Thursday, August 31st, 2005

Survey BB86 July 2005

The July Survey covered a number of different topics. Five on risk management and insurance were followed by two on e-communication and its current impact on meetings and travel. The final two questions were about incentivising employees to put forward innovative ideas. Other questions covered whether a degree is advantageous for job applicants, accounting and auditing problems, and the impact of retail sales levels.

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  • About the respondents

    The UK Business Barometer surveys the people running small and medium size businesses. In the July survey 153 respondents were drawn with the following population characteristics:

    Production & Manufacturing Distribution Services Total
    26.8% 9.8% 63.4% 100.0%

    Turnover ()
    < 1 M 1M-3M >3M Total
    71.3% 17.0% 11.8% 100.0%

    Number of Full-time Employees
    1-10 11-20 21-50 51-100 100+ Grand Total
    56.9% 30.1% 5.2% 3.9% 3.9% 100.0%

    Survey Findings

    Since 1998 there have been official requirements for listed companies to conduct formal risk assessments and implement appropriate risk control measures, in order to protect shareholders' interests. For smaller businesses the incentive is also clear - understanding the risks facing their businesses helps entrepreneurs to protect their assets and define their strategies. It is an essential part of business management.

    The first question in the July Survey asked what the main risks facing panellists' businesses are, and up to four could be chosen from a list of fourteen. Only just over half of the respondents exercised this maximum number of choices, the remainder making between one and three responses. The leading risk seen by respondents was the loss of key suppliers or customers, followed by changes in market or industry structure. The next two most commonly recognised risks were compliance with changing government regulation and the collapse of computer systems:

    Having recognised the main risks, companies would wish to be able to reduce them and would ideally have risk management processes in place for this purpose. Responses to the second Survey question showed that a relatively small proportion, less than 5%, of respondents think that their businesses' risk management processes are very well developed. Over half rate their RM processes as mid-way between 'not at all well developed' and 'very well developed'.

    Those running small and medium size businesses have to deal with business risk as a way of life - but even so, it emerged that 21% of respondents regard themselves as highly or relatively highly risk-averse. 50% feel that they rate mid-way between highly and not at all risk averse.

    Since one way of guarding against risk is by taking out insurance, this was the logical next area to probe. It appears that the vast majority consider that they are neither over- nor under- insured. 84% said that they have their level of insurance about right.

    In terms of the cost of insurance premia, 53% said that they have risen or risen significantly since last year, but 34% said they have stayed the same.

    Now that email and the internet are much more widely used, some respondents have noticed changes in the importance of face to face meetings with their customers. Although over half of respondents say there has been no change, 27% consider that the importance of such meetings has fallen, either significantly or to some extent. Conversely, for 17% of respondents, customer meetings have increased in importance, 3% significantly.

    In terms of the effects on the need to travel for business, 44% are travelling less or significantly less, while 10% are travelling more. 45% have not needed to change the amount they travel.

    In response to the question on graduate recruitment, 14% of respondents agreed that they see a degree qualification as a significant advantage for a job applicant, while 52% see it as some advantage. With 29% of respondents, a degree gives no advantage or disadvantage to job applicants. Applicants with degrees would be disadvantaged in applying for jobs to 5% of respondents.

    Panellists were asked to identify the problem areas in accounting and auditing their businesses, choosing from five options provided. They were asked to select all that applied. 59% of respondents said that none of the options provided caused problems for them, and 3% didn't know.

    Of the remainder, an average of 1.6 problem areas was chosen. Preparation of statutory financial accounts was found to be the main problem by these respondents, followed by understanding and interpreting the statutory financial accounts.

    The July Survey of Business Advisers (UKBAB), which includes many panellists from the professional accounting bodies, included a question on this topic. They were asked to identify the problem areas in accounts and audits for small- and medium - sized companies in two separate questions, and like panellists of the UKBB, they were asked to select all that applied.

    The Advisers made more selections than UKBB respondents and far fewer thought that the options provided were not problem areas for businesses. In the case of small companies, the average number of their selections was 3, eliminating the 4% of respondents who selected 'don't know'. Understanding and interpreting the statutory financial accounts was reckoned by most to causes problems, followed by management accounting including budgeting and planning.

    For medium-sized companies, the average number of selections by UKBAB respondents was 2.2, after eliminating the 37% of respondents who selected 'don't know'. Preparation of statutory financial accounts was thought to be the main problem by respondents, followed by understanding and interpreting the statutory financial accounts.

    A question on the impact on businesses of the recent downturn in retail sales elicited that 22% of total respondents find this detrimental to a high or fairly high extent . Looking at a lower level of detail shows that while just under 10% of respondents are in the distribution sector, less than 5% are retailers. Within the distribution sector, the percentage that are adversely affected rises to 60%, while within the production/manufacturing and services sectors taken together, the percentage is 19%.

    Of respondents in the production/manufacturing and services sectors, 63% said that the retail downturn would not affect them at all, or very little.

    An often-expressed opinion is that employees can see how to improve products or processes and will be better motivated if they are given the opportunity to contribute their ideas, providing those ideas are then taken seriously. 24% of respondents have a procedure in place for ideas from employees to be recorded, while 9% are planning to establish one. 23% of respondents have a reward scheme of some type for useful new ideas, and 9% are planning to introduce one.

    24% of respondents have a procedure in place for ideas from employees to be recorded, while 9% are planning to establish one. 23% of respondents have a reward scheme of some type for useful new ideas, and 9% are planning to introduce one.

    Listed below are extracts from feedback received in Survey BB86 July 2005.

    Comments are listed under sector headings.

    Views expressed are those of individual panellists and may not represent those of the University.

    Production & Manufacturing

    The threat to the future prosperity of my business is linked very closely to the events of last Thursday and the terrorist acts. In my experience whatever people say is happening on the High Street, it is usually at odds with what is happening in the tourist market place.

    Since 9-11 tourism has been at a low from which it just appeared to be recovering when the London bombs happened.

    We wait to see how much we will suffer as a result of 7-7.

    Perhaps this is an aspect you could ask about in your survey. Whilst I personally and our Exec team travel more now than in the past, this is related to our business now covering the whole of the UK and the Republic of Ireland , compared to 5/10 years ago when we were active only in Scotland and the North of England.

    Insurance: most has gone up but some has gone down. Fact to Face Meetings: these are so important for building and consolidating relationships, but unfortunately some clients say that they (genuinely) cannot afford the time for meetings.

    Re the use of technology. 5 years is too short a timeframe to have made any difference. I was e-mail and internet connected then as were most of my customers

    As a trainer I do a lot of work with Government Departments but at the moment they seem to be moving towards preferred supplier status with a complex and lengthy application process favouring larger companies. Only this week I have been offered a substantial piece of work by a specific Division of the Department for Work and Pensions only to have their offer overturned by the personnel division who insist on using their list of suppliers. It is a worrying development that could potentially put me and other small contractors of all kinds out of business.


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