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UK businesses are taking action to cut costs and preserve cashflow as the fear of a serious downturn takes hold, a survey reveals.

Three quarters of the SMEs surveyed by chartered accountants MacIntyre Hudson say they are already imposing stricter control over expenditure.

Nearly a third reported having reduced staff numbers, with 47 per cent tightening credit control for existing customers and 44 per cent conducting stricter credit assessments for new clients.

Atul Kariya, senior accountant at MacIntyre Hudson, believes that in the current climate a tight control over costs is essential.

He says: ‘Any business with high gearing is heavily exposed to a downturn in trading. With bank lending requirements becoming more onerous, this is most likely to affect fledgling and expanding firms already operating in a tough market.’

But Kariya adds that while costs must be kept under control, it is important to avoid panic downsizing that will compromise delivery.

He says: ‘Those businesses which can most effectively manage this delicate balancing act will be best placed when the upturn eventually comes.’

Despite the majority of the 500 respondents reporting the direct effects of a downturn on business, 78 per cent stated that media coverage was responsible for worsening their outlook.

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