Adapting to a Fragile Recovery: SME Responses to Recession and Post-Recession Performance

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1 Adapting to a Fragile Recovery: SME Responses to Recession and Post-Recession Performance John Kitching Reader, Kingston University Small Business Research Centre Kingston University KT2 7LB Tel: David Smallbone Professor, Kingston University Mirela Xheneti Researcher, Kingston University Eva Kašperová Research Assistant, Kingston University ABSTRACT Objectives: The paper investigates the implications of small firm responses to recession during for post-recession performance in Prior work: Recession conditions present (small) businesses with a dilemma: (1) to cut costs in order to maintain survival in the short-run at the risk of reducing the capacity to adapt adequately when recovery comes; or (2) to maintain greater capacity, incurring higher costs in the short-run, in order to retain the capability to realise opportunities for long-term value creation when the upswing comes. Both processes constraining and enabling firms can occur simultaneously, but unevenly, during recession. Previous research, however, has not investigated the connection between business responses during recession and performance during the recovery phase. Approach: Drawing on previous work, recession is conceptualised as producing heterogeneous firm-related impacts and responses that provide a variable starting point as businesses adapt to recession conditions and to the subsequent recovery period. Business decisions taken during recession inevitably shape future capabilities to adapt as the UK economy emerges from recession. The study draws on primary empirical data, quantitative and qualitative, from a 2-stage study of London-based small businesses: an online/mail survey of 221 small business owners, and face-to-face/telephone interviews with 28 owners. Results: First, a wide variety of linkages between management actions taken during the recession and subsequent performance are possible. Second, adaptations to recession conditions varied in their degree of success; there is no guarantee that adaptation will be successful. Third, small business adaptation and performance following the recession are contingent upon firms responses during recession as well as current actions and external influences, including product, labour and capital market conditions. Fourth, market and product diversification, alone or in combination with other practices, appear to have been the most successful forms of adaptation, although only under certain conditions. Fifth, business owners projects, practices and performance each vary over time. Even over a short 2-year period, firms adapt activities in response to changing circumstances; poor performance encourages firms to adjust products and processes. Implications: The paper contributes to current scholarly and policy debates on forms of business adaptation during recession and links with performance. The findings might inform policy initiatives aiming to restrict the severity of the downturn and lay the foundations for recovery. Value: The paper expands our understanding of the effects of recession-related responses on small business performance. As such the research is relevant to small business academics, practitioners and policy makers. Key Words: management; recession; recovery; adaptation; environment 1

2 INTRODUCTION 1 During , the world economy experienced its severest recession and financial crisis since the 1930s (IMF 2009a). The crisis led to the collapse, Government bail-out or partial nationalisation of major financial institutions in Europe and the US; to major programmes of fiscal and monetary reform; and to support for businesses and homeowners in the UK and elsewhere (HM Treasury 2009; IMF 2009b). The UK was the last major economy to emerge from the recession, Gross Domestic Product (GDP) having declined for six consecutive quarters (ONS 2010), from Q2, 2008 through to Q3, 2009, a peak-to-trough decline of 6 per cent. 2 Company liquidations rose markedly during 2008 and the first half of 2009; personal insolvencies, relevant to unincorporated firms, rose throughout 2008 and 2009 and did not fall until Q2, 2010 (Insolvency Service 2011). Building on previous research investigating SME responses and performance during the recession (Kitching et al. 2009a), this paper explores the connections between actions taken during the recession and business performance during the recovery phase for a sample of London-based enterprises. Small firm responses to recession conditions have implications for their subsequent resources, activities and performance. Analysis focuses on the circumstances shaping firms activities, business owners motivations for those actions, stakeholder responses and performance achieved. The evidence on the impact of the recession on London businesses is mixed. One source suggests that businesses were more resilient during the recession than during the early-1980s and early-1990s recessions, and attributes this, in part, to higher levels of business profitability in the period leading up to the recession (Wickham 2010). Higher profitability enables businesses to absorb declining sales and profits for a longer period and, perhaps, avoid hasty adjustment decisions. Wickham also reports that the decline in corporate profits was more modest during the recession than in previous downturns. Company liquidations were also reported to have been less severe than those experienced in the 1980s and 1990s recessions. Conversely, data from the Business Register Employment Survey (BRES) 2009 suggest that slightly more jobs were lost in London (2.8 per cent) than in Great Britain as a whole during the recession (2.5 per cent), suggesting employment impacts as large in London as