High number of micro-businesses expect to fail
ONE in six micro-businesses expect to fold before the end of the year.
That’s the shocking statistic from research commissioned by Midlands-based credit card company Capital One. Its survey also found that more than one in four (28%) of micro-businesses – firms with between one and nine employees – expect to go under within the next two years.
The findings, authored by Professor Francis Greene, associate professor of enterprise at Warwick Business School, highlight that a fifth (19%) of all micro-businesses have absolutely no credit in their main bank account. Despite this, 98% of micro-firms have no intention of applying for any bank loan finance over the coming 12 months.
The figures are even more shocking when they are viewed in the context that micro-businesses account for 95% of UK companies, employ seven million people and currently contribute more than £600bn to the UK economy.
Commissioned by Capital One, which has launched a new Business Platinum credit card specifically for micro-business owners and the self-employed, the report investigates how such firms are coping with the economic conditions and recommends ways their survival can be promoted.
Professor Greene, said: “Micro-businesses are the backbone of the UK economy yet they face real challenges in surviving in today’s climate. In order to provide micro-businesses with effective support we need to understand their immediate needs.
“Micro-businesses have no intention of applying for bank loan finance to fund their business needs. Instead they are relying on a mixture of savings and short- term external finance, mostly in the form of credit cards.”
“Ultimately it’s up to micro-businesses to create their own survival plan and in this regard there is clear evidence of a financial skills gap. Given that financial literacy is even more important in challenging economic times, there are several practical and common sense ways in which micro-businesses can better manage their housekeeping and succeed in these tough times.”
Professor Greene’s report calls for existing business advice services to be better promoted to help micro-businesses access the support available. It also offers micro-businesses some practical and common-sense ways in which they can manage their cashflow and therefore increase their chances of survival.
