Article date: 25 November 2010
2010 has been tougher on small businesses than expected
Outlook for 2011 remains subdued as SMEs fear decline in sales and cash flow.
For small and medium-sized enterprises (SMEs) hopes of a busy Christmas period are low, according to Aviva’s bi-annual SME Pulse1.
Nearly half of all SMEs surveyed (45%) said they expect Christmas to be difficult as consumers curb spending, with 10% predicting that it will be "make or break" for their business and less than 20% expecting good sales. In addition, over a third of SMEs (40%) said that 2010 had been tougher than they envisioned at the start of the year, compared with 23% who believe it has been better than expected.
The research also revealed that three out of five small business owners surveyed (61%) expect conditions to "remain difficult" in 2011 and almost a third (30%) believe there is a "real risk" of a double dip recession, with 11% saying that without a change in business conditions, they will cease trading. By contrast, only 17% were optimistic that the economy will improve next year. These findings are almost identical to those from research conducted by Aviva in April 20102 indicating that the majority of SME owners remain downbeat about economic recovery.
Key concerns for SMEs
Findings since Aviva’s last SME Pulse in April 2010:
- Employment remains tough, with an increase in the proportion of SMEs reducing staff pay or hours from 11% to 17%.
- Similarly, the proportion reducing temporary staff numbers has shot up from 6% to 16%, and the number reducing permanent staff has increased from 8% to 12%.
- Maintaining cash flow tops the list of SME concerns for 2011 with 33% stating that this is their biggest worry, rising to 36% for those in the professional services industry.
- Other worries include the fear of declining sales (27%) and concerns of the consequences of any potential rise in VAT to 20% (22%).
- The biggest driver for businesses moving into 2011, as they attempt to remain in profit, is the diversifying of product lines and services, rising from 32% to 39% over the past six months.
Action taken by SMEs to cope with difficult business conditions
David Bruce, commercial product manager at Aviva, comments: “Christmas is a crucial trading period, even more so with the VAT rise and government austerity measures hanging over consumer spending for the year ahead. The UK’s small businesses are a resilient community but it looks as though the coming months will test them to the limit.
“This is a time for creativity, for entrepreneurial flair, and above all for good, solid business skills. Our research shows that businesses are worried about the coming months so this is a key time to plan and prepare. Revisit your business plans regularly to make sure you know how your business is performing. Make sure you keep your staff informed and look to them for inspiration. Keep yourself informed too and make use of the wealth of specialist advice that is available, both from government and private sources.
“At Aviva, we know how important advice can be so we provide our commercial customers with free access to our web portal www.cutredtape.co.uk, which has a wealth of free advice, information and templates available ranging from HR, to finance, sales and marketing. If you are not a customer of ours but would like to trial this service we are offering free access for two days per user from 22 November to 31 December3. Visit www.cutredtape.co.uk for more information, using the password Aviva1.”
Sector and regional specific findings
The research also revealed some interesting sector-specific findings:
- Tradesmen (such as plumbers, painters, electricians) are most pessimistic about the Christmas period, with 54% expecting it to be difficult.
- Companies in Yorkshire (60%), Greater London 52%, the North West (50%) and Northern Ireland (50%) are particularly worried about the Christmas period and expect it to be difficult as customers curb their spending.
- People working in the professional services industry (accountants, surveyors, lawyers) are most pessimistic about their business projects in 2011, with 64% saying that they expect business conditions to remain difficult.
- SMEs operating in the catering and restaurant industry are most likely to reduce staffing or pay (35%), while those operating in manufacturing are most likely to reduce prices (31%) in the coming year, to keep their businesses healthy.
- Tradesmen are the sector most fearful about an economic "double dip" (39%).
- When we asked who expected business conditions to remain difficult in 2011 optimism for 2011 is particularly scarce in Wales (71%), the East Midlands (71%) and the East of England (67%), as well as amongst the professional offices such surveyors and restaurant (63%) and salon trades (63%).
0207 413 3155
0207 413 3155
Notes to editors:
1 Research conducted online by Redshift Research on behalf of Aviva, with 500 SME owners in October 2010. This is the bi-annual Aviva Pulse on how SMEs are running their businesses.
2 Research conducted online by Redshift Research on behalf of Aviva, with 500 SME owners in March 2010 revealed that 60% of SMES expect conditions to remain difficult for the rest of 2010, 32% believe there is a real risk of a double dip in the economy, and only 14% were optimistic that green shoots would appear during 2010.
3 Visit www.cutredtape.co.uk and use the password Aviva1 to enter the site, for a free two day trial until 31 December 2010. Full access to this site is free to Aviva commercial customers.
Aviva is one of the world's largest insurance groups* with 53 million customers worldwide and 46,000 employees.
Aviva’s main 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*.
In the UK, Aviva takes care of its 19.2 million customers by helping them look after their future, protecting what’s important – from their health to their homes, their cars to their business – and saving for the future.
Aviva has a 10.5%** share of the UK life and pensions market and insures one in six homes and one in 10 cars in the UK. It is also one of the oldest UK insurers, with a heritage stretching back more than 300 years.
RAC, which is owned by Aviva, provides breakdown and insurance services for individuals and businesses and has around seven million customers.
Aviva is carbon neutral worldwide, and is ranked in the top 10% of socially responsible companies globally by the Dow Jones Sustainability World Index. In the UK, Aviva invested £3.8 million into local communities in 2009. Read our corporate responsibility report at www.aviva.com/cr.
Aviva’s global Street to School programme is working in partnership with Railway Children in the UK to get children living on the streets back into education and everyday life. Find out more at www.aviva.co.uk/street-to-school.
The Aviva media centre at www.aviva.com/media includes images, company and product information and a news release archive.
For broadcast-standard video, please visit www.aviva.com/media/video.
Follow us on twitter: www.twitter.com/avivaplc
* based on gross worldwide premiums at 31 December 2009
** Source: ABI data released August 2010