Small businesses won’t survive a ‘double dip’

SMALL businesses have been “worn out” by the recession and more than a quarter don’t believe they would survive a double dip, new research suggests.

Data released today by R3, the insolvency trade body, shows 28% of small companies believe a second recession lead to closure.

“These figures confirm what insolvency practitioners have seen in previous recessions – the early stages of recovery are a difficult time for businesses,” said James Martin, R3’s Midland Chairman.

“Many struggling businesses have drawn heavily on their reserves in order to survive and their resources are now beginning to run out.  

“When an economy emerges from a recession, creditors’ behaviour changes as they believe they stand to achieve greater returns than they would have done during the downturn.”  

However, Mr Martin is warning that creditors, such as banks, are putting small businesses in jeopardy by calling in loans too soon.

“It is easy to forget that banks are not a company’s only creditors, for many their largest creditor is the Government,” he said.

“With close to 300,000 firms in crucial ‘time to pay’ tax arrangements with HMRC, it seems that a large number of businesses are in need of a financial health check.”

The research found that the hotel and catering sector was the least positive, with 47% of businesses saying another recession could lead to insolvency.

However, there was at least some cheer for the Midlands, as manufacturers were the most positive group with just 19% fearing a double dip would lead to closure.