SMEs in Poorer Cities at Risk from Spending Cuts

Posted on 20 July, 2013 by MOVEHUT

Small and medium-sized companies in the UK’s most vulnerable towns and cities face a particular threat from public spending cuts and the continual impact of the recession, a study has warned.

Hull is one of the cities identified as being most vulnerable

The findings from think-tank Centre for Cities are important because the coalition is hoping that private sector growth – mainly by SMEs – will more than fill the hole left by cuts to the public sector.

However the study, commissioned by Zurich, the insurer, found that SMEs in poorer cities and towns are over-reliant on trading in their local market. Almost two-thirds of SMEs in some places are reliant on local customers, rather than selling further afield. This leaves SMEs vulnerable not just to public sector cuts but also to unemployment and the squeeze on wages.

The study shows that Hull, Liverpool and Blackburn are among the places where small firms are most vulnerable, while Crawley, Cambridge and Reading are the least.

The 10 most vulnerable cities and towns are in northern England or the West Midlands; however it is not a north-south divide because Warrington and York are among the least vulnerable.

SMEs are critical to the success of the national economy and make up 99 per cent of firms in Britain’s cities, as well as providing around half of all private sector jobs.

It calls on the Department for Business to simplify the confusing mix of 900 business support schemes and urges Whitehall to work with England’s local enterprise partnerships to find more effective ways of encouraging small businesses to access relevant support.

The centre says UK Trade and Investment (UKTI), the trade promotion agency which supports exporters, should strengthen its local knowledge base and work more closely with local partners to help companies understand how they can deal with other domestic customers and export to international markets.

Centre for Cities’ chief executive, Alexandra Jones said: “Small and medium sized businesses are the lifeblood of the UK’s economy, but many have been particularly affected by the impact of the recession on their local economies. They will face challenges ahead as further austerity measures have a knock-on effect on local demand for their services.

“Government must recognise the importance of local economies to SME performance and resilience and ensure that local partners, including local enterprise partnerships, have a clear role in delivering national business support policies.”

What more do you think government can do to help SMEs?

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