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A survey of SMEs has revealed that in the first quarter of this year a majority
of firms reported decreases rather than increases in sales, jobs and investment.
The survey, by the independent Small Business Research Trust (SBRT), shows that
there has been a gradual decline over the past 7 quarters, with small majorities
in 2006 reporting falls rather than growth in all three indicators.
This decline has particularly affected employment and sales, while investment
remained stable until this year.
But in spite of the disappointing figures, optimism among smaller businesses
remains relatively high, particularly regarding sales.
The survey was carried out by the University of Liverpool, and is one of the
largest in the UK among smaller companies.
About 12,000 small firms were surveyed in January and February, and the results
showed that the economic environment continues to be relatively stable.
Of those responding, roughly a third reported that sales were steady, and about
two thirds said that employment and investment remained the same.
There were only small differences in the numbers of firms reporting decreases
rather than increases in the three indicators.
About 4% more firms reported less jobs rather than employment growth. For sales,
about 2.5% more firms said there had been a decrease rather than increase; and
for investment around 1% more reported a fall.
Sector analysis
The real estate and business services sector recorded high levels of growth in
employment, sales and investment, with 45% of businesses reporting an increase
in sales compared with 30% who said that sales were down.
In addition, 14% more firms reported employment up rather than down; and 16%
more said investment had increased rather than decreased.
The wholesale and retail sector fared less well, with declines in employment and
sales, though investment remained steady. Almost 11% more firms in this sector
reported employment down rather than up; and 17% more said sales had decreased
rather than increased.
Employment, sales and investment were all down in the manufacturing sector. The
differences between the numbers of firms reporting decreases rather than
increases were 5% for employment, 4% for sales and 5% for investment.
In the construction industry, 42% of firms reported sales up compared with 29%
who said they were down. However, while 10% reported more jobs created, 20% said
they had shed labour. Seventy per cent of construction firms said investment had
remained stable, though there was a small majority (4%) reporting an increase
rather than a decrease.
Regional analysis
Scotland is the only part of the UK that has had more businesses consistently
reporting sales growth rather than decline over the past 7 quarters.
But only 2% more Scottish businesses reported sales growth rather than decline
in the first quarter of 2006. This is well down from the last quarter of 2005
when 12% more Scottish firms reported that sales had grown rather than declined.
Employment is down, with 14% more firms saying they are losing jobs rather than
creating them; but investment is positive, with 4% more firms saying it has
increased rather than decreased.
The decline in employment, sales and investment among small businesses in the
North West revealed in a survey taken in the final quarter of 2005, has
continued this year.
For the second successive quarter, 40% of businesses in the region reported that
sales were in decline.
But while 44% of firms said sales had decreased, only 29% said they had
increased. Twenty seven per cent said sales had remained stable.
The survey also reveals that in the first quarter of this year, 9% more North
West businesses reported employment down rather than up.
Almost 7% more said investment had fallen rather than increased, the biggest
decline in investment in any region.
More North West firms also reported declines rather than growth in the three
categories at the end of 2005, though the first quarter figures for 2006 showed
some improvement in sales.
In the final quarter of last year, 25% more firms revealed decreases rather than
increases in sales, compared with 16% more this year.
Other indicators showed a slight deterioration, with 7% more firms in 2005
saying employment was down, and 2% more reporting investment lower.
Smaller businesses in London also showed declines in jobs, sales and
investments, with 6% more firms claiming that the number of jobs had declined
rather than increased. Almost 8% more said sales were down, and 2% more firms
reported investment was down rather than up.
This shows a decline since the last quarter of 2005, when more London firms
reported growth in sales and investment rather than a decrease, but a small
majority reported falling rather than increasing employment.
In the South West, 6% more firms reported an increase in sales rather than a
decrease. However, while more than two thirds of firms reported no change in
employment, 3% more firms reported employment down rather than up. Two per cent
more reported investment growth rather than decline.
Wales saw a decline in sales, with 9% more firms reporting a decrease rather
than growth. But employment and investment remained steady.
Of the 8 English regions where the number of responses to the survey was high,
Yorkshire and Humberside, and the East Midlands, were the only ones where more
businesses reported employment was up rather than down.
Dr Alan Southern of the University of Liverpool Management School, commented:
"Although year on year since 2004 there has undoubtedly been a marked slowdown,
the figures in the first quarter of this year may have been affected by seasonal
factors.
"The findings of the survey in the next quarter will be particularly
interesting."
Source:
RedAlert
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