Small business in growing recovery

Sept. 21, 2011 - PRLog -- Small businesses may be enjoying a tentative recovery in spite of broader economic uncertainty, according to a new quarterly report from Invoice and Asset Based Lender, Venture Finance.  

Average turnover for small businesses increased by 16.2 per cent between the end of 2009 and Q2 2011, signalling a return to growth for the small business sector.

The recovery comes after a deep decline in turnover during the recession of 10.5 per cent between 2007 and the end of 2009.

Peter Ewen, Managing Director of Venture Finance and Chairman of the International Factors Group, comments, “This is just what the economy needs. While tentative in some respects, small businesses have worked very hard since 2009 and have enjoyed increasing success as a result.”

The Cashflow Barometer report  and infographic will be released on a quarterly basis, providing up to date information on the financial performance of UK small businesses.

Small business fights back

Further data shows that small businesses are also issuing more invoices now than in 2010, after seeing a fall of 9 per cent to the end of 2009 and a recovery of 16 per cent to Q2 2011.

The average number of customers per business has also almost returned to pre-recession levels. Despite having fallen by 6.6 per cent from 2007 to a 2009 low, they have rallied by 5.8 per cent to Q2 2011, to a healthy 25.6 customers on average. The time taken to pay invoices has also fallen, an encouraging sign for recovering businesses.

Ewen comments, “Small firms look to be bringing in new customers and billing them for increasing amounts of business, which is great news. Such statistics are encouraging because they point to increasingly healthy cashflow – the lifeblood of business and growth potential”.

Sector Success

Sectors vital to the economy have also experienced a significant recovery.

The manufacturing and engineering sectors have enjoyed turnover growth of 32 per cent and 19.1 per cent respectively between 2009 and Q2 2011.

Surprisingly in the current employment environment, recruitment turnover also rose by 27.9 per cent since 2009 and services by 17.5 per cent in the same period, bringing both back to parity with 2007 levels.

However manufacturing customer numbers decreased by 35.4 per cent since 2007 and by a further 6.1 per cent between 2010 and 2011, suggesting firms may be relying on a core of stable customers.

Peter Ewen comments, “The current government is hoping desperately for a manufacturing and engineering resurgence and it looks like these small, dynamic businesses are already doing their bit for economic recovery.

“However, it’s important that manufacturers act to halt their apparent decline in customer numbers in order to assure a continued recovery.”

Seeking growth abroad

Export growth has also been promising, another area being encouraged by the government.

Average small business export turnover has returned almost to pre-recession levels after a severe 33.5 per cent fall to the end of 2010. A rapid recovery saw a 46 per cent rise between 2010 and Q2 2011 and export turnover is now down by just 2.2 per cent on the 2008 high.

Average days outstanding for payment from export customers have also improved from a high of almost 72 in 2007 to just over 64 in Q2 2011, a fall of 10.2 per cent. Export customer numbers have enjoyed a similar boost since their height in 2008, rising from a low of 4.6 by 30 per cent to an average of six.

Average invoices issued to overseas customers have risen significantly from a 2009 low of just under nine invoices to 18.4 per month at the end of Q2 2011, a sizeable 104 per cent rise.

“Export growth holds great potential for small businesses and it’s highly encouraging to see them capitalising on the opportunity. On the current trajectory, exports could become a vital revenue stream for small firms.

“To build on these strong growth foundations, small businesses need to put the tools in place to secure working capital for growth. This will be especially important for those exploring export markets, where payment terms and operating styles can differ significantly,” concludes Ewen.

Ends

Notes to editors

Cashflow Barometer Infographic
Please note, an infographic depicting some of the main statistics from the cashflow barometer report is available here.

About The Cashflow Barometer Report

The Capital Climate Report is comprised of statistics from over approximately 700 Venture Finance invoice finance customers. All companies in the sample fall into the BIS definition for small businesses – under £5.6m turnover and fewer than 50 staff. Percentage changes are based on mean averages for monthly turnover, customers, time taken to pay invoices and invoice numbers for 2007, 2008, 2009, 2010, and Q1 & Q2 2011. The percentages included are percentage changes between two values.

About Venture Finance

Venture Finance is an award-winning independent Invoice and Asset Based Lender and part of the ABN AMRO Commercial Finance group. Established in 1989, Venture provides Factoring, Invoice Discounting, Export Finance, Structured Finance and numerous related services to start-ups through to £150m turnover organisations. Providing consistent support via its 200+ staff and 11 regional offices, Venture helps clients manage working capital, refinance, restructure, fund business opportunities and expansion, purchase new equipment and finance M&As.