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Australia's small businesses outlines what’s impacting productivity

Australia’s small businesses outlines what’s impacting productivity

(21 September 2017 – Australia) According to the latest round of Scottish Pacific’s SME Growth Index, small and medium businesses, employers of more than two-thirds of Australia’s workforce, have named staffing regulations and excessive red tape as their main productivity constraints, in twice-yearly research which reveals an SME sector uncertain about revenue growth prospects.

The Index, which is delivered in partnership with East & Partners, looks at growth expectations and key concerns of 1200 owners, CEOs or CFOs of Australian SMEs across a range of industries, with annual turnover of A$1-20 million.

Scottish Pacific CEO Peter Langham said the September 2017 Index found that only 48 percent of SMEs were predicting revenue to rise through to February 2018, and on average were forecasting four percent growth. 23 percent were expecting negative growth and 28 percent indicated they would be stable or consolidating.

SMEs nominated “productivity” as being most impacted by employment regulations (29 percent), followed by excessive red tape (23 percent) and leave provisions (11 percent).

“Since 2014, the average number of full-time employees of businesses in the SME Growth Index has fallen from 88 to 75. Taking on employees is crucial to growth, and to the economy, yet there is a disconnect between SMEs and regulatory authorities if bringing on new employees, replacing staff or dealing with staff issues is having such an impact on the productivity of the sector,” Langham said.

“Prime Minister Malcolm Turnbull, in announcing his innovation agenda, rightly pinpointed that start-ups and small business would power Australia into the next 25 years of growth.

“To fulfill the PM’s vision, SME pain points around dealing with staff issues, and the red tape and reporting burden that comes with employing staff, must be addressed. Our leaders need to recognise that many business owners don’t have the resources to deal with difficult staff issues and this makes them hesitant to employ new staff.”

The SME Growth Index asked small business owners what change they’d make if they were PM for a Day. Their responses reinforce the finding that staffing issues are top of mind for SMEs, and highlight that SMEs want the government to go further in simplifying Business Activity Statement reporting.

Top priority for SMEs if they were “PM for a day”:

  • streamlining Business Activity Statement reporting (24%)
  • changing the Fair Work Act (22 percent)
  • reducing company tax (21 percent)
  • lightening compliance (10 percent)
  • removing payroll tax (8 percent)

SME leaders have very clear ideas about the first problem they’d fix if they were Prime Minister, with one in four SMEs saying their first initiative would be streamlining BAS.

“With the Federal Government’s Red Tape Committee due to table its report to Parliament in December, these results give all levels of government a clear indication of the actions SMEs want,” Langham said.

“Despite recent government efforts to streamline BAS, this is still SMEs’ number one area of concern, indicating more needs to be done to relieve this pain point.”

The SME Growth Index also highlights main barriers to small business growth – consistent with previous rounds, the top three hindrances for both growth and non-growth SMEs were: high or multiple taxes (75 percent), conditions of credit (69 percent) and availability of credit (64 percent).

When only growth SMEs were considered, one other barrier was prominent - more than 60% of growth SMEs named cash flow as an issue that hinders their efforts to grow.

“Given these barriers to growth, it is not surprising that the gap is closing between when it comes to SME choice of funders,” Langham said.

“The number of SMEs funding growth via their main relationship bank continues to trend down (from 38 percent to 27 percent) while the popularity of non-banks has grown (from 10% up to 22 percent) since the Index started tracking sentiment in 2014.

“With an almost 10 percent jump in the number of growth SMEs citing cash flow as a key barrier to business growth, and the increase in those planning to fund expansion plans via non-bank lending, the time is right for those who can step up and offer fast and effective growth funding for the SME sector,” he said.

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