Open University research into SMEs shows a glimmer of hope and positive outlook among some despite onslaught of recession.

The survey of some 1,300 small businesses in November and December by the Open University Business School detected a clear pattern: while the overall picture for SMEs appears bleak, firms in the sectors of business services and manufacturing are comparatively more confident.
 
The majority of firms (39 percent) expect their sales to be down in the final quarter of the 2008 financial year.

However, a quarter of firms (26 percent) – mainly from business services and manufacturing – actually expect sales to go up.

These findings mirror those regarding small businesses’ performance over the past year, with more firms in manufacturing and business services reporting an increase in sales compared to their counterparts in retail and construction, the two most negative small business sectors.
 
Also optimistic, according to those surveyed, are firms who see themselves as entrepreneurial. “

These are small businesses that strongly rate themselves as growth-oriented, innovative and competitive,” explained Colin Gray, Professor of Enterprise Development and author of the report. “Although they expect to cut employment and investment as most SMEs do, they report significantly better sales, employment and investment performance and expectations than the least entrepreneurial.”
 
Other findings include:
 
An active minority of small manufacturers stand out as beacons in the general gloom of the recession. They are more likely to rate their firms as entrepreneurial and to seek finance in order to support increased research and development and growth, despite the adverse conditions. Almost one quarter (23%) intend to increase their investment during the current quarter.     
 
Regardless of their level of optimism, the economic climate, cashflow, payments and debtors are small businesses’ greatest concerns. Nearly half (45%) of the firms taking part in the survey say they have not taken out a loan, and of those which do have loans, bank overdrafts are the most common.
 
Small firms in the South East, South West, East Anglia and the West Midlands have been hit harder by the economic downturn than those in other regions, while those in the North East and Scotland are still enjoying healthy sales growth.

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