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Entrepreneurial spirit flagging across business owners

UK entrepreneurial spirit is dwindling, and many SME owners are considering returning to the workforce as an employee, new research suggests.

The latest Aviva SME Pulse survey of 500 SME owners revealed that a third have lost the enthusiasm to run their own business.

Half said it is too tough to be a business owner in the current climate, and over a quarter admitted they no longer enjoy running their business.

One of the main contributing factors is thought to be the amount of money owners take out of their own businesses for personal use.

50% of respondents reduced the money they draw, over the past 2 years, with restaurant owners suffering the biggest fall.

A high proportion (73%) of those in the catering sector have seen a marked decline in the amount they withdraw from their business.

Sharing their thoughts on the last economic year, nearly half said 2011 was tougher than expected, and this was sentiment that was particularly strong among independent retailers and shopkeepers.

The outlook for the year ahead revealed 26% of respondents expected the first half of the year to be difficult as people curb their spending, as 24% expected a decline in sales.

Shirley Hermiston, Business Support Manager at the North East Business and Innovation Centre (BIC) commented: “As a business support agency we helped over 150 people to start their own businesses last year and whilst we have witnessed a decline in the number of starts; the enthusiasm and determination of our clients has certainly not been hampered.

“Indeed many of our clients decided to set up their own businesses because they are unsure about their job security and felt going it alone would give them a more secure future.”

David Bruce, commercial product manager at Aviva, added: “The mood continues to be down-beat about the economy as 2012 begins.

“Businesses are struggling against a backdrop of consumers spending cuts and many don’t envisage an improvement to the situation in the next six months.

“In addition, half of the SMEs we surveyed said they had not asked for funds from their bank with the same number telling us they had reduced the money they took from their business, suggesting businesses may be ‘self-funding’ their activities.

“This could be forcing them to focus more on the day-to-day operations than on planning for the future.

“Entrepreneurship is fundamental to economic growth, the Government last year called for a private sector-led recovery to help stimulate growth and yet, our research shows that the entrepreneurial spirit is being challenged, with a significant number of owners thinking about returning to the workforce.”

The Autumn Statement seemed to have washed over SMEs, as 70% believed the included measures would make little impact.

When questioned about the Government’s commitment to cutting red tape, two-thirds believed it was not true, while only 19% feeling that red tape measures introduced so far have been effective.

The number of SMEs trading without insurance was shown to have increased by 8% last summer to 20%, with one in five businesses admitting they do not have insurance at all.

Nearly a third were not confident they had the right policy in place, and one in ten of those employing between 11-25 staff said they had no policy in place.

Mr Bruce added: “Businesses know the importance of maintaining a healthy cash flow, keeping staff motivated and limiting unnecessary costs to a minimum but it is also really important for SME owners to be aware of the significance of having the right insurance to protect their business.

“In some cases it is actually a legal requirement, not having employers liability insurance for example, carries a heavy fine so it is worrying to see that of the 47% surveyed who employ staff one in ten admitted they had no insurance in place.

“If you need to make a claim, that is not the time to find out your insurance cover is inadequate. If you are not absolutely sure then speak to your local insurance broker.

“They can help to advise you on the most suitable cover to protect you, your business, your employees and your customers.”

This was posted in Bdaily's Members' News section by Tom Keighley .