‘Thumbscrews’ put on small businesses

Oct 13 2008 by Karen Dent, The Journal

RISING costs and disappearing customers are putting the thumbscrews on small businesses that are struggling to cope as the economic crisis tightens its grip.

Almost half – 48% – of the region’s small firms said trading conditions had worsened during the downturn, while 14% said they had seen an improvement since last year.

The figures come from the State of the Small Business Nation 2008, produced for BT Business to coincide with the start of Small Business Week.

The research found 57% of small firms in the North East were experiencing difficult trading conditions, in line with the national average, and 52% had lost customers, a slightly higher figure than the UK-wide picture.

Bill Murphy, managing director of BT Business, said: “This growing sector continues to be dynamic and energising, but more than ever we need to ensure the right resources and structures are in place to support Britain’s small business ‘engine room’ during these more challenging times.”

The banking crisis is causing cashflow problems for sector, according to John Wright, chairman of the Federation of Small Businesses (FSB).

Mr Wright, who is also the North East Regional vice-chairman of the organisation, said: “The banks, obviously because of the difficulties, have been more restrictive with overdrafts, pulling overdrafts and converting them into fixed term loans.

“In my view, they have acted irresponsibly in the past, I don’t want then to act irresponsibly to small businesses that need nurturing in the present difficulties.”

One NorthEast is working to secure £125m in funding from the Government, European Union and European Investment Bank, to provide a cash lifeline for small businesses struggling to access finance during the crunch.

The agency also has put a range of measures in place to support small firms during the current difficulties.

Ian Williams, the agency’s director of business and industry, said: “One NorthEast is committed to spending more than £18m in this financial year to support start-up businesses as part of a wider £71m business support package. We have also just unveiled a £10m credit crunch support package to help SMEs through extra grant aid, assistance to cut energy bills, greater access to finance and help to deal with tax and credit issues.”

The BT report found North East small firms were open to seeking advice to deal with problems. Some 42% would speak to mentors, compared to 36% nationally, while around four out of 10 said they turned to professionals such as lawyers or accountants.

Mike Parker, from the North East Chamber of Commerce, said: “What is essential for the business community is that we maintain confidence and help one another in as many ways as we can, be that paying bills promptly and by inter-trading.”