Closing down a consideration for small businesses

More than one in ten British small and medium-sized enterprises say they have considered closing down in the last three months amid the difficult economic situation.

The SME Risk Index from global insurer Zurich finds that a majority (84 per cent) of SME decision makers are fairly or very concerned about the UK’s current economic climate, with 38 per cent very concerned.

A further 84 per cent say they are not confident that the economic situation will improve in the next quarter, and more than two thirds (69 per cent) are still not confident when looking ahead to next year.  

In the North, 17 per cent of SMEs have considered closing down, compared with just 5 per cent in the Midlands, 7 per cent in London and 12 per cent in the South overall.

Despite the gloomy outlook, however, Britain’s SMEs are starting to fight back with many actively reviewing their business models and looking for new opportunities. When asked which three things they currently see as the biggest opportunity for their business, business innovation comes out top (33 per cent), followed by cost and expense reduction (30 per cent) and exploring web-trading and online marketing (22 per cent).

In the last three months more than half (58 per cent) have expanded activity to target new customers and one third (33 per cent) have diversified their business offering.

The uncertainty and instability within the Eurozone is adding to the pressure, with some 47 per cent of SME decision makers believing the Eurozone crisis will hit UK consumer confidence and spending, with a knock-on, detrimental impact on Britain’s SMEs.

Richard Coleman, director of SME at Zurich, says, ‘It is clear that SMEs are feeling the strain of an uncertain economic environment. Our research shows their confidence has been hit and they are concerned about the future.’

He adds that while it is encouraging that SMEs are looking for new opportunities to ease the pressure, there are considerable risks associated with development and expansion, particularly when owners are using personal capital to fund such activity.

‘This makes it vitally important that SMEs have a complete understanding of the risks present in such a fragile environment, and are fully capable of taking the appropriate steps to mitigate this risk and minimise the impact of external pressures.’

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