elsewhere (Smart 2011). Recession impacts on businesses, of course, extend wider than employment reductions. We begin by sketching the contemporary UK economic and political environment within which SMEs operate; this provides the wider context for the firms studied here. The second section proposes a conceptual framework for understanding firms adaptations under recession conditions and the connections with subsequent performance. The findings should be treated as preliminary until more detailed analysis is undertaken. We then discuss the methodological approach adopted before presenting the findings and conclusions. THE UK ECONOMY, SMALL BUSINESSES AND GOVERNMENT POLICY AFTER THE RECESSION The UK economy has been unsettled throughout 2010 and 2011, and prospects remain uncertain for business (BCC 2011). GDP grew in each quarter from Q4, 2009 through to Q3, 2010, but then fell in Q4, 2010 before recovering in the first quarter of 2011 (ONS 2010, 2011). Preliminary estimates for Q2, 2011 indicate only 0.2 per cent growth, suggesting to many commentators that the recovery remains fragile and the possibility of a double-dip recession persists. 3 Business services and finance, sectors in which London specialises, made the largest contribution to Q2 GDP growth (GLAEconomics 2011). Nevertheless, growth during the whole of 2011 looks likely to be modest and GDP remains 4 per cent below its pre-recession peak. Other macroeconomic indicators also point to the fragile state of the UK economy in summer Unemployment remains stubbornly high at 2.5 millions, inflation remains well above government target at more than 4 per cent, and Bank of England base rate continues for a 30 th consecutive month at a record low level of 0.5 per cent. In mid-2011, business investment was 3 per cent lower, household consumption 1 per cent lower, and retail sales volumes show no change on a year previously (HM Treasury 2011a). Problems in the Eurozone and the US, with several countries at risk of debt default or in receipt of bailouts, add to the prevailing mood of economic and political uncertainty. A disorderly unplanned default in any country would likely impact negatively on the London economy, weakening business and consumer confidence and possibly causing a new credit crunch, due to the interconnections between financial markets (GLAEconomics 2011). 1 The authors are grateful to the ISBE Research and Knowledge Exchange (RAKE) Fund for funding the qualitative part of the study and to Workspace Group plc for funding the survey. 2 Peak-to-trough is defined as the period leading from the quarter immediately preceding the GDP downturn through to the last quarter of decline (Q1, 2008 to Q3, 2009). 3 2

3 The UK government s principal policy objective is the accelerated reduction of the budget deficit as a precondition for sustained economic growth (HM Treasury 2010, 2011b). Major reductions in public expenditure have begun and are likely to exert a major constraining influence on consumer spending and business investment in the short- to medium-term. Government has emphasised the role of the private sector, and small and medium-sized enterprises (SMEs) in particular, in generating economic growth. Policy aims to stimulate SME growth through tax and regulatory reform, and various forms of financial and nonfinancial support. The Plan for Growth has, as one of its four aims, to make the UK one of the best places in Europe to start, finance and grow a business (HM Treasury/BIS 2011). At the same time, the public business support infrastructure is being transformed; the Regional Development Agencies are to be abolished and Local Enterprise Partnerships are planned to replace the existing Business Link network by the end of 2012 (HM Government 2010). The economic climate remains a predominant concern for small businesses (BIS 2011a; OUBS 2011). Sluggish demand, late payment and restricted access to credit continue to hamper many small businesses, with adverse consequences for sales, investment, financial well-being and business confidence (FSB 2011a, b, c; OUBS 2011), although at least one source has reported an increase in output and orders for SMEs in 2011 (CBI 2011). The stock of lending to SMEs contracted in the three months to May 2011, with many continuing to repay bank debt (Bank of England 2011a), although there was increased demand for credit from SMEs in Q2, 2011 (Bank of England 2011b). Despite difficult circumstances for small enterprises, UK Business Population Estimates suggest there were 4.4 million active businesses at the start of 2010 (BIS 2011b), comprising an increase of 48,000 over the previous year. 4 According to official estimates, new business starts exceeded exits in both recession years of 2008 and 2009 (BIS 2010, 2011b), suggesting small businesses are a hardy population, able to survive in even the most testing economic conditions (Kitching et al. 2009b). EXPLAINING BUSINESS ADAPTATION DURING RECESSION AND POST-RECESSION PERFORMANCE Small business adaptation and performance are contingent upon SME agents (owners, managers, employees) and other stakeholders (actual and prospective customers, suppliers, competitors, Government and others) implementing specific actions in particular contexts, particularly product, capital and labour market conditions. Business owners always have some discretion regarding the strategies they adopt, although their scope for choice is often severely constrained by resources and relations with other stakeholders, that influence how firms adapt and performance outcomes. Actions enable or constrain subsequent actions by bringing about changes in the firm s resource base and/or relations with stakeholders. Investments in new product/service development, for example, generate sales that, in turn, make possible future investment