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Mid-market businesses feel impact of GFC


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Friday, 30 July 2010: The fourth Deloitte Black Ink® Member survey, conducted in June 2010, confirms that the ongoing effect of the global downturn and reduced access to credit and funding continues to be felt by Small Medium Enterprises (SMEs). The lowest rate of positive sentiment since the survey began two years ago was recorded (34.1%), compared to 71.1% in December 2009, 67.3% in June 2009 and 58.7% in December 2008.

Black Ink® provides specialist financial advice to member suburban legal and accounting firms in fields including tax, insolvency, superannuation, forensics, business forecasting and corporate finance.

According to Simon Cathro, Deloitte Black Ink® Lead partner, it appears the global downturn and the more recent European sovereign risk crisis continues to negatively affect business confidence across the SME market.

“The level of distress found in SMEs at present is evidenced by the number of clients that have sought a delay in payment to the Australian Tax Office (ATO),” he said.

“The survey shows that in the last six months, 96.4% of Black Ink® members have had clients who have sought a payment delay or have entered into a payment plan with the ATO.

“Cash flow and working capital remain the biggest issues for our SME respondents, who also expressed increasing concern about the inability to obtain finance or to refinance,” added Mr Cathro.

The survey also shows a marginal increase in the number of businesses with clients that have made enquiries about insolvency (rising from 55.4% in December 2009 to 58.5% in the current survey).

Tougher trading conditions in the middle market have perhaps caused the sentiment of suburban accounting and legal firms to drop significantly in the last six months; only 34.1% of respondents registered a very positive or somewhat positive outlook. This is the lowest recording of positive sentiment since the survey began two years ago, compared to 71.1% in December 2009, 67.3% in June 2009 and 58.7% in December 2008.

“These figures highlight the ongoing impact of the Global Financial Crisis (GFC), and how it is continuing to adversely affect SMEs and their financial advisors,” said Mr Cathro.

Some of the key findings of this survey are:

  • 34.1% of respondents report a very positive or somewhat positive outlook, down from 71.1% in December 2009
  •  In the previous survey 12% of members’ clients had experienced growth. This has dropped to 8.5% while the number of clients suffering greater financial difficulty has jumped from 34.9% to 45.1%.

Mr Cathro noted that due to volatile market conditions, it will be SMEs that have the capability to manage the complex issues they face, such as management of working capital and debt, who will be the winners as the economy recovers.

“SMEs need to undertake regular and detailed cash flow forecasting post GFC to provide financiers with confidence that owners are managing their business in tough times. “

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Contacts

Name:
Jane Kneebone
Company:
Deloitte Australia
Job Title:
Director, Corporate Affairs & Communications
Phone:
Tel: +61 3 9671 7389, Mobile: +61 416 148 845
Email
jakneebone@deloitte.com.au

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