SME's fear of risk could further stunt economic growth

Financial volatility and a flat-lining British economy are leaving many small businesses fearing risk, a report from the Economist Intelligence Unit (EIU) has said.

It claims the 'biggest behaviour shift in a generation' when approaching risk raises serious concerns about the growth of small and medium sized enterprises (SMEs) and the economy as a whole.

According to the research, 53 per cent of SMEs now spend more time on their business strategy and risk management than they did before the financial crisis.

More than a third are doing more long-term financial planning while a third are scrutinising their business continuity plans more frequently.

However, the EIU said that such 'noble conservatism' raised uncertainty about the long-term strength and growth prospects of the UK economy.

"The past five years have put a squeeze on SMEs and many do not have the reserves - cash, resources, morale and other mechanisms - nor enough awareness of the full longer term costs they will face, in order to tackle on-going stagnation or volatility," said the EIU.

Richard Coleman, director of SMEs for Zurich, which commissioned the research, commented: "It's great to see the increased sophistication and long term view of many SMEs but for the SME economy 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."

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