Small firms hit hardest by slowing growth

Following David Cameron’s speech last week to pull together, the economic figures haven’t helped - revealing smaller firms are continuing to struggle the most.

Smaller companies have seen growth slow closer to stagnation, while rates of expansion have slowed considerably across all company sizes.

According to recent analysis from Markit, "Their [smaller firms] output has shown barely any growth in recent months, causing employment to stagnate in the three months to September.

"With the survey data indicating that an increase in output at a smaller company typically drives more job creation than at a larger firm, the suggestion is that policies targeted at helping SMEs look likely to not only help boost the flagging economic recovery but should also have a disproportionally beneficial impact on the labour market."

September's PMI survey data also shows that only medium-sized companies are reporting any noteworthy employment growth.

Large firms have shown the strongest expansion of output in the recovery so far, but nevertheless have shed the most staff.

In contrast, SMEs have taken on staff since their recoveries started, albeit in only modest numbers. However, due to the faster rate of output growth seen in medium-sized firms so far in the recovery compared to smaller companies, it is the former that have consequently exhibited the strongest employment growth so far in the recovery.

Fears of a continuing downward trend have also been added to with the publication of a new BDO Business Trends report that found a decline in business confidence.

BDO’s business optimism index is indicating negative growth for the first quarter of 2012.

Some of the key findings include:

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