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Small Businesses Show Resilience

Small Businesses Show Resilience

Category: Business

Updated: 31/10/2008
First Published: 13/02/2008

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

British small businesses have dug in their heels against a tide of market pessimism. Far from being defeatist, the industry remains confident about sales and profit growth for the year ahead, according to the second NatWest and RBS Small Business Monitor. Whilst the issue of CGT reforms have loomed over small businesses for months, research shows this clearly wasn't their No1 concern.

Steve Pateman, Chief Executive, NatWest and RBS Business Banking comments: "There was no knee-jerk reaction to sell businesses to avoid proposed tax increases, instead entrepreneurs have rightly prioritised the issues within their control. Staying ahead of the competition remains the chief concern ahead of Government legislation and red tape."

Confident about performance

Optimism for performance growth runs across small business with over a third (36%) expecting sales to increase (despite only 16% seeing a rise in 2007). Across the sectors confidence is greatest in hotel, restaurant and construction, with more than half in each expecting higher sales. Uplift is also expected for profit margins, whilst 16% actually experienced a fall last year, 13% are confident of a rise this year despite market scepticism. Whilst agriculture, health/social care and wholesaling expect a tougher 2008 a percentage still expect sales and profit growth in each of these sectors.

Scottish businesses are most optimistic about profit margins, selling prices and operating costs for 2008. Scottish entrepreneurs are 15% more likely than the rest of the UK to expect an improvement on last year's selling prices. They are almost twice as likely to expect operating costs to fall (13% vs 7%) and 40% expect higher profit margins (36% in UK).

More welcome good news for the economy is that 10% of all small businesses surveyed in Britain expect to take on more staff, quite a shift from the 1% who reported job creation in 2007.

Challenges faced

Whilst historically red tape has been a chief concern for those running a small business, for the second time in this survey, competition has been cited as their chief concern. Steve Pateman, comments: "It's encouraging that businesses continue to be concerned about problems they can actually do something about. This displays good business sense on their part, no business can afford to take their eye off the competition".

Reaction to CGT reforms

Small businesses were surveyed at a time when those worth under £1 million faced significantly higher taxes when selling up. Whilst much was written about the impact on the industry there was certainly no rush to sell up, in fact only 7% were planning to sell to escape higher tax. Whilst the news sent nothing more than a ripple across the industry as a whole, waves were seen in certain sectors, namely hotels where almost 1 in 4 (23%) were planning to sell their business as a result, followed by transport and communications (12 for both). Steve Pateman added: "We provide support to over 1 million small businesses, of which the Dragon's Den type of serial entrepreneurs who see their business as a golden goose are a minority. Most are in it for the long haul and view their business as their livelihood, so it's no surprise there was little reaction to sell in response to the proposed CGT reforms."

Britain's entrepreneurial flare lives on

This survey has shown yet again that Britain's entrepreneurial spirit is alive and kicking. Finding, and acting on, a potential market opportunity still remains one of the main reasons for staring up (increasing to 19%), evidence that the entrepreneurial spirit is alive and well. The sectors attracting most new business in this opportunist way are Healthcare/Social work (30%) and property (27%). Again this remains second only to the desire to have control over ones own destiny as a motivation for starting up (21%).

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.