Small businesses to cut back on staff

More than a quarter of small businesses will be cutting back on staff over the next 3 months, as the demand for UK goods weakens with the financial crises.

According to the latest SME Trends report from the Confederation of British Industry (CBI), employment is shown as beginning to fall in the last quarter, after a year of growth.

A balance of +13% of SME’s were found to reducing their staff, representing the largest quarterly fall since October 2003. The figure shows a dramatic change from 3 months ago, when a balance of +6% of SME’s were increasing their workforce,

A decrease in orders both domestically and abroad seem to be behind the cuts, with 30% of SME’s claiming that orders have dwindled 

The next few months looks no more optimistic, with +27% of firms saying they expect to make staff cut-backs before the end of the year.

Russel Griggs, chairman of the CBI's SME Council, said: "Given the speed at which the downturn has hit every sector of the economy it is not surprising that small and medium-sized businesses are also seeing orders and output hit - both home and abroad - despite the relief provided by falling commodity prices.

"It is worrying that more SMEs are finding a lack of credit affecting business decisions.

"[T]he bold rate cuts of recent weeks and measures to support SMEs should help prevent a further credit squeeze but the impact is unlikely to be immediate."

If your business is looking for ways to reduce costs during the crunch, but you’re not ready to make staff cuts, you may find our article Savings for business; cheap phone, broadband, and utilities useful, as well as other articles in our business advice section.