Nearly 70 per cent of small firms expect to introduce a pay freeze in the next three months while 23 per cent will cut wages, according to a new survey.
The Quarterly Small Business Sentiment Survey from the Small Firms Association (SFA) reveals that 30 per cent of companies have been forced to make redundancies while 28 per cent expect to do during the next quarter. In addition, 63 per cent of companies have stopped recruiting.
A total of 475 companies employing over 8,340 people responded to the survey.
It shows that 64 per cent of firms have experienced a decrease in business activity over the last 3 months and 26 per cent said they have lost business due to the decline in sterling. Manufacturing, retail and hotels, catering and leisure, experienced the biggest declines in business activity, according to the study.
As many as 84 per cent of small firms said they feel less confident about the overall business environment than this time last year. Three-quarters of companies rate the overall business environment currently as poor and 74 per cent said they expect it to remain poor in the next three months.
Sentiment in the manufacturing, financial services, hotels and catering, and retail sectors are the worst. The other services sector was the most optimistic with for example 46 per cent of education / training companies rating the business environment as "good" or "average".
In the next 3 months, 69 per cent of respondents said they expected a decrease in profitability; 62 per cent predicted a decline in turnover and 56 per cent a dip in domestic sales.
Some 43 per cent of businesses surveyed believe their customer base will decrease during the second quarter, while 25 per cent are predicting their base will expand.
One-third of small firms have seen the availability of working capital decrease in the last 3 months, with 19 per cent indicating the availability of investment finance has also decreased.
"These results clearly indicate the deteriorating market-conditions small businesses are facing, and the urgent need for the Government to put in place an appropriate response to ensure that small businesses can stabilise and position themselves for growth when the global economic upturn takes place," said Patricia Callan, director of the SFA.
