The Zurich Risk Index is now sitting at 40.18 points, indicating the highest level of risk to the UK’s small businesses since Q1 2014 and a 5 per cent increase in the last six months.
The latest results from Zurich’s SME Risk Index show that more than half (56 per cent) of Britain’s small businesses voice concerns over the current economic climate.
The survey of more than 1,000 small and medium-sized enterprise (SME) owners and decisionmakers also shows that almost two in five (39 per cent) believe their business faces more risk now than compared with 12 months ago, with nearly one in ten (8 per cent) saying they have considered closing down the business.
Key drivers of concern appear to be issues related to the workforce and layers of red tape. More than two in five respondents (44 per cent) have reported a skills shortage as a challenge to the success of their business, and just less than two in five (39 per cent) have stated that the weight of regulation and compliance is a roadblock.
This has had a knock-on effect throughout a number of significant business operations. Nearly one in five (19 per cent) has had to reduce its prices in the last financial quarter, while more than one in eight (13 per cent) has had to make staff cuts and others have reduced wages (8 per cent).
Despite this, a lack of confidence in the economic environment has revealed how SMEs have become more innovative and business-savvy as they look to safeguard their future success.
Almost half (48 per cent) of businesses have expanded their business development activities to target new customers, almost a third (30 per cent) have diversified their business offering and more than a quarter have invested in business assets and operations (28 per cent) to maximise their output.
These endeavours have paid dividends, and while the business environment remains uncertain almost twice as many SMEs reported business growth in the last quarter (39 per cent) than reported a reduction in the size of their business (20 per cent).
Anne Griffiths, head of SME proposition at Zurich says that while a number of firms are forced to make difficult decisions, more small businesses are working harder to reach new audiences and exploring innovative methods to diversify their offering than are cutting costs or staff.
‘In front of a precarious economic backdrop, the SME community is demonstrating the flexibility to adapt and capitalise on their environment.
‘What we are seeing now is the strength of character that has cemented small businesses’ place as the powerhouse of the British economy, but they will need all the support available for them to ride out the current uncertainty.’
Further reading on economic outlook
See also: Owner’s salary