February 17, 2011 06:23 ET

Bosses Fear No Pick Up for Business in 2011

LANCASTER, UNITED KINGDOM--(Marketwire - Feb. 17, 2011) - An overwhelming 82.3 per cent of bosses believe their SME businesses will fare the same or worse than last year in 2011.

The gloomy findings are revealed by the latest Premierline Direct poll, which asked its SME customers: "On balance, how do you feel your business will fare in 2011 compared to 2010? Probably better; Much the Same; Probably Worse.

The largest group - 47.1 per cent - believe their businesses will cope with the tough economic conditions in much the same way as last year. But a pessimistic 35.2 per cent expect things will probably be worse in 2011.

On the upside, an optimistic minority of 17.7 per cent of businesses believe they will probably do better in 2011 than they did last year.

We don't have to look far to see the reasons for most businesses' belief that trading conditions in 2011 are likely to be no better or worse than in 2010.

Inflation is constantly in the news, as it heads ever nearer to four per cent, creating deep fears that interest rates will have to rise AND, of course, raising costs to businesses – especially at the petrol pump – and those for consumers.

And while figures from the British Retail Consortium (BRC) show that like-for-like UK retail sales were up by 2.3 per cent in January compared to the same month in 2010, this has been mostly put down to a burst of spending caused by pent up demand after the December freeze, plus a rush to beat the VAT rise.

Banks' lending remains subdued and net loans to companies actually fell again during December, according to the latest data from the British Bankers' Association.

This, once again, puts a brake on business confidence – and, even if a business is confident enough to invest, the funds may well not be available or affordable to fund that investment.

Higher taxes, the fear of unemployment (and real job losses), as well as an uncertain housing market are all sapping consumer, and therefore business, confidence.

Our survey coincides with the findings of The Federation of Small Businesses' (FSB) quarterly report on the health of small businesses, which showed that confidence in the fourth quarter of 2010 stood at -13.2, the deepest decline since the survey began in March 2010.

But there are some small hopeful signs. 

The widely monitored survey of recruitment by the Recruitment and Employment Confederation and KPMG, the professional services provider, revealed that hiring in January grew at its fastest rate in six months.

The survey found:

  • Stronger expansions of both permanent and temporary appointments.
  • Pay pressures remained muted.
  • Availability of temporary workers continued to rise with hourly rates falling slightly.

Overall demand for staff grew at the fastest pace since last June.

It's obviously far too early to say if this rise marks the beginning of a real economic turnaround and signals business is on the move. But it is a piece of welcome news.

Whether SMEs can afford to be a little more cheerful about the year ahead is going to depend a great deal on what the government does to kick start the economy and, most of all, improve consumer and business confidence. 

SMEs are not only an important part of this recovery process, they are actually the key.

As Xavier Rolet, CE of the London Stock Exchange, pointed out recently: "There are 4.8 million (SMEs) in the UK alone. It is more realistic for each of them to add one job than it is for each of the FTSE 100 to create 48,000 jobs. If we succeed in generating one new job in each SME then the effect would be transformative."

And those jobs would transform not only the labour market, but also the prospects for businesses.

There's a budget next month. Let's hope George Osborne is ready to act.

Robin has been a journalist for more than 20 years, during which time he has held several senior media management positions in both Fleet Street and Hong Kong. Robin recently returned to the UK after being based in Italy for six years. He has a passion for business innovation.

The content of this article reflects the views of the author and may not necessarily reflect the views of Premierline Direct.

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