SMEs Report Falling Customer Demand

[27 April 2009]

Falling customer demand biggest hindrance for UK SMEs, finds Open University Business School survey

Almost two-thirds of SMEs cited a reduction in customer demand and a lack of consumer spending as the biggest issue affecting them in the first quarter of 2009. That is the key finding of the Quarterly Survey of Small Business in Britain, published by the Open University Business School and supported by ACCA (the Association of Chartered Certified Accountants) and Barclays Bank.

SMEs in Scotland were the least affected but still 56 per cent reported a reduction in demand for their services, compared to 65 per cent in Wales and a massive 75 per cent in the West Midlands. 71 percent of businesses in East Anglia experienced a fall in demand, while 62 per cent in both the North East and North West flagged this as a challenge. 

25 per cent of SMEs reported that access to finance has been an effect of the downturn. This was the biggest issue for businesses in London, where 30 per cent of SMEs highlighted issues in securing funding. 

Fourteen per cent of SMEs reported experiencing problems with suppliers and difficulty in obtaining trade credit in the current climate. This was one of the biggest problems for Welsh employers. 13 per cent of firms surveyed said they have had to shed key members of staff and to overcome problems with staff moral Only 7 per cent of SMEs from Yorkshire were affected by staff issues but 20 per cent of employers from the West Midlands highlighted issues with personnel during the quarter. 

Another commonly mentioned issue was the downturn's effect on cash flow, with some customers delaying payment of their bills. The previous quarter's findings showed that small firms are usually owed more by their customers than they owe to their suppliers. 

Professor Robin Jarvis, head of ACCA's small business unit says: "Compared to the 1991 recession, businesses are now much more concerned about falling demand and are relatively less concerned about the availability of finance. Therefore the Government should primarily focus its efforts on stimulating consumer demand and this is reinforced by the latest figures from the BBA: figures for March show an improving picture with a big rise in deposits and term lending."