SME job security ‘reliant on lower pay’

THE number of people employed in the small and medium sized enterprise (SME) sector will remain solid in the next six months, 83% of businesses leaders said is response to a recent survey.

That further job security will come at a price and will mean lower pay or wage freezes. Of the 330 decision-makers working in the SME sector taking part in the study, 56% warned they saw more pay cuts in an area of business where over 65% have already taken smaller salaries instead of job losses.

Fewer than 29% have implemented redundancies since April 2009, the survey found. At this stage in the economic cycle those pay cuts have been made in all sectors of the SME market.

Nearly half the number of those surveyed (46.8%) were bullish on profits, saying they expect profitability to remain the same or rise in the year ahead.

The biggest challenge was identified as reduced sales volumes (51.9%) while only 9.6% saw bank funding as their major obstacle.

More than 72% said getting paid by customers has become slower this year with just 1% confirming payments had speeded up.

Big Red Book said the level of optimism on job retention and profitability was so good that this sentiment could mark the transition from green-shoots to recovery over the next twelve months.

“The SME market is struggling in the current economic climate as much as any other sector,” said Marc O’Dwyer, managing director of Big Red Book. The company is a provider of leading edge accountancy and payroll software to over 35,000 businesses.

In a separate analysis ISME, the independent small firms lobby group, warned business sentiment was very negative across its broad membership.

The results of its third quarterly trends survey, including responses from over 500 companies, found “the business environment for SMEs continues to be extremely tough”.

Employment is continuing to deteriorate with sales very weak and profits and revenue under pressure, said ISME.

“On a positive note business optimism continues to improve, there has been an increase in investment, and export values while still negative have rebounded for the second quarter in succession, although Sterling remains a threat.”

ISME’s findings on future optimism reflects the Big Red Book survey which concluded “resilience in the face of job cuts and lower profits is evident across most of the companies surveyed”.