Over half (56%) of small and medium-sized enterprises (SME) in the UK have taken deliberate steps to diversify their business in order to survive the recession according to new research by Aviva[¹].
Diversification through new products or services, opening at weekends, trading for longer hours and targeting new customer groups were the most common actions taken by SMEs to weather the economic storm, compared to additional promotions and increased discounts (28%). Reducing staff pay, benefits and/or hours (18%), and reducing the number of permanent staff employed (10%) were other frequent actions taken by SME owners. Interestingly, only two per cent of those polled declared that they had applied for one of the Government’s business assistance programmes such as the Enterprise Finance Guarantee.
The survey also highlighted the fact that the recession is forcing some SMEs into taking unnecessary risks; enforced reductions in overheads are leading to cut-backs on crucial areas of business protection and operational security. Over one in 10 (12%) SMEs admitted that they don’t have any commercial insurance in place. Given that employers liability insurance is required by law, there is a risk that some companies could be trading illegally. With an estimated 4.7 million SMEs in the UK[²], that means there could be around 560,000 businesses that are potentially at risk of being out of pocket should a disaster strike[3].
David Bruce, commercial product manager at Aviva, comments: “Britain’s small business community remains entrepreneurial, creative and opportunist at heart, with an innate ability to be both flexible and versatile. The ability to anticipate and adapt to the changing environment is key for any successful business, and business owners are clearly leading the way in this regard.
“However, it is worrying to see how many businesses have admitted they have no insurance at all. If one of your staff, or a customer, has an accident at work it is unlikely you would be able to pay out a claim that could run into thousands of pounds yourself. Protecting what you’ve already got and what you’re trying to build for the future should be fundamental for any conscientious business owner.”
Other business concerns
Cash flow
It is clear that cash is still king, with 69% of SMEs polled citing cash flow as their toughest business challenge in 2009 and 38% describing it as the aspect of their business that worried them most.
This concern is reflected across multiple business sectors. Of those polled, restaurants, pubs and companies trading in the leisure sector were the most concerned about money, with 75% citing cash flow as their primary area of concern. 70% of shops, salons and beauticians cited cash flow as their main challenge, while the Professional Services sector seemed least affected by financial worries.
Despite the current economic environment, the survey revealed that almost a quarter of SMEs (23%) found dealing with paperwork, due to cuts to services from specialist providers, a tougher challenge than obtaining capital from the bank (19%).
Bruce continues: “Running a business can be stressful at the best of times but you don’t have to be a ‘jack of all trades’ so play to your strengths and try to focus on the reason you became your own boss in the first place. Dealing with red tape and paperwork can be quite daunting but remember that expert advice need not be costly and can free up your time to concentrate on more important areas, like generating income.
“For example, instead of worrying about what sort of insurance you should have why not let your local insurance broker sort it all out for you. That would be one less job for you to do and peace of mind that your business is adequately protected.”
Putting in the hours
One in five SMEs of those surveyed regularly works over 50 hours per week, equating to 104 hours or 4.3 days per year over the EU Working Directive’s specified rules. Given this devotion, it’s perhaps no surprise that SME owners rate determination and hard work as the character traits most commonly found in successful businessmen and women.
The hardest workers in the UK (calculated by number of hours worked) appear to be in Wales, with 23% of those polled regularly working 56+ hours per week. Greater London and the North East of England are also amongst the regions investing the most time into their businesses.
Comparatively, the shortest working week, and possibly the best work-life balance is enjoyed by those based in Northern Ireland, with three in four SME owners (75%) working 35 to 40 hours per week and only six per cent working a 56+ hour week. Overall it appears that the recession is forcing SMEs to work longer hours in order to keep their businesses going; time is one of the first areas to be sacrificed in a recession.
Table 1.0: SME working hours, by region
| Region | 35 to 40 hours |
46 to 50 hours |
56 + hours |
| East Midlands | 68% | 15% | 17% |
| East of England | 53% | 29% | 18% |
| Greater London | 53% | 25% | 22% |
| North East | 43% | 36% | 21% |
| North West | 69% | 17% | 13% |
| Northern Ireland | 75% | 19% | 6% |
| Scotland | 62% | 24% | 13% |
| South East | 54% | 34% | 12% |
| South West | 72% | 17% | 11% |
| Wales | 54% | 23% | 23% |
| West Midlands | 69% | 28% | 3% |
| Yorkshire/Humberside | 62% | 31% | 7% |
Bruce continues: “Businesses need to be aware that longer working hours can affect performance at work. For example, the result could be a higher number of accidents or injuries.
“With 38% of all major accidents involving slips, trips and falls amounting to nearly 11,000 serious injuries in the workplace every year it is important to take steps to safeguard yourself against a claim[4]. Talk to your broker to make sure you have the right level of insurance for your particular business.”
Sources of specialist business knowledge
Aviva’s research found SMEs preferred the internet for sourcing specialist business knowledge, scoring higher than asking a family member or friend (35%), with 84 per cent of those polled looking online for solutions to their business challenges.
Of those companies using specialist services, it seems the majority are concerned with staying on the right side of HM Revenue and Customs with 91% using accountancy services.
Bruce said: “The internet is a fantastic research tool but the sheer quantity of sites you can visit for information can make finding help or advice a complicated and overwhelming task.
“We know businesses already have enough to do every day without having to search around for the right advice so we have put all the information in one place. Our website provides free information on a range of legal and health and safety matters, as well as advice on risk and guides to sales, marketing and business planning to our customers.“
[¹] Research conducted online by Red Shift Research with 500 SME owners in August and September 2009
[²] The Department for Business, Enterprise and Regulatory Reform, 30 July 2008. http://stats.berr.gov.uk/ed/sme
[3] 12% of 4.7 million SME’s = 564,000
[4] www.hse.gov.uk/slips/index.htm and www.hse.gov.uk/slips/index.htm
