The Forum of Private Business is warning companies that they could alienate their workers, including umbrella contractors, if they scrap this year’s office Christmas party.

It is thought that at least 50% of small firms will cancel the annual festive party this year, but according to the FPB this could cause demotivate staff and leave them unwilling to go the extra mile for the business in the future.

Many SMEs are finding that cash is in short supply, but festive frolics don’t need to be expensive and the benefits of providing an annual get-together should not be underestimated, said FPB chief executive, Phil Orford. As well as motivating staff, these events encourage communication and reward employees when pay increases and bonuses are not a feasible option.

The FPB suggests that companies not providing a party should come up with other morale boosting ideas such as obtaining discount vouchers for meals and putting elaborate decorations up in the office. Demonstrating that you recognise the hard work done by your employees can mean more to them than a gift or financial bonus, the FPB added.

In addition to abandoning the traditional Christmas party, several SMEs intend to shut down for less time than they usually would over the festive period.

A survey conducted by Close Invoice Finance discovered that 36% of SMEs will be open for two days longer than in previous years and another 22% will cut the usual holiday by three days. Nearly half of the surveyed businesses said they were worried that staff would take sick days leading up to Christmas and many have reminded employees that they will face disciplinary action if they take unauthorised absence.

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Despite all the publicity surrounding Project Merlin, umbrella company contractors might be surprised to learn that a large proportion of businesses in the UK are unaware of its existence.

Project Merlin was devised at the beginning of this year to encourage the major banks to lend more money to companies in the UK, especially small businesses.

Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland all signed up to the deal, whilst Santander also agreed to increase its business lending. The Project Merlin banks promised to lend a total of £190 billion to UK companies this year, £76 billion of which would go to smaller firms.

However, lending to smaller firms actually decreased from £20.5 billion to just £18.8 billion between the second and third quarters of this year.

Travelex has recently published its latest Confidence Index showing that 62% of firms do not know about Project Merlin. The Index also showed that only about 40% of the UK’s smaller companies are confident in the current economic climate.

Paddy Earnshaw, the customer director from Travelex Global Business Payments, said that knowing how to access credit could spell the difference between success and failure for small enterprises and it is extremely concerning that almost two-thirds of smaller businesses are not aware of Project Merlin.

The Chancellor did spell out measures in his Autumn Statement to make more financial help available to SMEs, but maybe the Government should take heed of the results of Travelex’s research and do more to publicise the help that is available.

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A new survey by international office space supplier, Regus, suggests that the UK’s SMEs are turning to contractors to help them through the uncertain economic times.

49% of SMEs that trade internationally say they intend to hire freelancers and 39% plan to hire people who will work remotely.

The research also discovered that overall business confidence has dropped by 20% since April. However, SMEs that trade overseas displayed 88% business confidence, compared to domestic firms who are only 79% confident.

Celia Donne, the regional director of Regus, said SMEs know they have to continue their investment in growth, and are turning to freelancers and remote workers as a way to boost their headcounts. 27% of employed people in the UK are now classed as flexible workers, demonstrating that the employment market has undergone a significant shift in recent years.

Another survey, this time from Simply Business, found that 27% of small firms intend to increase their headcount over the coming 12 months. Whilst this sounds like good news, the downside is that nearly three-quarters of SMEs are not intending to hire new staff next year, and in fact they could be planning to make redundancies.

Burdensome bureaucracy is putting a lot of companies off taking on new employees and government incentives have done little to encourage them. The National Insurance Holiday scheme fell flat and although the Chancellor has come up with measures to help young people into work, only time will tell whether they will be successful.

In the run up to Christmas, hiring will slow down as many companies look forward to the festive break. Hopefully, things will start to pick up again in the New Year.

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Contractors may have noticed that the customer service they receive from small businesses is not always as good as they would expect it to be.

In fact 81% of small firms have admitted that their customer service is not up to scratch, even though the majority of them believe responsiveness drives their business decisions.  Furthermore, 52% think they need to improve their overall communications with both current and prospective customers.

48% of SMEs said the best way to meet customer needs was to find a happy medium between staff resources and skills. 41% of decision makers said they wanted to be able to access staff at times that were convenient to them, whilst 39% said that customer service could be greatly improved if customers could access an expert when they needed one.

Being unable to access to the right person at the right time has long been a common gripe from people who phone customer service helplines. 34% of SMEs think the answer to the problem could lie in allowing staff to work more flexible hours.

Michael Bayer, the president of Avaya EMEA, the company that conducted the research, said that companies have to go the extra mile when it comes to providing customer service. Consumers have a vast array of similar companies to choose from and if they suffer a bad experience, it’s not difficult for them to move their business to a competitor.

He went on to say that it was interesting to see that SMEs are prioritising customer service, responsiveness and relationships. It’s imperative that businesses can communicate effectively with their customers in today’s fast-moving global business world.

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Private sector suppliers, including limited company contractors, are focusing increasingly on their cashflow and threatening clients with legal action if they do not settle their invoices in a timely manner.

