manager at Aviva, comments: “Officially, the recovery started towards the end of 2009, but for many businesses green shoots have yet to appear.

“Small business owners remain resolute and resourceful, but they continue to need support and advice. With the election just a few weeks away, many will no doubt be looking for further clarity on the key policy pledges that will have a tangible effect on their bottom line."

Key worries for SMEs at present
Cash flow remains the most pressing item on SMEs’ business agenda with 33% stating that this will be their biggest worry in 2010, rising to over 40% for shopkeepers, salon owners and tradesmen. 

Other worries include the fear of declining sales (28%) and concerns of the consequences of any potential rise in Vat to 20% (17%).

A further 10% of SMEs listed the amount of time they spend wading through red tape as their biggest worry. As a result of this, Aviva will be offering two days free access to its customer web portal, www.cutredtape.co.uk between 21 April and 21 May. The site contains free information, advice and template tools on aspects of business such as health and safety, legal regulations, marketing and finance for Aviva’s commercial customers.3

The research also revealed a significant - and growing - proportion of SMEs admit that they don’t hold any commercial insurance on their business, with 15% of those surveyed admitting they did not have any cover in place compared to 12% six months ago2.

Staffing
However, the research does reveal some positive signs. The proportion of SMEs reducing staff pay or hours has fallen over the past six months from 18% to just 11% at present. Similarly, the proportion reducing temporary staff numbers has fallen from 17% to only 6%, and the number reducing permanent staff has dropped from 10% to 8%. 

David Bruce continues: “The same problems that small businesses have been facing for 18 months still haven’t been solved since our last survey in October 2009. For example, businesses would still like to cut the amount of red tape they encounter.

“However, it’s encouraging to see evidence of more businesses retaining staff and ending the policy of reducing pay and hours. Though, it makes little commercial sense if these measures are being funded in part by companies cutting back on their insurance policies. Not only could this be illegal as some insurances are compulsory but owners are putting their livelihoods on the line.

“Our advice to any business is to speak to your broker.  They are best placed to advise you and check you have at least the minimum amount of cover that’s right to protect your business.”

Sector specific findings
The research also revealed some interesting sector specific findings:

  • Tradesmen (such as plumbers, painters, electricians) are most pessimistic about their business prospects in 2010 with 20% expecting it to be worse than 2009, compared to 17% on average.
  • SMEs operating in the catering and leisure industry are most likely to reduce staffing, pay (26%) and prices (19%) in the coming year, compared to the average of 11% and 7% respectively.
  • Professional services are the sector most fearful about an economic "double dip"’ (38% compared to an average of 32%).

Commercial insurance can be complex, which is why Aviva doesn’t offer it direct. Visit www.aviva.co.uk/yourbusiness to find your nearest independent broker.

-ends-

Media contacts:
Anna Carter
E-mail: anna.carter@hillandknowlton.com
Telephone: 0207 413 3514

David Chambers
E-mail: david.chambers@hillandknowlton.com
Telephone: 0207 413 3155

Sally Leeman
E-mail: sally.leeman@aviva.co.uk
Telephone: 01603 684225

Notes to editors:

1 Research conducted online by Redshift Research on behalf of Aviva, with 500 SME owners in March 2010

2 Aviva conducted similar online research with 500 SME owners in September 2009. The research was again conducted by Redshift Research on behalf of Aviva.

3 Visit www.cutredtape.co.uk and use the password Aviva to enter the site, for a free two day trial until 21 May.  Full access to this site is free to Aviva commercial customers.

Aviva is the world’s fifth largest* insurance group, serving 53 million customers across Europe, North America and Asia Pacific.

Aviva's main business activities are long-term savings, fund management and general insurance, with worldwide total sales of £45.1 billion and funds under management of £379 billion at 31 December 2009.  

We are the largest insurance services provider in the UK and one of the leading providers of life and pensions products in Europe.   

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* based on gross worldwide premiums at 31 December 2008

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