General
31 Jan 2014

Extreme weather events are a top threat to SMEs

Over a quarter of small and medium-sized firms in the UK see extreme weather events as a ‘real threat’ to their business, according to recent research from The Open University Business School. The latest Quarterly Survey of Small Business in Britain examines how SMEs deal with various ‘external shocks’, including extreme weather events, and what factors contribute to business survival and resilience following a serious external event.

The survey of 1,353 business owners was conducted during October and November 2013, before the more recent storms and flooding that hit the country over Christmas. It found that 27% of respondents believe that extreme weather conditions have ‘posed a real threat’ over the last five years, including many graphic examples, such as an office and warehouse being left under 100mm of water when the local area was hit by major flooding. Nearly three quarters (73%) of the businesses identified at least one external threat in this period. The most commonly identified threats over this period were ‘the credit crunch’ and ‘unstable market conditions’, which were each identified by 44% of businesses.

Dr Richard Blundel, Editor of the report, said: “Our survey highlights the impact of extreme weather events on many of our small and medium-sized businesses. The scale of the response is striking; whilst many businesses felt that they have improved their crisis response as a result of these events, it is evident that many others have suffered in the long term.

“In addition to the changes that business owners can make to increase resilience, respondents felt that some of the most important factors to longevity were: developing authority, skills and initiative in staff to manage unfolding events; maintaining relatively low fixed costs and/or minimal debt; and, if possible, identify potential risks in advance to create an action plan.”

Hilary Shortland, Managing Director of Concept Multi-Car Ltd., has been in the business of camper van conversion for over 20 years, said: “What affected sales most last year from our point of view was the weather… normally the beginning of the year is when our customers tend to look and purchase, but because the weather was so awful for the first three months of the year, it delayed everything.”

Dr Blundel concludes, “More than five years on from the start of the global economic crisis, and as many businesses begin to report signs of an upturn, it’s timely to examine how resilient SMEs have been in the face of external threats. Our survey identifies the ways that firms have prepared in advance and how they’ve adapted their operations in the face of a crisis. On a positive note, it appears that the owners and managers of surviving firms are learning from their experiences of dealing with severe disruptions – and this learning may help to increase their capacity to respond to similar events in the future.”

The research was supported by Barclays Bank, the Association of Chartered Certified Accountants (ACCA) and the Finance and Leasing Association (FLA)*.

Sue Hayes, Managing Director of Business Banking, Barclays commented: “By their very nature, SMEs have to be fleet of foot and consistently resilient to the challenges of growth. These challenges can come in all forms, from both economic and climatic turbulence to disruption in the supply chain. At these moments, it is vital to keep your bank informed so that they can provide the relevant advice and support.

“Whilst impossible to fully prepare for the unexpected, a strong and diverse business plan that allows for short-term pressure on a business and its finances will see more and more SMEs weather the unanticipated.”

For a copy of the full report, and supporting case studies**, please visit www.open.ac.uk/quarterly-survey

Other key findings from the report were:

• Some 40% of respondents thought that their business was stronger as a result of their exposure to these external events, but for more than a quarter of respondents (27%), the business had been weakened as a consequence.
• The most commonly identified changes that businesses were making in order to become more resilient were to diversify into new market(s) and/or business activities (37%), closely followed by making changes to the supply chain and/or forming new business partnerships (30%), and reducing the number of permanent staff employed (28%).

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