Troubled times ahead for small firms
Around a third of small businesses are still struggling to get affordable credit from the banks despite commitments to lend fairly, according to new figures from the Federation of Small Businesses (FSB).
The poll of over 5,000 FSB members shows that 30 per cent of small businesses have seen an increase in the cost of new or existing finance in the last two months.
The figures also portray a worrying economic situation for small businesses: over 60 per cent reported that trade had decreased in the last two months and 40 per cent are being paid later for services and supplies. This has led to more than a third (35 per cent) considering reducing employee numbers, 36 per cent considering cutting staff working hours, 41 per cent contemplating curbing future hiring and 39 per cent even thinking about closing down.
FSB National Chairman John Wright said: "With trade down and invoices increasingly being paid late, small businesses are having to turn to their banks for credit to tide them over. But, despite the Government's £500 billion bailout, the banks still do not seem to be lending to small businesses.
"These figures show that with nowhere to turn, small businesses are having to consider cutting jobs and maybe even closing down. This would be a disaster for millions of employees as well as the economy as a whole.
"The onus will now be on the banks and their branch managers to stop their Scrooge-like tactics and open their pockets to small businesses."
Insolvencies
In a separate report, insolvency specialist, Tenon Recovery, predicted 'a potential epidemic' of insolvencies in 2009, and said that its calls for assistance from businesses were up almost 200 per cent on the same period last year.
Carl Jackson, head of Tenon Recovery, said: "We believe the symptoms we are seeing now are a precursor to a potential epidemic of insolvencies in 2009. It is quite usual for some non seasonal businesses to turn off the lights in the run up to Christmas as they know they will not be able to survive in the New Year but we have never seen such a broad spread of businesses fail so early.
"There are currently some 4.7 million SMEs in the UK employing around 13.5 million people. A continuing increase in the number of small business insolvencies would have a significant impact on the UK economy and it is very important to make sure that this does not happen."