Small businesses feeling the pinch

Despite modest increases in confidence, nearly one in three small business owners said their inability to attract work was proving to be their biggest problem so far this year.

Other major worries included the oft-cited ‘red tape’ burden and the shortage of skilled personnel, according to Natwest’s quarterly survey of small business.

The government, however, will be pleased its message is finally getting through as this is now the fourth consecutive time since 1997 that red tape has fallen in importance.

In the past, its record on regulation has come under fire from organisations such as the CBI and ACCA over the level of regulatory control under which UK plc has to operate.

More worrying though, as doubts grow over the economy, will be small business’ bleak outlook on revenues – despite steady price rises throughout 2000.

Small businesses registered their biggest increase in quarter-on-quarter investment in the first quarter of 2001, but with little or no growth in sales turnover forecasted to match these acquisitions, overcapacity could become a problem if the economy takes a turn for the worse.

Another area of concern for small business is the increasing segmentation of the labour market, as a shortage of skilled personnel becomes the most pressing concern for big businesses.

According to the survey, the labour market has divided itself into ‘small firm employees’ and ‘large firm employees’, with little movement across the divide.Movement that does occur is predominantly from small companies to larger ones, leaving small businesses to poach employees from each other, recruit from the pool of graduates or from the unemployed.

Predictions for the forthcoming months reflect the darkening mood surrounding economic confidence. While the government promotes Britain as fertile soil for entrepreneurs and small business ventures, one in four small business owners say they will close down their business on retirement.

Unsurprisingly, the survey reckons it is the hospitality industry where the small business sector is likely to suffer the most in the coming year.

Restaurants and hotels registered the biggest fall in trading optimism, even before foot-and-mouth disease took on epidemic proportions.

And while the true economic impact of foot-and-mouth has so far only being guessed at, as far as small businesses is concerned, they are bracing themselves for a tough trading year.

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