The current economic recovery could still be jeopardy, according to a survey this week of accountants in the UK. The Credit Check survey of 250 accountants, published by the Venture Finance and Accountancy magazine, suggests that 60% of accountants believe that the number of small business insolvencies is set to rise. In fact, the accountants taking part in the survey predicted that 10% of their clients will be insolvent in the near future.
The main problem identified by accountants is that small businesses are still being held back by the long tail-end of the recession, with over a third performing worse in the second quarter of 2010 than in the same period of the previous year. The overall strength of UK business is classified as ‘weak’ or ‘very weak’ by one third of the surveyed accountants.
According to the respondents, small businesses in the UK are currently still mainly focusing on trying to stabilise their finances rather than trying to grow their business. This has implications for the overall economy, which will require small businesses to grow in order that it too can flourish.
However, the reverse of this seems to be happening, with over a quarter of the accountants revealing that their client’s businesses are shrinking or dying due to a lack of working capital. Over two-thirds of the accountants surveyed believe that no upturn will occur without greater access to finance, yet 80% also said that their clients have lost all faith in traditional sources of finance.
Once again, this all appears to lead back to the accusations that SMEs are unable to get access to finance at the time it is most desperately required. Without financial backing easily available, it is impossible for the majority of businesses to think beyond simply trying to survive and starting to grow instead.