SMEs faring worst from unstable economic conditions

The UK’s SMEs and small businesses are suffering the most from continuing economic instability, according to the latest figures from financial monitoring system Red Flag. There were 10.5% more SMEs seeing early signs of financial distress in the third quarter of 2012 in comparison to the previous quarter. Large companies fared distinctly better across the same time period, with a 61% decline in those suffering being recorded. Across all companies in the UK, there was a 9% increase in stress levels in Q3 2012. A partner at Begbies Traynor, Julie Palmer, suggested the conditions were forming a perfect storm for the UK’s SME sector, as the rising cost of energy prices and the declining availability of bank credit were hitting companies hard. Julie also indicated that late payment culture was continuing to inhibit cashflow across SMEs: “(The figures indicate) it is evident that larger businesses are exploiting their scale by enforcing lengthier payment terms on SMEs”. The news follows Sainsbury’s announcement that it would increase payment terms for non-food suppliers from 30 to 75 days, a move denounced by the Forum of Private Business (FPB).

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