SMEs cut back spending as FY2011 draws to an end; worry about carbon tax, interest rates

Small businesses are increasingly reluctant to splurge as the 2011 fiscal year draws to an end, a survey shows, with interest rates and the proposed carbon tax weighing heavily on SMEs.

According to the survey of 1000 businesses with fewer than 200 employees, the number of SMEs planning to splash cash before the end of the financial year this week has fallen.

The survey finds that of the one-in-three small companies that normally make outlays just before June 30, some 55% will cut back this year.

The areas targeted for cutbacks were plant and equipment (59%), information and technology (48%), marketing and sales support (35%), administration (34%), and employees (31%).

The survey, conducted by Telstra and the Council of Small Business of Australia, merits serious attention, says COSBOA executive director Peter Strong.

“Small business people by their nature are optimistic people, otherwise they wouldn’t have gone out of their own. To have them pull back on spending shows that they are cautious,” Strong told SmartCompany.

The survey identified higher interest rates (72%), tax reforms (69%), red tape (66%), a carbon tax (65%) and the cost of finance (60%) as the biggest worries for small business.

Strong says the Government needs to provide greater clarity on the carbon tax, which it hopes to introduce next July.

“My understanding is the impact will be minimal, but it needs to come out and address concerns that the impact will be borne by SMEs, particularly bricks and mortar,” Strong says.

He also believes SMEs are overlooked by the Reserve Bank in favour of big business, particularly the miners, and the central bank fails to communicate properly with small business on its interest rate decisions.

“We’re not on their radar,” Strong says, adding that it’s no surprise, given the RBA’s members tend to come from big business.

By contrast, the survey also found that 14% of respondents said they would spend more before June 30, with plant and equipment, and information and communications technology nominated as likely purchases.

The survey also found that adding new customers is the top priority (at 74%), followed by managing cash flow (57%), managing costs (55%) and adding revenue from existing customers (52%).


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