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SME risk index falls, but business worries remain

At a glance

  • There are concerns by SME owners about the stability of the national economy
  • This has been reflected in the Zurich SME Risk Index, which measures the perceived level of risk faced by businesses
  • Brokers need to address these worries and help SMEs prepare for potential economic downturns

While the economy has started to pick up, there are concerns from SME owners that this slight upturn will not last forever.

These fears are reflected in the latest results from the Zurich SME Risk Index, which measures the perceived level of business risk faced by SMEs (a score of 100 is the highest possible level of risk). It has fallen to 39.92 points in Q3 of 2014, from 42.17 in Q2 – not a large drop, but a cautious one.

Mortgage broker David Bird is optimistic about the outlook for his business, especially for a man who founded his firm in the depths of recession.

Bird, like many other SME owners has spent the past few years assessing potential risk within their business, to ensure they are as prepared as possible for any economic downturn.

SME shrink

“We’ve tried to cut out the fat as much as possible,” says David, “That way, if our profits were to drop significantly, we’d have a comfortable buffer before the company starts to lose money.”

His feelings echo many of his peers who may be slightly more confident about the risks they face, yet are still persistently troubled by economic concerns.

SMEs fears remain

While many SME owners are now better prepared for any potential risks, the ever-changing economy has meant that many have significant fears about their business outlook. According to the SME Risk Index:

  • 21% of SMEs say their business shrank during the third quarter
  • One third of SMEs say they face a medium-to-high risk of going out of business over the next 12 months
  • Two thirds of SMEs had doubts that the economic situation will improve within the next quarter

Commenting on the findings, Richard Coleman, Managing Director of Commercial Broker at Zurich says: “It’s great to report again that ?SMEs ?are continuing to feel better about the risks their businesses face, but it’s clear that the wider economic environment is a source of increasing concern for? them – even as their concerns over some of the more specific risks reduce.”

Confidence boost needed

John Walding, of the Forum of Private Business, agrees: “Most small companies are yet to be convinced about the extent of the recovery, and are looking for reassurances on a range of issues before they take more people on.

“People on the street aren’t feeling the recovery, and they don’t see it reflected in their wage packets. Business needs a confidence boost. Economic woes in Europe and Japan, late payments and business costs rising higher than inflation are all concerns, while access to finance remains a key issue.”

It’s just about making sure that you’re aware and ready for possible risks if they do emerge

David Bird, Mortgage Broker

Age on uncertainty

Bob Bradley, chairman of leadership development group MD2MD, highlights further concerns: “The combination of EU countries lagging behind with their own stalled economies, and the inevitable distraction of the next UK general election, is adding to this uncertainty,” he says.

However, he thinks that the UK’s SME business owners are well placed to weather this turbulence, thanks to their experience in assessing risk.

“Proactive small businesses are able to take action early and survive even the rockiest of roads. What’s needed now is a steady hand from the Chancellor and the Prime Minister to reassure SMEs that measures will be taken promptly to support them,” he says

It’s a sentiment that David Bird echoes. “On the whole we are confident. It’s just about making sure that you’re aware and ready for possible risks if they do emerge.”

For more information, contact a Zurich employee.

Image © Getty

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