Lovetts, a debt recovery firm, reported recently that the average timespan from invoice date to ‘letter before action’ is now 68 days; down from 72. Suppliers’ willingness to wait for payment has now been decreasing for the last three consecutive quarters.

Lovetts’ MD, Charles Wilson, said that suppliers have adopted an attitude of debt is debt and it makes no difference who the customer is. He suggests that last year’s forbearance has now run its course and suppliers are getting tough on any late payers.

He went on to explain that last year, businesses gave customers much more leeway before threatening legal action in order to maintain a good working relationship.

However, companies must make sure they carry out their threats and pursue a legal claim. If they don’t follow up, they will be accused of crying wolf.

80% of businesses that send letters warning debtors of recovery action do secure payment, so they are an effective deterrent. But with debts to SMEs totalling a record £33.6 billion, suppliers must demonstrate that they mean business when it comes to chasing overdue invoices.

Bad debts are not the only problem facing UK SMEs at the moment.

Global recruiter Hays conducted research that discovered that 55% of jobseekers think they could get better benefits working for a larger organisation, and 52% are concerned that smaller firms lack stability.

Small businesses need to attract skilled and talents personnel in order to remain competitive and employers should take the time to explain the direction the business is heading and future growth opportunities to potential recruits, Hays director Charles Logan said.

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Contractors might be interested to learn that UK workers do not have quite such a strong sense of work ethics as some of their global counterparts.

Jobs board Monster questioned employees around the world asking if they would engage in unethical behaviour in order to advance their career. Taken overall, 86% said they would not indulge in this sort of behaviour. However, in the UK the percentage was 83%, indicating that more people would consider behaving unethically.

Internationally, 6% of respondents said they might breach company policy, the same percentage would engage in underhand behaviour and 4% went as far as to say they would break the law in order to get ahead professionally.

8% of UK respondents would do underhand things and 5% would break the law to get ahead, but only 4% would break company policy.

Mexico appears to have the most trustworthy workforce. Only 12% of those questioned said they would engage in illegal, unethical or underhand behaviour to further their career.

Meanwhile, contractors concerned that somebody might steal their ideas might be interested to learn that a new service is to be set up to help SMEs protect their copyright, designs and trademarks.

The small claims service is to be introduced into the Patents County Court and will limit fixed costs as well as allowing damages up to a maximum of £5,000.

Recent research has discovered that 17% of SMEs gave up trying to enforce their intellectual property rights because of high court costs. Hopefully, small businesses will find the new system easier to use and more cost effective.

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Despite the slow growth in the UK economy, contractors such as those working through umbrella companies are doing surprisingly well, according to a new survey by the PCG.

The PCG polled 2,000 freelancers and discovered that in the last twelve months, 75% of them have been under contract for at least eleven of them. 84% of the survey’s respondents said they expected business opportunities to remain the same or improve in the coming months.

The MD of the PCG, John Brazier, said he was in no way surprised at the results because freelancers can help accelerate the economy while UK PlC is getting back on its feet.

He went on to say that although public sector opportunities are drying up, PCG members have proved that they are adaptable and secured private sector contracts. However, in order for the freelance community to deliver its full potential, the government must address the problem of red tape and reduce the amount of regulations.

Whilst life is good for the majority of freelancers and contractors, nearly 25% of SMEs saw their pre-tax profits drop by 50% in the last financial year.

The SME Distress Monitor, from Baker Tilly, also shows that nearly 10% of companies that filed accounts last year saw their sales decrease by more than 30%.

Sarah Batchelor, from Baker Tilly, said the research demonstrated that short-term debt pressures are having a really bad effect on SMEs. As cash-flow tightens, business owners must take action at the earliest possible opportunity to make the best of available financial options to stave off problems in the future.

The current economic outlook is far from stable and it is crucial that SMEs seek advice and implement safeguards if they are going to survive, she added.

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A lack of internships and entry-level jobs could lead to a lost generation of graduates, HR directors are warning.

Recruitment consultancy, Office Team, surveyed HR directors and discovered that there is an urgent need for employers to develop training programmes and internships for younger people. HR directors said they were greatly concerned at the lack of entry-level opportunities and pointed out that graduates could find themselves facing career progression problems if this is not addressed quickly.

57% of the HR directors who took part in the survey think the current economic climate will negatively impact the younger generation when they start looking for their first job. On the other hand, 34% said the economic climate would have no impact and 4% expect it to have a positive impact on graduates’ prospects.

Maybe surprisingly, only 19% of HR directors are concerned that rising tuition costs will have a negative impact on the job prospects of younger workers.

SMEs in the UK now account for almost 20% of all UK employment, but the BCC has discovered that micro-businesses appear to be reluctant to hire school leavers and recent graduates.

47% of respondents to a recent BCC survey said they were nervous when it came to taking on school leavers with A Levels, mainly due to concerns over their level of business skills. Only 22% felt confident about the recruitment of school leavers whilst around 33% said they were fairly confident that a recent graduate would have the right business skills.

