SME sector is let down by government policies

BCI survey states that low levels of output, orders and employment show little signs of improving

The government has failed to provide enough help to SMEs to enable business growth and 34 per cent of SMEs saw order levels drop during the second quarter of 2005, according to the Confederation of British Industry (CBI).

The CBI’s SME Trends survey found that, for the period ended 31 July, 33 per cent of businesses with up to 499 employees had experienced output level declines. Almost a quarter reported a decrease in their employment levels during that time and the CBI said it expected further job losses to follow as a result.

According to the report, SMEs’ ability to raise prices also remained pressurised due to the sustained rise in average unit costs during the quarter.

Doug Godden, head of economic analysis at the CBI, said the picture looked bleak for SMEs.

“There is no let-up at present for SMEs, with lower output, orders and employment for the second quarter running. These firms also see little reason for optimism about the next three months.

“Current tough economic conditions only add to the other difficulties faced by smaller firms. The government has a long way to go before it delivers a climate that allows the small business sector to thrive,” he said.

However, the CBI’s report did discover that 27 per cent of SMEs had seen an increase in output during the quarter, with 17 per cent also experiencing a rise in employment levels.

Bob Jones, managing director of SME appliance vendor Equiinet, said: “The future of the UK rests with SMEs, but the UK can’t be based just on services alone because it needs manufacturing too. I would agree with the CBI report, but positive results will only come as a result of hard work and investment.”

Ross Miller, chief executive of VAR Trustmarque Solutions, said: “SMEs are vital to the UK economy and in tough times many won’t invest internally. This will have a knock-on effect. The channel will not grow if these conditions continue and the weaker resellers may go bust.”