While 49% of small firms reported that sales were down over the year, most notably in manufacturing and construction, fewer firms now expect to cut employment and 62% of small firms have not changed employment levels over this past year.
Almost half of respondents, especially those employing more than five people, now aim to expand over the next three years. Within this group, 34% have seen an increase in sales over the past year showing resistance against the generally poor performance of the economy as a whole.
The biggest improvements are for hotels and restaurants (up from -20% to +27%) and retail (up from -27% to +23%). However while construction does not appear to be suffering as much as in 1991/92, it is the sector with the greatest net cuts as it saw a 30% cut in employment, 20% cut in investment and a 20% drop in selling prices.
Professor Colin Gray, professor of enterprise development at the OU Business School, said: “During the 25 years of conducting these surveys, we have seen an impressive resilience in small business owners. They are motivated not so much by a desire to make money but more by a desire to be their own boss and be responsible for directing their own small enterprise.
“These second quarter results show the mood of UK small businesses as one of cautious optimism. The decline appears to have slowed and may be levelling out and points to small businesses having a very different experience of recession.”
But the last three years have been hard for entrepreneurs. More than one third (37%) are now setting modest growth targets, and 32% aim to keep their business at its present size.
61% of small firms reported the ‘economic climate or fall in demand’ as the biggest factor affecting their businesses. 33% said cashflow, payments or debtors was an issue while 31% said Government regulations were the biggest problem.
The survey of 848 small business respondents was carried out by the enterprise research team at the Open University Business School with sponsorship by Barclays Bank and the Association of Chartered Certified Accountants. It was based on questionnaires and interviews with SMEs in the second quarter of 2009.