Small and medium-sized enterprises are more comfortable than last year with the economic climate, research finds.
Zurich’s SME Risk Index shows that SME confidence in the economy has continued to rise and is now significantly higher than when its index began.
Some 53 per cent of SMEs worried about the economic climate, but this represents a 3 per cent drop on last quarter, and a 31 per cent drop on the figure from the beginning of the Risk Index in October 2012 (84 per cent).
This means that almost half (44 per cent) of SMEs say they are not currently worried about the economic situation.
As a result the Zurich Risk Index has now fallen to its lowest level since records began, sitting at just 37.14 points.
This fall in concern is linked to decreased worries across several key factors. Nearly three quarters (71 per cent) of SMEs say they are not concerned about bank lending, with the result that just 24 per cent now say they are worried about financing their business.
Worries about red tape are at their lowest, with just a third (33 per cent) of SMEs now saying they are concerned about regulation and compliance.
This is accompanied by confidence that the economic situation will continue to recover. Most SMEs (57 per cent) are confident the economic situation will further improve within the next year, compared to just 37 per cent when the Risk Index began in October 2012.
However, despite an improved business environment, SMEs are still fighting to stay profitable. Almost half (47 per cent) of businesses have expanded their activity to target new customers and 28 per cent have diversified their product range or service to meet business need in the last three months.
Moreover, the threat of more drastic measures still looms large. Almost one in ten SMEs have considered closing their business recently.
Around 8 per cent of SMEs surveyed have considered closing down their business in the last quarter, and 10 per cent say they’re at risk of shutting up shop in the next year.
SMEs are still heavily reliant on just a few customers;15 per cent of businesses questioned would need to significantly downsize operations if they lost their two biggest customers in the next 12 months.
Jason Eatock, head of SME at Zurich says, ‘When you consider that two years ago 39 per cent of businesses were worried about securing a basic bank loan, it’s great to see that only 24 per cent of SMEs see themselves in the same situation today.
‘However, while the situation is improving overall, it’s clear that businesses are having to work hard to remain ahead of the curve and keep their operations profitable in a changeable economic landscape. With almost half of those surveyed having expanded to target new customers within the last three months, and a further 10 per cent saying they could be at risk of going out of business in the next year, it’s clear that the situation is far from comfortable.’
Eatcock adds that accurate risk planning will be important for small companies in this ‘precariously-balanced’ situation.