Brit Business Unbeaten by Credit Cunch
Despite the last 12 months being a period of economic instability, driven by the credit crunch, increased raw material costs, changes in oil prices and fluctuating consumer demand, UK businesses show they are not willing to give up and instead, continue to fight.
According to the latest annual UK Enterprise Survey Report 2008 from the Institute of Chartered Accountants in England and Wales (ICAEW), UK businesses remain ambitious.
The survey paints a detailed picture of how UK businesses of all sizes, in all regions and all sectors – as well as their counterparts across the globe – have felt the impact of the more than a year-long credit crunch. It shows that whilst nearly two-thirds (65%) of UK businesses confirm the credit crunch has had a negative effect on their organisation, 83% say that business growth is still one of their main objectives. Their growth plans are, in fact, almost identical to those before the credit crunch hit (average annual growth target this year is 12.4% compared with 13.4% last year).
Clive Lewis, ICAEW Head of SME issues, said:
"There’s no doubt that UK businesses have suffered over the last year and there is no immediate prospect of things picking up, however, businesses show that they are determined to continue doing what they do best: focus on growth and increased profitability."
Micro and small businesses lead the growth in the UK economy, and the number of micro businesses planning growth of over 6% per year is even higher this year than in 2007. Medium and small sized businesses have slightly less ambitious growth plans, however, as do start-ups.
Whilst the survey shows that the credit crunch has made it harder for businesses to plan (72%) as well as creating increased short (64%) and long-term (53%) borrowing costs, there are positive outcomes to the economic turbulence. Just over half of UK businesses (51%) see some benefit in weakened competitors and nearly one-third (32%) say it has increased their opportunities for business acquisitions. Another effect of the credit crunch is that UK businesses are now putting more focus on increasing their cash balance and paying down debt than in last year’s pre-credit crunch survey.
UK businesses do, however, face several barriers to business growth, and one key area highlighted by most is the UK regulatory and taxation environment. More than half of UK businesses (53%) do not think the regulatory and taxation environment is business friendly, and it is the smaller businesses who struggle the most with red tape. Nearly double the amount of micro businesses state business taxation as a critical or strong barrier to growth this year compared with last year.
Singled out as particular business hindrances are employment legislation and employment tax together with business tax, with 38% of the respondents saying that regulatory change and enforcement represents a critical or strong barrier to their future growth.
Mr Lewis continued:
"There is a clear message to the Government in these survey results; UK businesses need help to get through this difficult economic period. That means fewer regulatory and taxation changes, proper consultations on any proposed changes and enough time and support for businesses to get to grips with it all.
"What we want for UK businesses is a level playing field both within the UK and with other markets, and that requires greater stability from the Government to assist businesses through the uncertainty caused by the current economic turbulence."
The annual survey of chartered accountants in business provides a unique picture of the opportunities and threats facing UK businesses: economic issues, globalisation, growth and regulation.
The full ICAEW UK Enterprise Survey Report 2008 can be accessed at: www.icaew.com/enterprise.