Falling demand affecting UK SME’s

The results from the first quarter of 2009 are now in and it appears that the main problem affecting UK small businesses is the fall in consumer demand, experienced by 64% of SMEs. Surprisingly, only 25% of them felt that their access to finance has been affected by the downturn. 

The other main effects of the poor economy were issues concerning suppliers and trade credit (14%) or having to shed key staff and deal with morale problems (13%). 

Falling demand has hurt businesses the most in the West Midlands (75% affected) and the least in Scotland (only 56%). Welsh businesses were also hit badly (65%), along with those in East Anglia (71%) and the North (62%). 

The main side-effect of the fall in demand has been reduced cashflow and delayed payment of bills, resulting in small firms usually being owed more by their customers than they owe suppliers. 

According to Professor Robin Jarvis, head of ACCA’s small business unit, this recession is quite different to 1991 in that “business are now much more concerned about falling demand and are relatively less concerned about the availability of finance.” He suggests the Government should therefore be focusing on stimulating consumer demand to hasten our economic recovery. 

Tip of the hat to the ACCA for providing this information 

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