SMEs predict tough times ahead

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Nearly one in five SMEs in the UK expect their businesses to fall behind the overall growth in the market in 2008, with fuel costs a key concern according to a survey by GE Commercial Finance. However, over a quarter of respondents predicted strong growth, down just a few points from the 31% that foresaw strong growth at the outset of 2007.

Firms that can add value in new geographies should pay attention to the findings, with over 1 in 10 SMEs looking to expand overseas to pursue growth in the coming year. However, for a number of firms the credit crunch, higher interest rates and commodity prices have caused them to turn inward and focus on organic sales in the UK over the coming year, with 81% predicting this avenue as the best source of sales growth, up from 69% last year. 24% of respondents cited fuel costs as the biggest constraint on growth in the coming year, in marked contrast to 2007's survey, in which no one was concerned with the price of fuel.

Interestingly, SMEs placed reducing bad debts further down their list of priorities than last year. This may reflect the fact that SMEs have largely avoided the worst effects of the credit market issues, or it may be a more ominous sign. They could be less focused on reducing bad debt because the opportunities to do so do not exist, whereas last year credit was abundant and refinancings commonplace.