in resources (staff, equipment, premises, and advertising) that enable yet further investments. There is no guarantee, of course, that particular activities will produce the outcomes intended. Investments succeed, or fail, to varying degrees contingent upon the actions of important stakeholders as well as small business agents themselves. Performance depends on how well firms adapt to their circumstances relative to others with whom they compete for resources and markets without foreknowledge of what constitutes better. Recessions impact unevenly on businesses, posing major threats to, but also offering important opportunities for, businesses (Kitching et al. 2009b). Two broad sets of views regarding how small businesses are affected by recession, and other external shocks, can be discerned these may be termed the vulnerability and resilience views (Smallbone et al. in press). On the vulnerability view, small businesses are treated as highly susceptible to external shocks, such as recessions, owing to limited resources, customers and product lines across which to spread risk all of which restrict a firm s capacity to withstand competitive pressures in difficult conditions and to avoid performance decline. Small business performance is, arguably, highly volatile in the short-, medium- and long-run due to influences largely beyond their control (Storey 2011). On the resilience view, small businesses are perceived as able to survive, and possibly thrive, during difficult times, owing to their flexibility in adjusting resource inputs, processes, prices and products (e.g. Reid 2007) in order to exploit resource acquisition, mobilisation and market opportunities. Recessions present many small businesses with a major dilemma: to cut costs in order to maintain survival in the short-run at the risk of reducing their capacity to adapt adequately when recovery comes; or, alternatively, to maintain greater capacity, incurring higher costs in the short-run, in order to retain the capability to realise opportunities for long-term value creation when the upswing comes. Cost-cutting actions such as reducing 4 Business Population Estimates for the UK and Regions 2010 are the first based on a new, revised methodology, which means estimates are not directly comparable with those provided by previous editions of SME Statistics. The net impact of the revisions has been to reduce estimates of the number of UK enterprises by approximately 400,

4 staff, for instance, might reduce the firm s capacity to exploit opportunities to acquire and mobilise resources, or to persuade customers to buy. Revenue-generation activities such as advertising campaigns might be expensive yet fail to generate sufficient sales to cover their cost, leading to a diminution in the firm s resource base. Studies of small enterprises demonstrate the importance during downturns of both cost-cutting activity (Churchill and Lewis 1984; Michael and Robbins 1998; DeDee and Vorhies 1998) and revenue-generation practices (Shama 1993; Latham 2009). Recovery arguably creates opportunities for small businesses in so far as aggregate demand increases but also constrains them by entailing higher commodity input prices and by encouraging competitor entry or intensified competition among incumbent firms. Both processes constraining and enabling firms - occur simultaneously, but unevenly, during recovery, as well as recession. Studies of large enterprises demonstrate that pre-recession profit performance is no indicator of withinrecession or post-recession profit performance (Geroski and Gregg 1997), suggesting that market selection pressures operate on factors in addition to pre-recession profit performance. Previously profitable firms might experience specific cost or demand shocks during recession that contribute to poor profit performance, while previous poor performers may adapt to recession in ways that enable them to increase performance. Whether such arguments are applicable to small businesses is unknown. Questions remain, therefore, as to whether, and how, actions taken during recession influence subsequent performance. Are small firms that retrench during recession better placed to take advantage of the upswing in economic activity? Or, are firms who attempt to implement revenue-generating strategies during the recession better able to exploit emerging opportunities for business survival and development in the macroeconomic recovery phase? And under what conditions are such performance outcomes achieved? What factors influence the success of particular adaptations? We illustrate some possibilities below. METHODOLOGICAL APPROACH To investigate the connections between SME responses to recession and subsequent business performance, the study involved a two-stage research design: a combined online/mail survey conducted during January- March 2011 (221 useable responses); and face-to-face/telephone interviews with 28 owners conducted March-May All businesses were independent, employing fewer than 250 employees, and were tenants, or ex-tenants, of a major provider of industrial and commercial property in the capital. Sample businesses varied by principal activity, turnover and employment (Table 1). The majority of businesses were micro businesses, turning over less than 500k in their last financial year. Most commonly, firms operated in the information and communication, and professional, scientific and technical sectors. Micro businesses dominated both the online/mail and interview samples. The online/mail survey generated quantitative data on the perceived challenges, business responses, use of finance and finance-seeking behaviour, and actual and anticipated performance; this descriptive data contextualises the interview findings. The interviews produced detailed qualitative data on business adaptations, motivations for those actions, trading circumstances, and performance. Substantial summaries of the 28 interviews were produced, incorporating verbatim quotations, varying from 3-7 pages in length. Summaries were analysed using Nvivo 9 software, which permits coding, storage, retrieval and linking of textual data. We now turn to the empirical findings. We begin by looking at the survey data on business performance in 2010 before investigating the survey and interview data with regard to the links between actions taken during the recession and subsequent performance of these businesses participated in the 2009 study. 10 were new businesses. 4

