Exclusive: Three out of four business cutting costs, says leading accountants

Three out of four businesses are cutting costs and almost one–third are shedding staff as the UK sinks into recession.

A survey of more than 500 small and medium-sized UK businesses found more than half reporting conditions in their own business have deteriorated since last year and 84% perceive an overall economic decline, with a similar proportion “anxious about business conditions over the next year.”

Companies with substantial debt face the biggest problems, with 89% of firms “with borrowings” reporting a significant deterioration in business and 63% saying trading has become more difficult.

Almost two-thirds are paying higher interest rates on loans than six months ago and indebted firms are cutting costs at a greater rate than average, with 40% axeing jobs.

The study by accountancy and business advice firm MacIntyre Hudson, which includes a specialist travel trade team, found almost half of firms have tightened credit for existing customers and 44% imposed stricter credit assessments for new clients.

The deteriorating economy poses a particular challenge for companies run by management teams that have previously experienced only expansion.

MacIntyre Hudson principal Atul Kariya said: “The UK has enjoyed 15 years of economic growth, during which most businesses found increasingsales was the quickest route to increased profits.

“Many were able to ignore their cost base. But in today’s climate, control of cost and cash flow hasbecome paramount.”

Kariya warned against reacting by simply cutting staff. He said: “It is important to avoid downsizing in a panic.”

Fellow MacIntyre Hudson principal Andrew Burnham said some firms are defying the gloom but still cutting back in line with the downturn.

He said: “Despite high anxiety, 26% say their business is doing better than last year and 19% say trading is much the same. Yet many are taking protective measures. Fear is the driving force.”

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