Optimism among owner-managed businesses in the South West is back on the agenda, according to the 2011 Baker Tilly Owner-Managed Business (OMB) survey.
It has uncovered a year-on-year rise in positive sentiments from 40% to 75% of respondents.
However, business owners are less bullish about profitability. Although 60% expect an increase in sales volumes compared to just 45% in 2010, only 35% expect to see an increase in gross margin and a quarter of regional respondents expect headcount to decrease this year.
“The economic recovery remains fragile," said Ruth Foreman, Baker Tilly's office managing partner in Bristol. “Rising interest rates, increasing commodity prices, sovereign debt issues and public sector austerity will continue to cause concern. As a result, OMBs should not fall into a false sense of security; maintaining cost control, keeping a close eye on cash and ensuring efficient working practices are going to be key. OMBs still need to be vigilant and careful about how they navigate their way through this ‘stop go’ recovery.”
Just over half see taking business from failing competitors as their best opportunity for growth while supplier consolidation and continued lowering of costs to give competitive edge are also seen as key opportunities by a fifth of respondents.
In terms of priorities, more than two thirds are planning to expand into new markets and more than half to reduce their costs further with 50% hoping to develop new products and services. Access to credit is no longer seen as a threat to business with only 15% of respondents indicating it as a major issue. Likewise the lack of skilled workers is now less of a worry for businesses in the South West.
But 45% see rising fuel costs as a major threat. Downturn in demand is still a worry for businesses but much less so this year than last. Other areas of concern include increased inflation on goods and services (35%) and increasing regulation (30%).
Overall, however, perceived threats seem to have decreased – almost all of the key business issues were at a lower level.
For example, access to credit is significantly lower with just 15% of respondents in the South West indicating it as a threat – although it is not clear if this because banks are ‘back in business’. Or is it because fewer businesses are looking for credit and in fact operating within their means, or are they changing their budgets to allow for funds for development.
Ruth Foreman said: “The aggregate value of UK SME bank deposits is at an all time high, reported to be close to £60bn. These cash piles have grown as a result of a slowdown in investment and capital expenditure, selling down stock and better credit control. It is however, important to bear in mind that these are aggregate figures, and that there are many viable businesses across the UK that would benefit and thrive with easier access to credit.
"None the less, these cash stockpiles might explain why concern over access to credit has seen such a significant fall since last year – we are seeing a slight loosening in credit policy from the banks but the appetite to borrow just isn’t there. OMBs are getting smarter about managing cash flow and running on lower levels of working capital – a fortunate by product of the recession. Those businesses that allowed themselves to develop some fat have been the subject of crash diets, let’s see if they can keep the weight off.”
She added that for many businesses, organic growth is going to be slow and hard to come by. Those fortunate to be sitting on large cash balances may decide to deliver growth via acquisition and investment.
