Small firms well placed to cash in on the recovery

8 March 2010

As brokers, many of us have witnessed the sad demise of small and medium-sized businesses at close range, while simultaneously trying to support our clients against lenders’ tightening criteria.

To quantify this the Bank of England reported that almost 60% of respondents to its September Business Barometer Survey covering small and medium-sized enterprises said they had experienced some difficulty obtaining credit compared with survey.

Larger businesses are starting to look more healthy but it is important to take the profit and loss data emerging with a pinch of salt. Why? Because many invested in land. Persimmon is a good example.

These companies’ land assets were heavily written down for the purpose of last year’s figures so they look comparatively strong now.

But smaller companies are primed to thrive. Particularly where they have been flexible in their approach to working hours, these firms’ output can be resurrected relatively quickly.

It doesn’t take long to implement an idea these days. New services can be offered and even building societies are approaching us with innovations such as exclusive mortgage products, bespoke underwriting and an appetite for niche lending.

The unemployment figures in the media paint only part of the picture. The working hours that have been cut back and their true impact on output are not measured.

We could finally see many financial services firms bring their call centres back to these shores

As we recover, the process of taking on new workers and training them inevitably delays their effect on output, rendering a proportion of their workforce ineffective for some time.

So those inflexible employers who culled harshly will not be as productive this year as they used to be even if headline employment figures get better.

To make it worse, a quarter of the redundancies in this recession are the result of company insolvencies, meaning there will be fewer roles to return to when the upturn begins in earnest.

Interestingly, demographics in the UK are such that we may never get those jobs back.

Financial services used to be one of the UK’s biggest exports so our ability to recover by that route is limited.

Consequently, we will have to redirect our resources in the longer term, both as a nation and as employers, in the direction of creating more exportable goods.

The Department for Business, Innovation and Skills is no doubt working right now on ways to influence the career choices of the next generation.

The fall in the value of sterling could work in our favour in this regard, encouraging individual companies to source staff and services domestically instead of from abroad.

So we could finally see many financial services companies bring their call centres back to these shores.

While a few choice financial services and property giants have some weight behind them, many do not.

It is smaller companies that are not wrapped up in red tape that are best placed to take advantage of opportunities emerging in the recovery. And their confidence to innovate will result in success.