Orders up but profits down at smaller firms finds new research
While many small businesses have experienced a rise in orders and turnover in recent months, new research has discovered that rising energy bills, fuel prices and raw material costs have hit margins.
The Forum of Private Business found that almost one in three members on its ‘Economy Watch’ panel saw increases in their order books and turnovers, with only 16% reporting a decrease. Business for 54% stayed steady between the Forum’s previous survey in mid October and the latest study carried out in late November.
However, many business owners on the panel also reported a sharp drop in profitability during the same period as increases in fuel costs, energy prices and raw materials hit home.
46% of the firms surveyed said they had seen a recent increase in the cost of doing business, with only 1% reporting that costs had fallen.
As a result, 27% of Economy Watch panel members reported a decrease in profitability since they were last surveyed in October, compared to just 14% who reported an increase.
Forum spokesman Phil McCabe said: “Ever-increasing costs of unavoidable overheads like gas, electricity, fuel and raw materials are taking their toll. This inflationary pressure is a real concern and it’s something the Government really needs to tackle if it wants smaller businesses to drive economic growth and create jobs in the months and years ahead.”
Economy Watch also revealed businesses expect to secure 20% more finance for development in 2011 than they did in 2010. Those surveyed anticipated to receive around £45,500 each next year, rather than the £38,000 they said they expected during 2010 when surveyed in February. However, the amount business expect to source from external sources - predominantly traditional bank lending – has seen a 27% slump. Correspondingly, the amount business owners expect to come from internal sources such as directors, friends and family members, has shot up from 10% for 2010 to 45% for 2011.