TheCityUK poll reveals profitability and higher VAT as key issues for British SMEs in 2011

11 January 2011

Pressure on profit margins and this month's increase in the top rate of VAT to 20% are seen as the biggest threats for 2011 by managers of British SMEs. Reduced availability of bank lending was seen as a relatively smaller issue for decision-makers at the companies surveyed.

43% of respondents in a poll of decision-makers in 500 small and medium-sized businesses commissioned by TheCityUK, the independent body promoting UK-wide financial and related professional services, saw reduced margins and profitability as an issue, with 17% seeing it as the key risk to their business in the coming year.

Running a close second, higher VAT concerned 39% of respondents, with 15% considering it to be the key risk. Reduced cash flow was identified as a concern by 36% although only 9% saw it as the main concern.

Interestingly, respondents did not link cash flow worries to the availability of bank lending, with only 21% citing reduced lending availability as a potential problem and only 7% citing it as their main concern. Of those decision-makers not citing reduced bank lending as an issue, 46% said it would not be a problem at all, 28% said it would only be a small problem and 15% said they had not experienced any reduction in the availability of bank lending.

More prominent were a reduced forward order book and the increasing impact of business regulation which each concerned 28% of respondents and the ongoing shrinkage of the public sector which was seen as an issue by 27%.

Chris Cummings, CEO of TheCityUK, comments: "There's no doubt that 2011 poses significant challenges for small businesses which are the backbone of the national economy and employ over 13 million people. While lending was an issue that grabbed the headlines, the real obstacles to growth now need to be addressed.

"The banks have made a clear commitment to lend more to SMEs and create a £1.5 billion growth capital fund to finance thousands of small and medium-sized businesses. The Government has also made a welcome pledge to reduce corporation tax to the lowest rate in the G7. Business has pressing concerns that must be heard if the private sector is to create the jobs and opportunities needed to take up the challenge of generating real growth and make sure the UK remains globally competitive."

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