Businesses see growth times ahead

The research revealed that despite levels of business confidence being at a record low for the majority of respondents (49%), over six out of ten (66 per cent) are determined to make it through the downturn. Over a fifth (21 per cent) are predicting business growth in the next twelve months, whilst seven per cent of bosses cited that their business has been unaffected by the recession. Four in a hundred business owners view the current economic climate as an exciting challenge for their business.
The optimistic approach comes despite a continued gloomy outlook for the sector. Recent reports have predicted that the current economic downturn will see up to six per cent of small businesses collapse in 2009.

Issues impacting levels of confidence in the SME sector
The report revealed that financial issues have now replaced red tape and competition as the greatest cause for concern amongst the UK’s small business community.
Concerns over cash flow was cited as the greatest threat to survival closely followed by a lack of support from the banking sector, with small businesses hopeful the government will do more to help the business community access finance such as loans and overdraft facilities. Cutting corporation tax and a commercial rates relief was identified as a way government could help improve levels of confidence amongst the small business community. A recent move by the Chancellor, Alistair Darling, has seen a deferral from a full rise, with rates rising by two per cent this year instead of the predicted full five per cent, in an attempt to save small firms up to £600 million.

Feedback also revealed two thirds (62%) of the small businesses questioned had not noticed any change in their banks attitude to lending with only two per cent of those questioned feeling they had directly benefited by receiving a loan. Recent cuts in interest rates have reportedly had little effect in helping to restore confidence amongst the sector with over two thirds (64%) stating that a further reduction in rates would have no benefit on their business.

Cost Efficiencies
In an attempt to cut expenditure and increase cost efficiencies, nearly four in ten (39 per cent) of small business owners are set to implement a headcount freeze amongst their workforce with 11% planning to make redundancies. Downsizing on office premises was another popular means of reducing overheads with 17% of those questioned actively looking for smaller commercial premises.

Despite a wave of cost cutting measures, the research revealed that nearly half (49 per cent) of small businesses are continuing to spend on IT and technology in an attempt to benefit from cost efficiencies in the long term.

Converged devices such as iPhones and BlackBerry smartphones were identified as the most popular technology products with increases in staff efficiency and less requirement for fixed office space cited as the greatest reasons behind this continued investment. Recent research from O2 revealed that over one in ten (13 per cent) small businesses have not renewed a lease on an office or business premises and are now working remotely and from home.

This shift to converged devices is supported by sales figures from O2’s London retail outlets which reveal that nine out of ten small business customers have switched to iPhones and BlackBerry smartphones compared to last year when only two in ten small businesses across the UK were using converged devices.

Simon Devonshire, Head of Small Business Marketing, O2 commented: ‘At the end of the first business quarter of 2009, it is evident that there is very much a ‘thrive and survive’ mentality amongst small business owners. Whilst conditions are clearly very tough small businesses are determined not to fall victim to the recession and are scrutinising their business model to see where savings can be made and new business won. Confidence is essential for anyone running a small business and in the current economic climate keeping confidence in yourself, your team and your business is more important than ever. As a result of this, O2 will continue to invest in monitoring the confidence levels of the small business community twice a year to see how business confidence levels progresses’”

In response to the findings of the Small Business Confidence Index, O2 has introduced three new Business Flexibility packages designed exclusively to help small businesses increase flexibility and cut costs. In the first package small business customers can save on hardware investment costs by holding onto their existing handsets and getting a SIM only small business tariff. The second and third packages allow small businesses to switch more easily from business to consumer tariffs or temporarily reduce the number of mobile numbers held by a small business in the event of it needing to downsize without incurring termination fees.

Devonshire added: ‘As a business, O2 is committed to helping its small business customers and making it easier for them to manage costs effectively and get from their mobile services exactly what they need.’
David Molian of Cranfield School of Management’s Bettany Centre for Entrepreneurial Performance & Economics commented: “There are three things in O2’s Small Business Confidence Index which really stand out for me. First, it suggests that the UK’s small businesses are increasingly viewing the glass as half-full, not half-empty. Compared with earlier surveys, fewer businesses believe they won’t make it through, and a good number actually see opportunities to grow. This is encouraging, because ultimately the health of our economy hinges on confidence.

Second, it’s clear that many businesses are now adjusting to the new reality. They’re focusing, quite rightly, on cash as number one and on improving the productivity of their workforce through, for example, smarter investment in converged IT and telephony.

Third, the survey highlights the lag between government initiatives and their effect in the market. There’s nothing unusual in this, but it underscores that government and the banking community need to broadcast to small businesses that there is money to lend, and to make it available fast.
We are not out of the woods by any means, but this survey provides encouragement and evidence, if it were needed, of the resilience of the small business population.”