SMEs survive the recession

SMALL and medium enterprises (SMEs) have proved more resilient to the recession than previously thought, according to new research published today by Kingston University.<br /><br />As a result of their greater flexibility and ability to adapt to changing conditions, the research found that nearly half of all SMEs were able to either maintain or increase their levels of profitability between January 2008 and January 2009. And at a time when policymakers are urging banks to increase lending to households and businesses, the report shows that availability of credit is not affecting SMEs as much as is thought.<br /><br />This is because not that many SMEs use bank loans anyway, says Dr Chris Pieroni, operations director of Workspace Group, which provides business space to SMEs and which commissioned the research.<br /><br />Only 21 per cent of the SMEs surveyed have ever used a bank loan to access credit, with more preferring to use personal credit cards, overdraft facilities, or ask friends and family for money.<br /><br />There has been much debate over whether it is the demand for credit or the supply of it that is keeping bank lending figures so low. In the case of SMEs, only 32 per cent of the sample reported an unsuccessful/partly successful application for external finance. Pieroni says that small firms &ndash; which account for 99 per cent of all companies in the UK &ndash; are clearly far more creative about their use of finance, as well as being more fleet-footed.<br /><br />This will put them in an excellent position to benefit from the economic recovery, says Pieroni. &ldquo;There will be enormous opportunities for them and it will be the point at which they can grow very quickly. As firms begin to free up and spend a bit more, it will be the small firms that can deliver the products and tailor them appropriately,&rdquo; he adds.