|The financial crisis has left small businesses locked in a vicious circle of risk avoidance that leaves them unable to grow, according to a new study.
The Economist Intelligence Unit (EIU) said five years of economic volatility and stagnation has resulted in the “biggest behaviour shift in a generation”, with many businesses shunning risk.
Companies have adopted a “notable conservatism”, researchers said, which in turn could be holding back economic growth.
More than half of small businesses are spending more time analysing their strategy and focusing on risk management than they did before the financial crisis, the EIU found.
Businesses now have “a longer-term view on financial planning, debt, business continuity preparation and building reserves”, the EIU said.
However, they are also “less opportunistic”, with many no longer having the “resources or morale” to grow their operations. Small businesses’ risk appetite is no greater today than it was two years ago, as many have been waiting for an economic recovery before considering investing again, the researchers found.
Richard Coleman, a director at insurance firm Zurich, which commissioned the research, said: “It’s great to see the increased sophistication and long term view of many SMEs but for [small employers] to drive growth, we need them to regain their appetite for controlled, calculated risk-taking.
“In the face of such a challenging environment however, some are understandably reluctant to do so.”
Separately, in an attempt to help small business owners overcome their fears over hiring staff, the Government yesterday published an online guide to taking on a first employee.
The “toolkit” provides free information on setting pay, getting the right insurance, understanding tax requirements and checking a new employee’s right to work in the UK.
Acas, the dispute resolution service, has also launched free online guides to “getting employment law right” to reduce fears over workplace disputes.
The guides cover recruitment, contracts, getting the most out of staff, managing a complaint and handling staff absence. They also include a legal checklist and document templates.