Small businesses are wary of taking on debt and are reluctant to hire new staff, with many fearful of the impact of the upcoming carbon tax, new research has revealed.
A quarterly survey of 552 companies by accounting and financial services firm WHK Group found 50% of small business respondents were not keen on new borrowings, with 69% putting a freeze on new staff.
The negativity appears to be driven by the twin concerns of instability in the global economy and Australia’s carbon tax, which is due to roll out on July 1 next year.
While just 17% of SMEs are involved in the export and import markets, more than half of those polled say turmoil in overseas markets will make life harder for them.
Perhaps more striking is the attitude towards the carbon tax with a huge 83% saying they don’t understand the move to price carbon emissions, although 73% believe that it will have a negative impact on their business.
But there is a bright spot when it comes to bank borrowing, with the banks appearing in some cases to be giving small businesses a slightly better deal.
Repricing of loans is rife in the SME market according to the study, with 7.2% of businesses experiencing a downward repricing, up on the 2-3% level of the past 12 months.
“These are certainly worrying times for business owners,” says John Lombard, CEO and managing director of WHK Group.
“It seems hard to see a positive anywhere at the moment for SMEs. These results question the success of the current education campaign re. introduction of a carbon tax.
“With 82.6% of respondents not understanding the effect of this tax on their business it is hard to see what message has been understood. These business owners are a long way from understanding the impact of this tax.
“While we only have anecdotal evidence to rely on from the survey it seems that there is a new found level of branch manager discretion and a willingness to not see the SME sector as a one-size- fits-all model by the banks.
“This could be a sea change for SMEs in their relationships with their banks. The swings in repricing in both directions indicate that there is more discretion on a case-by-case basis in looking at the creditworthiness for these smaller businesses.”
Lombard says it might be worthwhile for SMEs approaching a bank review to work with their accountants and advisers to show their performance in the best light.
“This could either limit the higher repricing of credit or to better benefit from a downwards repricing on the cost of their debt,” he says.