At a glance
- 53% of SMEs are now worried about the economic climate – a 31% drop since Zurich’s Risk Index began in October 2012
- Most SMEs (57%) are confident that the economic situation will continue to improve within the next year
- Businesses are having to work hard to remain ahead of the curve and keep their operations profitable in a changeable economic landscape
SME confidence in the economy continues to rise, but for many firms the threat of closure still looms large.
Zurich’s August SME Risk Index, shows that small business’s confidence in the economy continues to grow, and is now significantly higher than when our index began. 53% of SMEs are now worried about the economic climate – a 3% drop from last quarter, and a 31% fall from the 84% recorded in October 2012.
Concern at its lowest level
What is the Zurich SME Risk Index?
The Zurich SME Risk Index is formulated by calculating a mean score against nine different parameters, which asks how concerned management are about each of these. From these scores, an overall mean is calculated to create an index score between 1 and 100, with 1 being “No concern at all” and 100 being “Very concerned”.
The Zurich Risk Index is now at its lowest level since our records began, sitting at just 37.14 points.
This fall in concern is linked to decreased worries across several key factors.
Nearly three quarters (71%) of SMEs say they are not concerned about bank lending, with just 24% worried about financing their business. Worries about red tape are at their lowest, with only a third (33%) of SMEs saying they are concerned about regulation and compliance.
This is bolstered by confidence that the economic situation will continue to recover. The majority of SMEs (57%) are confident that the economic situation will continue to improve within the next year, compared to just 37% in October 2012.
Threats still loom large
However, despite an improved business environment, small and medium businesses are still fighting to stay profitable. Almost half (47%) of businesses have expanded their activity to target new customers and 28% have diversified their product range or service to meet business need in the last three months.
In addition, the threat of more drastic measures still looms large. Almost 1 in 10 SMEs have considered closing their business recently. 8% of SMEs surveyed have considered closing down their business in the last quarter, and 10% say they’re at risk of shutting up shop in the next year.
SMEs are still heavily reliant on just a few customers – 15% of businesses questioned would need to significantly downsize operations if they lost their two biggest customers in the next 12 months.
Hard work ahead
Jason Eatock, Head of SME at Zurich, says: “Having recorded Risk Index figures since more difficult times in 2012, it’s a pleasure to report that SME concern about business risk has continued to drop, and is now at its lowest level since the index began.
“When you consider that two years ago 39% of businesses were worried about securing a basic bank loan, it’s great to see that only 24% of SMEs see themselves in the same situation today.
“However, while the situation is improving overall, it’s clear that businesses are having to work hard to remain ahead of the curve and keep their operations profitable in a changeable economic landscape.
“With almost half of those surveyed having expanded to target new customers within the last three months, and a further 10% saying they could be at risk of going out of business in the next year, it’s clear that the situation is far from comfortable.
“It’s exactly this precariously balanced situation that makes accurate risk planning important. Business owners seeking to make the most of this changing economic landscape and secure a firm future for their company should ensure they have a strong understanding of the real risks facing them.”
For more information please speak to your local Zurich contact.