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Crunch time for SME business owners, says survey
With 77 per cent of business owners citing the negative impact of the credit crunch on their commercial affairs, and 84 per cent claiming its toll on their personal wealth, Alistair Darling was right to revise his forecast for an economic recovery this year.
The survey, conducted by Bradford accountants Watson Buckle in December last year, also revealed that where they ran a business, some 58 per cent of respondents said the credit crunch was causing business volumes to drop, which in turn had forced 32 per cent of them to reduce their margins. Just 29 per cent observed that customers were taking longer to pay and a mere 13 per cent claimed hardship in obtaining credit.
When asked who was to blame for the current economic crisis, 84 per cent of respondents pointed to the banks. Just over half felt the government was at fault (52 per cent) and around one in four (26 per cent) t thought it was a global problem, linking it to the world economy.
Judging by these results, the UK Treasury’s independent probe into how banks are managed will have been a welcome move.
When it came to forecasting, business owners were united in their opinion that the credit crunch would affect them or their business in the future, polling 94 per cent.
This level of agreement reflects the economic and financial reality that the Chancellor has slowly been warming to since he announced in November that 2009 would to be a “difficult” year. At the time, Darling predicted the UK economy would return to growth in the second half of the year. This has since been revised.
More recently, on 11 February, the governor of the Bank of England, Mervyn King made a dramatic downward revision to the bank’s growth forecast, announcing the UK economy could shrink by as much as 4 per cent in the summer and remain in recession through 2009.
It is now widely anticipated that the government’s annual budget statement, scheduled for 22 April, will include a revision to the Chancellor’s original economic forecast.
Media reports claiming people are feeling the pinch were also reflected by the survey’s respondents, 84 per cent of whom felt the credit crunch had affected them personally. A good 42 per cent of those surveyed admitted to cutting back on their spending with 61 per cent and 65 per cent expressing concerns about their investments and pensions respectively. One in ten (10 per cent) voiced concerns about their mortgages and 16 per cent appeared anxious about their levels of personal debt.
Commenting on the findings, John Kinsella, tax and corporate finance partner at Watson Buckle, advises: “This survey proves that since the credit crunch took hold, the blows suffered by UK plc have steadily filtered down the system to hit the SME community and their pockets. What is interesting is the percentage of respondents citing a negative impact to their personal finances, in that it outweighs the proportion of people claiming dents to their business affairs. That said, there is widespread agreement among business owners on one topic – the future – and it doesn’t appear to be that bright.
“This information underlines the fact that there is a pressing need for continuing support to the UK’s SME community at government level. That said, calls for help are being heard. The HMRC recently launched a Business Payment Support Service in recognition of the fact that many companies are, and will be, facing cash flow problems in the coming months. The scheme allows business owners to spread their tax bill payments – an initiative that will likely see a lot of up-take.
“It is worth noting, however, that where we have seen businesses agree a new payment structure with HMRC, some have coincidentally found themselves on the receiving end of a VAT inspection notification.
“The survey also provides Watson Buckle with valuable data that will enable us to estimate the level of demand and need for our financial products – ranging from no-nonsense advisory to more strategic accounting and auditing services – proving we are better placed as a result to advise our clients on how best to weather the downturn.”
For more information, contact Watson Buckle on 01274 516700.