New research from Hiscox reveals small to medium sized businesses (SMEs) under increasing pressure from tax burden and growing economic uncertainty

Business taxation has topped the list of concerns for UK SMEs according to specialist insurer Hiscox’s second annual SME Risk Barometer, which measures the top ten business concerns for small to medium sized businesses.

Amid growing concerns that the recent decision to increase capital gains tax will have a negative impact on SME owners, four out of five of the SMEs surveyed are already citing the burden of taxation as their top worry.

John Heaney, UK speciality commercial underwriting Manager at Hiscox said: “Obviously CGT is a hot topic for SME owners right now. The ending of taper relief and the increase in CGT is a potential hindrance to entrepreneurial endeavour.

“Our research shows an anxiety by small business owners towards taxation in general. The cost of running a business has increased, reflected in rising local business rates and the increasing compliance cost of tax regulation.

“Overall, the Risk Barometer shows that 40% of SMEs’ top concerns are issues unrelated to their core business activities.”

The Hiscox research also revealed SMEs are feeling the effect of today’s challenging economic environment. Pressure to increase sales has shot from fifth to second place in the poll, while the effect of the economy on business was a worry for three quarters of the SMEs polled. Worries around cashflow have also increased and are now ranked the sixth top concern, compared with ninth place in 2006. Linked to cashflow, clients refusing to pay also featured in the top ten concerns for the first time.

In 2006, at a time of sharp rises in energy prices, increasing energy and rent costs topped the list of SME concerns. However, it seems small businesses have more pressing concerns in 2007 as rising energy prices have dropped to fourth in the poll.

Heaney continued: “As the economy starts to slow down, our research shows that SMEs are feeling the heat from a wider range of risks than last year, with cashflow a key concern and clients refusing to pay entering the top ten for the first time. In addition, the pressure to expand – with all its associated risks – to keep up with customer demand and maintain profitability is also weighing heavily on the minds of those running small businesses.

The report also found that processing paperwork, complying with UK company law, and dealing with competition were all concerns for a high proportion of the SMEs surveyed. Despite growing calls for businesses to take the lead in the fight against climate change by improving their green credentials, only 57% of SMEs admitted to being worried about their carbon footprint – suggesting that more immediate risks such as technology malfunctions or problems relating to cashflow, remain more pressing.

More than half of SMEs (51%) admitted to spending more time looking at risk management issues than they did two years ago.