5 TABLE 1 Business Samples: Online/Mail Survey and Interview Samples Online/mail survey % Interviews % Employment size Micro (< 10 employees) Small (10-49 employees) Medium (50+ employees) Turnover Less than 50k turnover in last financial year k k k k m and above No data Sector Information & communication Professional, scientific & technical activities Manufacturing Wholesale & retail trade Arts, entertainment & recreation Administrative & support service activities Construction Education Financial & insurance activities Accommodation & food service activities Human health & social work activities Utilities (e.g. electricity, waste management) Real estate activities Transport & storage N Note: sector defined in terms of Standard Industrial Classification 2007 categories MANAGEMENT ACTIONS AND BUSINESS PERFORMANCE Researchers have distinguished firms undertaking retrenchment activities during recession, centred on costcutting and asset divestment from those seeking to generate revenue through investment, innovation and diversification (e.g. Shama 1993; Michael and Robbins 1998). Survey respondents were asked Referring to the recession conditions in the period , would you describe the most important management actions you undertook during that period as mainly aimed at cost-cutting or income generation? Of those answering the question, 70 per cent reported focusing principally on revenue-generating actions; 29 per cent concentrated on cost-cutting and 1 per cent reported other responses (we refer to these as ambidextrous, incorporating cost-cutting and revenue-generating practices). These are broad-brush treatments of firms strategic approaches, ignoring more fine-grained accounts based on the particular character and scale of responses; for instance, firms differed as to whether they cut costs by 5 per cent or 35 per cent. Similarly, revenue-generation might involve the development of an innovative product new to the industry, the minor modification of an existing product, or the sale of an existing product to a new group of customers. Revenue-generators were slightly more likely to achieve better sales and profit margin performance in 2010 (53 and 44 per cent respectively), than cost-cutters, although the differences are not statistically significant at the 0.1 per cent level (Table 2). This important finding suggests that businesses adapting to recession by implementing revenue-generating and cost-cutting actions are equally likely, in aggregate, to perform better during the macroeconomic recovery phase than during recession. 5

6 Table 2 Actions in and Performance in 2010 Cost-cutting Actions (%) Revenue-generation Actions (%) Higher sales Lower sales All Higher profit margins Lower profit margins All Note: columns do not sum to 100 per cent due to rounding; cases with missing data excluded; one firm reporting ambidextrous adaptation excluded. Source: online/mail survey All (%) Interestingly, the survey data show a significant association between actions taken in and actions taken in 2010 (p=0.000) (Table 3). Both revenue-generators and cost-cutters during were more likely to continue their respective approaches in 2010 than switch, although the tendency was less pronounced for cost-cutters. Several reasons for this pattern of survey responses might be proposed. First, revenuegenerators are perhaps more likely to operate in expanding sectors, or to have already exploited market opportunities during the recession and, therefore, be encouraged to continue their approach particularly now the recovery appears to be underway. Second, cost-cutters, in contrast, are more likely to be active in industries where competition remains fierce and possibilities to win new business are limited, encouraging continuation of the retrenchment approach. Moreover, some cost-cutters might find switching to a revenuegenerating mode difficult, even if considered desirable, because resources and capabilities have been reduced and need to be reconstructed. Strategic reorientation towards revenue-generation is likely to involve more far-reaching decisions about resources and their mobilisation than cost-cutting approaches which very often entail only one-off decisions or minor readjustments in business practices. Table 3 Links between Actions in and Actions in 2010 Cost-cutting actions (%) Revenue-generation actions (%) All (%) Cost-cutting actions Revenue-generation actions All Note: cases with missing data excluded; one firm reporting ambidextrous adaptation excluded. Source: online/mail survey Third, paradoxically, this might also explain why a smaller proportion of cost-cutters, in comparison with revenue-generators, persist with the same approach adopted during the recession. Where possible, some cost-cutters might attempt to adapt to recovery by implementing modest revenue-generating approaches because further cost-cutting is perceived as undermining the capacity to maintain product/service quality and sales. Fourth, a minority of revenue-generators in report switching to cost-cutting in 2010, possibly because attempts to increase revenue through investment or diversification have proved less successful than intended. Fifth, Table 3, by definition, includes only surviving businesses. Survivors might prefer to continue with the strategic approach initiated during the recession as it has proved successful in maintaining survival. The adaptation strategies pursued by non-survivors, and the causes of non-survival, are unknown. The overall pattern of survey responses reflects these diverse forces. 6

