SMEs saw profit slump
Sep 28 2011
Many SMEs saw a decline in profits
Almost a quarter of small and medium-sized enterprises experienced a 50 per cent decline in their profit before tax last financial year, research finds.
The figures, attained by Baker Tilly’s newly-launched SME Distress Monitor, are based on 2010 accounts filed with Companies House by almost 20,000 SMEs.
Of those companies whose accounts were filed in 2010, almost one in ten also report more than 30 per cent downturn in their sales.
Sarah Batchelor, partner at Baker Tilly Restructuring and Recovery LLP, says, ‘Our research highlights how severely short term debt pressures are mounting for SMEs. As liquidity is tightening, it is essential that business owners take prompt action at an early stage to maximise the financial options available to them, in order to minimise future problems.
‘As we have seen over the past few months in the construction and retail sectors, the outlook for the high street and for business in general is concerning. Seeking timely advice and implementing strategic safeguards is crucial to surviving the current tough economic conditions.’
David Hudson, London Head of Baker Tilly’s Formal Insolvency team says that there has been an ‘artificial economy’ over recent months where stability has been seen to be settling, aided by quantitative easing and low interest rates.
‘However, the cracks are now appearing as inflation rates and shifts in the market are challenging this fragile stability. Businesses that suspect they are about to encounter problems need to tackle potential issues in advance. In today’s climate, proactivity is key,’ he says.
Denis Baker, CEO of Company Watch, which provides analysis of the health of companies worldwide adds, ‘This disturbing information is out there in the public domain and being assessed by the credit managers of these companies’ suppliers. SME managers must engage in proactive dialogue with their key stakeholders to reassure them, not just bury their heads in the sand and hope.’
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