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Fall in customer demand cited as biggest issue in current economic crisis

18 May 2009

A fall in customer demand has been the biggest issue facing SMEs during the first quarter of 2009, according to a report published by the Open University Business School.

Among the findings of the Quarterly Survey of Small Business in Britain, which was sponsored by ACCA, are that:

• 64% of SMEs consider a reduction in demand as the biggest problem they have faced, compared to 25% who have experienced difficulty in accessing finance due to the downturn
• 14% have encountered problems with suppliers and obtaining trade credit
• 13% have had to dispense with key members of staff or deal with staff morale problems
• Scottish SMEs seem to be faring slightly better than their counterparts in England and Wales, with 56% suffering a fall in demand, compared to 65% in Wales, a massive 75% in the West Midlands, 71% in East Anglia and 62% in both the North East and North West.

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

The BBA figures, which show that overdraft lending to small businesses rose by 1.2% in real terms between January and March 2009, may explain the findings of ACCA's Global Economic Conditions Survey Q1 2009, which reveal that accountants working in smaller businesses are more upbeat about the signs of business recovery than those in larger organisations.

'There is still a lot of pain out there,' said Jarvis. 'But small businesses are gradually discovering that the sky hasn't fallen on their heads after all.'