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A recession could be a knockout blow for businesses rebounding from the pandemic, says a research firm.
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Potential downturn ‘could be fatal for one-third of SMEs’
11 April 2023
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A recession could be lethal for up to one-third of businesses on the mend in the wake of the pandemic, said analysis firm ACA Research.
ACA Research’s Small and Medium Enterprise Sentiment Tracker for March revealed that 34 per cent of SMEs felt they were poorly positioned to withstand the impact of a downturn in the next 12 months as many struggled to regain their footing.
The report showed a focus on rebuilding with only 30 per cent of SMEs saying they would concentrate on growth over the next 12 months, the lowest figure for a year.
The primary concerns of small businesses were wage costs at 61 per cent, interest rates at 80 per cent, and energy costs at 81 per cent.
Rising energy cost concerns showed the largest month-to-month jump from 76 per cent to 81 per cent, while staff or skill shortage concerns revealed themselves to be a significant challenge for businesses and rose from 51 per cent to 54 per cent.
In an attempt to combat higher input costs, two-thirds of SMEs said they were passing some increased prices onto customers.
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However, many organisations acknowledged the competitive nature of their markets, as 62 per cent said they could not keep rising prices if they were to retain market share.
Despite these struggles and the looming concern of a recession, the report revealed that small and medium-sized enterprises had improved slightly across several performance indicators.
One-quarter of SMEs had higher revenues than before the pandemic with almost half — 48 per cent — able to operate at a profit compared to only 43 per cent in February.
Despite the predominantly positive results throughout March for SMEs, 67 per cent expected the economy to become weaker over the coming three months, promoting the concern of a recession among firms.
ACA Research’s report also found more than half of SME owners and managers supported the Labor government’s decision to apply an increased tax rate to superannuation earnings on balances above $3 million, with the hospitality sector the most likely to support the change.
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