The UK's small businesses will need greater support if they are to continue to play a significant part in the economic recovery, a new study has suggested.
Research by consultancy group, the Centre for Economics and Business Research (CEBR), revealed that bank lending to small companies had fallen by 4.5% over the past year, while borrowing costs had increased.
The study forecasted that 312,000 start-ups will be created by the end of 2010 and a further 297,000 in 2011, making a major contribution to replacing the 330,000 jobs estimated to be lost as a result of public spending cuts. Furthermore, these firms spend £1.1 trillion on their supply chain annually – 49% of UK business expenditure - and account for £1.6 trillion of total national business turnover, greater than the whole of the FTSE 100.
Charles Davis, managing economist at CEBR, said: “The world of big business community and government must work together to support these businesses, to thrive and safeguard economic success, and support smaller businesses throughout the supply chain. This is especially important as the government cuts public spending and the private sector must drive the economic recovery.”
However, according to the study, confidence among small firms has been in decline for the past year, falling faster than larger companies, as difficulties gaining access to capital and cashflow problems have had a knock on effect. The consultancy is calling for the government to do more to support smaller businesses by: offering a greater tax relief, improving financial conditions and prompt payment and encouraging the collective or aggregate purchasing of intermediate goods.
Kanat Emiroglu, British Gas Business managing director, which commissioned the research, said: “In terms of spending power and economic contribution, total turnover and job creation, small businesses are engines of economic growth. But unless we create the right conditions to allow them to thrive, economic recovery remains far from assured.”
© Crimson Business Ltd. 2010