Short-termism grips UK’s increasingly stressed small businesses

Short-termism is gripping UK small businesses, according to commercial insurer AXA, which today reveals that many are adopting short-term planning and cutting reliance on external funding ahead of Brexit. Staying agile and light is a common strategy, but may not give businesses the best chance of survival if financial cushions are not in place too.

The study* finds a sharp increase in financial anxiety amongst business owners. Over the course of 2018, those reporting they felt chronically stressed** about their businesses increased by almost 50 percent, reaching 29 percent by year-end. Previous studies have shown that the self-employed tend to be more stress-resilient than other population groups, which makes the recent rise in stress even starker.

While growth and hiring plans are down for 2019, the biggest pull-back is on funding, just 17 percent of business owners plan to invest in their business this year. This is a fall of 37 percentage points in 2015 when that was 54 percent, the lowest figure in five years.

Far fewer are turning to banks, government or EU-backed schemes designed to help them too: just 4.8 percent say they will seek funding from these sources, a three-fold fall in 2015. ‘Under the radar’ finance is vastly preferred, as businesses are now more likely to turn to family, friends, other small businesses and existing personal credit to fund growth.

Funding growth can be difficult to do for a small business. However, by pushing for more sales and customers, the business should have more money to fund itself. With the banks and government out of the question for most small businesses, one of their few options is to work even harder to create a successful company. By incorporating more marketing strategies into their business plan, such as clickfunnels templates for example, they should see a rise in their sales and revenue. The more marketing a company does, the more awareness they are creating for themselves. Hopefully, small businesses will create enough money to keep themselves trading without having to loan money.

Small businesses are also tending to defer things like insurance, pensions, savings, and business banking products – another sign that many are planning month-to-month rather than for the longer term. AXA’s research found that:

– Three in ten small businesses have no insurance of any kind, a figure that has barely moved in five years. It means a large part of the UK business is not underwritten for common risks, and could potentially be breaking the law.

– Half of the small businesses (52 percent) have no way of getting ‘sick pay’ – either by having staff, sub-contractors or family members who can keep the business going while they are absent, or in the form of a rainy day fund. Personal accident cover, which pays a monthly benefit to cover lost income during recovery following an accident, is taken up by just one in ten self-employed people too.

Seventy-five percent of small business owners do not contribute to a pension fund, most (57 percent) citing a fluctuating income as the top reason they cannot pay in. Half of those who are not paying into a pension (35 percent) say they have alternatives in mind, commonly a mix of property investments, company pensions from old employment, the business (either continuing to work, drawing income from it or selling it’ and state pensions.

Most small businesses – 68 percent – report that they shore up their business income using personal finance and a variety of informal arrangements. These include their partner’s income, family loans, property investments, state benefits or a current pension (eight percent currently draw a pension) to paper over dips in income.

Furthermore, digital tax records are a crucial way of forecasting cash flow and tax liability but are kept by just 45 percent of small businesses. HMRC remains the biggest creditor in business liquidations in the UK.

The final sign that small businesses feel alone and alienated from sources of support is the number who plan to return to the labour market this year. While 11 percent of business owners combine their venture with part-time or full-time employment, a further 20 percent of those surveyed said they are planning to take a job too. This would mean a third of today’s businesses being supported by the owner taking another job.

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