Downturn hits half of businesses

Roughly half of small and medium-sized enterprises are feeling the effects of the economic downturn, according to a survey from Business XL’s sister title GrowthBusiness.co.uk.

The poll of 156 companies suggests that although the slowdown has spread beyond its origins in the financial sector, it has yet to make itself universally felt. More than a third of businesses claim to have suffered no adverse effects from the gloomy economic climate, while a further 13 per cent do not see it being a hindrance to their growth now or in the future (see chart).

However, of those companies affected by the slowdown, most have been badly hit. Some 30 per cent of all respondents claim it has ‘very much’ affected their business, compared with 22 per cent who have been affected only ‘a little’.

George Derbyshire, chief executive of the National Federation of Enterprise Agencies, a lobbying agency for small and growing businesses, says that it is difficult to tell which sectors will be hit hardest if the downturn deepens.

‘Unless you are directly exposed to the mortgage market, it’s all somewhat random at present,’ he notes. ‘What is certain is that rising prices of transport and food mean that people have less disposable income than they used to.’

Derbyshire adds that the effects of a cutback in consumer spending, coupled with less availability of credit, would be widespread. ‘I don’t think any business can say that it’s immune. The differentiator will be the quality of management: well-managed businesses may be able to weather the storm, while those that are complacent will struggle.’

In related news, the British Chamber of Commerce (BCC) has downgraded its growth forecast for 2009 from 2.0 to 1.6 per cent, citing an expected ‘very sharp deceleration in consumer spending growth, in reaction to falling house prices and the squeeze on household disposable incomes’. The BCC’s growth forecast for this year remains 1.7 per cent.

For more economic insights and to participate in our latest poll, visit www.GrowthBusiness.co.uk.