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Credit crisis - small firms feeling the heat

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Of the small firms surveyed as part of the SBRT’s report for the first quarter of 2008, 74% with both overdrafts and loans reported an increase in lending rates over the last six months. Rising interest rates are another concern, with 59% of respondents indicating that they had had a ‘negative’ or ‘very negative’ impact on investment. Purchasing, employment and sales have also been hit.

"The survey shows trading conditions have declined significantly this quarter in all areas – sales, employment and investment, with only medium-sized businesses suggesting any growth in levels of employment," said the FPB’s Chief Executive, Phil Orford. "This contrasts with the optimism expressed at the end of 2007, where confidence in the future level of economic growth still showed signs of remaining stable. Expectations have weakened considerably since the last quarter; each measure has moved into a negative balance and all sizes of businesses, in all regions of the country, now expect a much lower performance for 2008."

The volume of smaller businesses reporting a fall in sales increased from 26% to 33%, compared to the survey carried out in the fourth quarter of 2007. Investment growth also declined significantly; the net balance decreased from 8% to -5% for micro businesses, small businesses saw a fall from 8% to 2%, and medium-sized businesses reported the most significant decline, from 27% to 9%.

Posted April 1, 2008