This year has seen 50,000 fewer business start ups compared with 2007. However, Barclays predict that the decline in start up business numbers will ease by the end of 2008.

Because SMEs are now starting up with a greater degree of caution, they are likely to be better placed to survive the current economic downturn. With new start up business figures expected to reach 380,000 by the end of the year, Nic Bayley, Head of Product for Barclays Local Business said: “We believe most of the downward adjustment will have occurred by the end of the year, and a lot of the fall has already occurred.” He added: “Business closures are also past their peak and are likely to level off shortly. While we expect some further decline in the stock of firms into 2009, by early 2010 we could be seeing the first real signs of a pickup in SME numbers.”

Despite this positive projection, the economy continues to operate unpredictably. To minimise adverse affects on SMEs, they are advised to look at key areas. These include: Factoring to alleviate any current cash flow problems; outsourcing responsibilities from payroll to content writing – this can reduce employee related expenses and buy SMEs expertise in areas where they are lacking; telecommuting, which offers a way of cutting back on office space and enables remote workers; negotiating on payment deals to stretch out cash flow; and debt restructuring. Appraising every area can take time, but is a valuable measure to ensure SMEs are operating at their optimum at the most effective financial rate.

Although there is a great deal of uncertainty that seems to be accumulating day after day, SMEs continue to function amongst a supportive community and with reasonable optimism. Bayley commented: “The spectre of 1993 – when we last saw a recession – is often invoked, but today matters are fundamentally different. Small businesses have kept their borrowing in line with their assets, rather than borrowed excessively.

SMEs are advised to keep control of their budget, and focus on indicators which effect performance and productivity. On the whole, SMEs are managing to monitor fluctuations in income levels and expenditure, and identify favourable market changes to turn them to their advantage. Constant revisions of how the economy is affecting SMEs is crucial, and businesses are urged to update their strategies to strengthen their position.

Bayley noted of SMEs: “These are savvy businesses which have been prudent with their finances.”

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