Economic improvements overshadowed by late payment, according to latest barometer of small business

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Improvements in orders and turnover experienced by small firms are being overshadowed by cash flow difficulties as a result of late payment, the latest Economy Watch member panel survey from the Forum of Private Business suggests.

Our research shows that, while there are indications of recovery for small firms, particularly those seeing a boost in orders and sales, this is being more than offset by increasing late payment.

Improvements in orders and turnover experienced by small firms are being overshadowed by cash flow difficulties as a result of late payment, the latest Economy Watch member panel survey from the Forum of Private Business suggests.

According to the monthly survey of members on the Forum’s Economy Watch panel 43% of respondents said they had experienced an increase in orders, with 18% reporting a decrease and 39% no change.

In all, 35% said their turnover has increased from February, 24% that it has fallen and 40% that it stayed the same. Respondents’ total turnover is up by a reported £508,000 in March compared to the previous month.

However, the total amount of capital tied up in late payment at any one time is £16,608,500, an increase of £1,014,780 from February. This equates to 35.5% of their combined turnover.

“Our research shows that, while there are indications of recovery for small firms, particularly those seeing a boost in orders and sales, this is being more than offset by increasing late payment,” said the Matt Goodman, Policy Representative at the Forum of Private Business.

“Unfortunately, it’s a case of two steps forward, three steps back as far as small businesses and the economy are concerned. Late payment devastates cash flow. It is important that more large companies sign up to the Government’s prompt payment code and that the principle of sustainable payment is embraced across the supply chain.”

The survey’s other findings are as follows:

Other economic indicators

In total, 23% of business owners noticed an increase in profitability, 29% a reduction and 48% no change.

The amount of money held on deposit has increased for 13%, stayed the same for 53% and decreased for 34%.

Cash flow difficulties not resulting from late payment have become worse for 20% of business owners surveyed, better for 13% and remained the same for 67%.

Investment in machinery and equipment has increased for 17%, fallen for 21% and remained unchanged for 63% of respondents. For investment in sales and marketing it is 29%, 11% and 60% respectively.

The tax burden has risen for 27%, remained the same for 70% and fallen for just 4% of business owners surveyed. Other business costs have increased for 41%, stayed the same for 51% and decreased for fewer than 1%.

Business priorities and needs

A total of 24% of respondents anticipate not investing in their businesses in the coming months, with 54% expecting to invest in sales and marketing, 18% in machinery and equipment, 25% in product and process development and 13% upgrading property.

Improved business confidence and industry growth was chosen by an overwhelming 45% of respondents as the main factor that would help their businesses to grow, followed by innovation and improved product ranges (15%), reduced costs (10%), cash flow improvements (9%), cuts to public spending and better government management (9%), new clients (9%) and improved marketing (9%).

In all, 6% cited less tax, the same number improved access to finance, 5% less red tape and 5% resolving competition issues. Further, better working practices were selected by 4% of respondents, more business-to-business investment by 4% and ‘stability’ by 4%.

Confidence

Business confidence has decreased, with 39% of respondents saying they are ‘confident’ or ‘very confident’ compared to 44% in February. However, levels of pessimism have also fallen slightly, with 13% ‘pessimistic’ or ‘very pessimistic’ compared to 16% in February.

Business support

Of all the businesses surveyed, 16% anticipate requiring support in the coming month, with 68% intending to be self-sufficient and 15% uncertain, indicating the importance of a stable business environment.

Finance

The amount being sought in loan lending has decreased by £44,000 compared to February. Other forms of finance are being pursued more aggressively, including overdrafts (up by £8,200) and alternatives such as use of credit cards (an increase of £11,900).

In all, access to finance has improved for just 6% of respondents, deteriorated for 13% and remained unchanged for 63%.

The majority of businesses now believe finance is ‘affordable’ or ‘very affordable’ (78%, down slightly from the 81% recorded in February) while just 10% said it is ‘unaffordable’ or ‘very unaffordable’ – the same figure as in February.

The average cost of overdrafts has remained at 5.7% and stayed at 4.4% for secured loans. The cost of unsecured loans increased slightly to 11.6% (from 11.5% in February). Although increasing for 7% and decreasing for 3% the cost of finance has not changed for 90% of respondents.

Most businesses are holding back from seeking growth finance, probably until there is greater confidence in the lending market.

Employment

Total employee numbers have decreased by 4% over the past year and 8% of businesses surveyed have reduced staff working hours.

Chosen by 45% of respondents, the cost of employment is seen as the joint biggest barrier to recruitment along with economic conditions and the local business climate.

A quarter (25%) selected the complexity of employment law and18% poor skills of local workers. In all, 16% feel they are unable to recruit good staff and 14% cited health and safety law as the biggest barrier to taking on new employees.

In addition, 29% of businesses surveyed said their ‘business model’ does not require further recruitment, 11% felt that their existing staffing levels are adequate to meet their growth plans and 10% believe there are no barriers to recruitment. Just 1% believe they do not have the internal management skills required.

Staff training costs have risen for 14%, fallen for 9% and stayed the same for 77% of respondents.

ENDS

Notes to editors

Formed in 1977, the Forum of Private Business is evolving following a year of intensive research about the real needs of small businesses.

As an invaluable extension to its members’ teams the not-for-profit organisation has developed a range of tailored business solutions to support, protect and reassure small firms throughout the lifecycle of their businesses.

These are: ‘Finance Director’, ‘Legal Director’, ‘HR Director’, ‘Health and Safety Director’, ‘Development Director’, ‘Purchasing Director’, ‘Communications Director’ and ‘Managing Director’.

For full list of services under each solution and/or membership package, visit http://www.fpb.org/membership or call 0845 612 6266.

Broadcast media – the FPB has ISDN capability and can provide comment, in quality audio, at short notice.

The FPB can also provide journalists with localised and sector-specific case studies.

About the Forum of Private Business

A not-for-profit organisation, the Forum of Private Business provides a personal, friendly and highly tailored service to its members – with the primary purpose of helping them run their businesses more profitably.

Representing thousands of small businesses across the UK – including retail, service providers and manufacturing companies – the FPB is recognised by the Government as one of the six main business support and lobby groups. It uses this position to influence decision-makers in the UK and Brussels on the issues that matter to small businesses. Visit http://www.fpb.org.

The FPB helps owners and managers of small and medium-sized businesses to comply with regulations via its dedicated member helpline, 24-hour legal advice line, and Health & Safety Guide, Employment Guide and Credit Control Guide.

In addition, the FPB’s http://www.smallbusinesschannel.co.uk was launched in June 2009, providing a wealth of free video advice and information on a range of topics to business owners and managers.

The FPB is a proud supporter of the Children’s Cancer and Leukaemia Group (CCLG): http://www.fpb.org/charity
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