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One-Quarter Of Smallest British Companies Could Tank By 2015

by Jim ONeil on February 23, 2012

in uk banks

British micro-firms are companies that employ fewer than ten people. Managers of more than one-quarter of them believe their company will fold by 2015. One in six worries their company will close by the end of this year. With millions of these small businesses predicted to close, the British economy will suffer.

These alarming statistics were revealed in a survey of 1,000 UK firms conducted by YouGov. More than one-third of micro-firm owners said it has been more difficult to fund their business during the past year. This, coupled with the difficult economic climate, has led many to the brink of closing.

The bank account of one in every five is empty.

In the UK, more than nine in ten companies are considered micro-firms. In a report prepared for Capital One finance company, Warwick Business School Professor Francis Greene called micro-firms “the bedrock of British business” and said that those with no money in the bank are extremely vulnerable to collapse because they do not have a “safety net.”

Despite this, only two percent plan to apply for loans bank offered this year.

Based on the statistics revealed by YouGov, approximately 1.6 million UK citizens are at risk of career collapse. Even knowing this, micro-firm business owners are relying on credit cards, financial support from friends and family, and personal savings instead of a loan.

Forum of Private Business member Phil McCabe states that firms need cheap loans but are not confident in banks, which must do a better job of lending.

The latest small firm lending plan proposed by Chancellor George Osborne recently suffered a setback. HSBC and Barclays believe they would incur losses if they participated because they can raise funds more inexpensively on money markets than through government borrowing.

When micro-firm owners run out of savings, they may resort to payday loans rather than bank financing.

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