Customers spending less is the biggest problem faced by small businesses, according to a survey of London businesses.
With the VAT holiday now at an end and consumers reining in spending, both in anticipation of imminent tax rises and to cut their personal debts, the nascent economic recovery doesn’t necessarily mean the tills are ringing again.
One in five (20%) business owners polled by Business Link for its Business Confidence Index cited a fall in consumer spending as their biggest worry. This probably fuels the next biggest concern, winning new business, which polled 16%.
Tax rises
Even though an economic recovery is underway, growth in the last quarter was an anaemic 0.2%, and the ballooning public deficit mean severe spending cuts and tax rises are all but inevitable.
Seventy-two percent of businesses claim to be still feeling the effects of the downturn, compared to 63% a year ago when the country was technically still in recession.
A recovering economy does not mean that small businesses are out of the woods – recovery on the business front generally takes longer to manifest itself and entrepreneurs need to remain on their toes
Patrick Elliott, Business Link in London CEO
London’s entrepreneurs are seeking to mitigate residual problems from the recession primarily by refocusing on their core products and services (59%) or by cutting costs (50%).
However, the number considering drastic measures such as laying-off staff has dropped significantly in the last 12 months, from 19% to 13%.
Four in 10 businesses, meanwhile, believe it unnecessary to take any action to deal with the recession. Larger businesses are more likely to feel this way compared to smaller SMEs (49% versus 39%).
It’s not all bad news, however, with 70% of businesses feeling confident about the future and six in 10 planning to grow. However, small businesses and sole traders, it seems, are much more likely than large businesses to adopt a cautious approach, streamlining the business to ensure its survival rather than seeking to expand.
“A recovering economy does not mean that small businesses are out of the woods – recovery on the business front generally takes longer to manifest itself and entrepreneurs need to remain on their toes in the months ahead to ensure they’re on track,” says Patrick Elliott, chief executive of Business Link in London.
For those businesses that are looking to grow, increased marketing activity is the most popular method for facilitating expansion, in particular online marketing, followed by sales, which is predominately favoured by sole traders and smaller businesses.
The quarterly Business Confidence Index measures the business sentiment of over 3,000 SMEs across a wide range of sectors, businesses sizes, regions and business ownership demographics.
