Small businesses 'struggling'

14-08-2006

Employment among small businesses remains uncertain despite slowly improving economic conditions, it has been claimed.

A report published today by the Small Business Research Trust (SBRT) shows that renewed confidence in the medium-term prospects for the UK economy have helped small businesses thanks to higher orders by distributors and suppliers.

Their inventory buildups have failed to stem falling job levels in the small business sector, however. The SBRT survey shows that on balance three per cent more firms reduced staff during the second quarter of 2006.

"It is quite likely that smaller firms have had a harder time than their larger counterparts during recent months," commented Mark Beresford-Smith of the HSBC bank.

"With the number of people unemployed continuing to rise and with households burdened by outstanding borrowings of £1.2 trillion, sentiment is softening, especially in respect to making ‘big ticket’ purchases," he predicted.

Sales appear to have stalled after five quarters of pronounced growth, leading financial commentators to suggest that inflationary pressures, together with generally suppressed retail prices caused by limited demand and low consumer confidence, are combining to undermine business prospects.

"While our survey indicates that small businesses have been holding up over the past six months, this feel good factor may rapidly change against a background of increasing energy costs together with inflationary pressures that have now forced the Bank of England to increase interest rates," Brian Wolfe, chairman of the SBRT, said.

"Small businesses would have difficulty in recovering these additional costs by increasing prices," he warned.


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