SMEs more at risk in volatile markets

SMEs are more likely to struggle due to financial strain imposed when "the economy gets tough" compared with larger businesses, claim economic experts.

F&C Asset Management says that most commentators are predicting a very difficult year for the economy in the wake of a tough Christmas for retailers and no interest rate cut from the Bank of England yesterday.

Jason Hollands, head of group communications at F&C Asset Management, says that the bad news is in share prices as they have been ‘marked down’.

This assumes that companies will continue to have profit warnings and need to raise extra cash.

‘When the economy gets tough, smaller companies tend to be more reliant on bank borrowings, whereas some of the big global companies are less exposed,’ he continues.

At the beginning of 2008, the Daily Telegraph predicts that despite the out-performance of blue-chip shares over mid-cap and smaller companies in the second half of last year, this is a reason to expect larger, defensive companies to remain in demand.

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