Posted on Jan 26th, 2023

A senior figure at one of the UK’s biggest accountancy firms for SMEs has criticised the “hysteria” around the outlook for smaller firms.

Recent surveys have claimed a sharp fall in confidence across the SME market, driven by rising costs and a lack of government support.

But Paul Clifford, Midlands regional CEO for Azets, says this is partly the product of hysteria and misinterpreted statistics.

“There are plenty of risks in the market for SMEs, but SMEs can react and pivot quickly, which is why recessions traditionally don’t hit them as hard as larger businesses,” says Mr Clifford. “I’m quite bullish about 2023, especially in the SME market.”

The Federation of Small Businesses and the Chambers of Commerce have issued surveys suggesting an air of gloom.

But Mr Clifford tells Accountancy Age that there is a need for a “more balanced view”, arguing that there is naturally a “certain degree of hysteria around this”.

He says: “Inflation and interest rates increasing has obviously put pressure on consumer spending, but I think the companies that are strong and well set up to come out of the pandemic are in a good position.

“This is my third or fourth recession, and one thing I’ve learned is that poor businesses don’t make it through.”

Mr Clifford also argues that the pandemic may have distorted insolvency figures, with many businesses’ inevitable liquidation being delayed due to the “lifeline” of government support measures.

“In a strange way, Covid did some good for certain businesses. There were suddenly lots of businesses that would’ve closed down within the normal course of trading, and suddenly they had a lifeline of free cash.

“The reality is we’re always going to see insolvencies because there’s always poor businesses. So I think it is slightly distorted by Covid.”

Glenn Collins, head of technical and strategic engagement at ACCA UK, says there is a hangover from the last year’s political turmoil and the resulting tough decisions by the Chancellor.

“SMEs have been feeling a bit unloved since the Autumn Statement, with various different freezes, HMRC service levels deteriorating, energy costs and things like that piling up,” he said.

Responding to Mr Clifford’s scepticism, he said the underlying economic data “probably is slightly more optimistic”, but argues that the current level of trepidation, even among stable SMEs, is understandable.

Original Post: Accountant blames ‘hysteria’ for SME gloom