School leavers and graduates can gain a lot from working in small firms but this lack of confidence in their business ability is not only holding them back, but also the small business. Edward Mellett from WikiJob.co.uk suggests that small business owners should help young people by offering them work experience and summer holiday placements so they can get a feel of the business and get advice on upgrading their business skills.

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New research suggests that the personal finances, and private lives, of a lot of small business owners are suffering because of the rising costs associated with running their own company.

The study, conducted by the Centre for Economic and Business Research and Make it Cheaper, discovered that 47% of small business owners have had to inject some of their personal finances into their company this year.

89% of SMES think the UK is an unbearably expensive place in which to conduct business and a lot of them are only surviving by supplementing their company cash flow with their own personal finances.

The MD of Make it Cheaper, Jonathan Elliott, said the effects of cost increases and squeezed margins are not only affecting companies, but also the financial security of the businesses’ owners and families.

Another survey, this time form Bibby Financial Services, shows that more than 25% of SMEs feel they are only just surviving. 24% say trading conditions have deteriorated further since last year and 35% expect the UK economy to remain in the doldrums until at least 2014.

Edward Rimmer, the UK chief executive of Bibby, said businesses are still a long way away from a full recovery and although turnover is currently stable, there is a danger that negative growth could turn into a backward slide and lead the UK back into recession.

24% of small enterprises this that the economic recovery can be best helped by a loosening of lending criteria. Despite this doom and gloom, 70% of businesses in East Anglia are optimistic about their future and 50% share the same optimism in several other areas of the UK.

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The government is planning to accredit more lenders to offer loans to SMEs under the Enterprise Finance Guarantee scheme.

In order to encourage smaller lenders to sign up for the scheme, the Business Department is increasing the amount it insures against default, from the current 9.75% to 15% on the first £1 million of every loan.

Last week, the Bank of England said that small business lending was falling at a faster rate than ever. In May, small business lending fell by 4.9% compared to May 2010. The number of loans through the EFG scheme has also dropped dramatically. EFG began in January 2009 and in May that year 647 loans were paid to a total value of £65.3 million. In May 2010, 453 loans were taken out, worth £41.9 million and in May this year that had dropped to 291 loans, valued at £30.2 million.

A spokesperson from the Business Department explained that the 2009 peak in EFG lending happened at the height of the economic downturn. Economic conditions have rebounded since then and small firms are able to get normal business loans.

Barclays bank is one high street institutions that is lending to small businesses. In the first half of 2011, the bank has made £20 billion available to smaller enterprises and is on course to lend £40 billion by the end of the year.

Barclays is already more than half way to meeting its Project Merlin targets but it is believed that others in the gang of five will fall short.

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New research from Aviva shows that around 10% of small firms in the UK are worried they might have to close this year if trading conditions do not improve.

Aviva surveyed 500 small businesses and discovered that a mere 13% feel positive that the British economy will improve, whilst 28% think that we might drop back into recession.

David Bruce, Aviva’s commercial product manager, said confidence among SMEs is at its lowest since the start of the global downturn and many are now seriously concerned that they will lose their business if the economy doesn’t improve this year.

The FPB was not surprised by these findings and believes the general pessimism is caused in part by the lack of accessible funding for small enterprises. The banks taking part in Project Merlin have so far failed to meet their key lending targets. However, the current economy could offer business owners the opportunity to move into niche markets and high redundancies mean there is a strong pool of candidates to recruit from.

17% of firms are using sales and discounts to keep their business thriving and another 17% have had to resort to permanent price reductions. 14% are looking to cut salaries or benefits, and 9% are thinking about reducing their permanent headcount.

The downturn in demand is affecting nearly 66% of firms according to Lovetts, the commercial debt recovery law firm.

The government has come up with measures to help small businesses, such as the New Enterprise Allowance and the Red Tape Challenge, but these have not brought about an entrepreneurial uprising.

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Last week’s GDP figures from the Office for National Statistics confirmed growth of just 0.2% in the second quarter of this year.

Various one-off factors have been blamed for the sluggish growth, such as the royal wedding, April’s warm weather and the Japanese tsunami.

George Osborne, the Chancellor of the Exchequer, said it was positive news that the British economy is still growing and jobs are being created. The UK is also seeing an increase in the number of start-ups, which should benefit umbrella company contractors. 396,000 new firms started up in 2010/11, up from 362,000 the previous year.

Kevin Walmsley from Wilkins Kennedy said that recessions present opportunities and the increase in start-ups shows that there are still entrepreneurs who are confident that they have a strong business model.

However, small businesses are being crippled by rising costs and more than 50% of them think their business will fail if the situation continues. Over the past five years, overheads have increased by 22.8%.

A survey by the CEBR and Make it Cheaper has discovered that rising costs are the most significant threat to 78% of small businesses. In fact 89% said the UK is an unbearably expensive country in which to conduct business.

67% of small firms said their profit margins have been eroded by increasing costs, 46% have had to increase their prices and 22% have reduced their headcount. 74% of the UK’s small firms think that rising costs have damaged their ability to grow and 86% say this is damaging the economic recovery.

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