7 Next, we present qualitative interview data to illustrate connections between small firms adaptations during recession and recovery, and linkages between actions taken during the recession and subsequent business performance. LINKING BUSINESS ADAPTATIONS DURING RECESSION TO PERFORMANCE UNDER RECOVERY CONDITIONS: INTERVIEW DATA Tables 4-7 summarise data from the 28 interviews on principal mode of adaptation since 2008 with postrecession performance. We define principal mode of adaptation as cost-cutting, revenue-generation or as ambidextrous, based on respondents replies to questions concerning the configuration of firms actions. Classifying firms in this way is, admittedly, a crude instrument, compressing the sheer variety of practices, and their combination, that SMEs might implement; the survey collected data on more than 40 separate practices. Revenue-generation practices, for instance, include new product development, investment in new equipment and increased marketing and advertising spend; cost-cutting includes employment reductions, switching suppliers on cost grounds and reducing external debt. Similarly, categorising performance at a particular point in time ignores the different measures one might use (sales, profit margins) and the non-linear performance profiles firms might achieve over a 2-year period. Mode of adaptation and business performance are best understood as always in process. Small businesses are continuously taking some actions as a consequence of agents interpreting their circumstances, defining projects in light of those circumstances, and implementing practices to achieve these projects. Performance is typically lumpy rather than continuous, but also exhibits variability over time. Projects and practices are subject to revision as circumstances, or agents perceptions of circumstances, change. Notwithstanding such important conceptual and measurement issues, we categorise businesses into four broad types: (1) those with weakening performance during the recession in , relative to the pre-recession period, and further weakening performance in (Table 4); (2) those with weakening performance during the recession in , relative to the pre-recession period, and stronger performance in (Table 5); (3) those with stronger performance during the recession in , relative to the pre-recession period, and stronger performance in (Table 6); and (4) those with stronger performance during the recession in , relative to the pre-recession period, and weakening performance in (Table 7). Cross-tabulating principal mode of adaptation since 2008 with subsequent performance, we find a variety of relationships between them (Tables 4-7). Overall, we have classified five businesses as cost-cutters, 12 as revenue-generators and 11 as adopting an ambidextrous approach (including two whose approach varied between and ). As Tables 4-7 demonstrate, each type of action was associated with each type of performance in at least one case, highlighting the complexity of linkages, with the exception of businesses performing strongly during recession but poorly after. Firms adapting to recession primarily through attempts to generate revenue were prominent in this particular group; cost-cutters were absent. Similarly, pursuit of a particular approach (cost-cutting or revenue-generating) does not guarantee successful performance (at least at the time of interview): both approaches produced successful and unsuccessful performance. To explore the complex dynamics between adaptation and business performance further, we present four cases in greater detail, one from each category. For each case, we provide details of performance change during the period to and the forces contributing to performance, including the current and past actions of small business agents within a wider context of stakeholder activities and relations. The cases confirm the diversity of adaptation/performance connections. 7

8 Table 4 Weakening Performance During Recession and Recovery Products 2. Estate agent (*) 7. Picture framing service 10. Acupuncture services 13. PR 23. Large format printers, graphics and installations Workforce Principal mode of adaptation since 2008 size 8 Cost-cutting. Emphasis on non-replacement of staff. Also implemented a variety of measures, including reducing input prices & various expenses. Heavy reliance on personal savings to maintain business cash position. Switching to reliance on estate management service, away from survey work, has both facilitated survival but also discouraged a shift to more fundamental business readjustment. 1 Revenue-generation. Small investments using retained profits such as a special glass for frames and an under-pinner to increase the efficiency of the framing process. Two attempts to diversify services (web design for their artist customers and small frames for the mass market) in after period of poor sales especially for artwork. Small frames for the mass market not pursued because of large marketing costs & labour required to make it successful. 1 Revenue-generation in , followed by cost-cutting in Introduced minor measures such as website improvement and remote reception using retained profits. Failure to generate sufficient increased sales led to the major cost-cutting decision to relocate business at home.. 1 Revenue-generation. Minor practices such as networking to create opportunities & to diversify services using mainly owner s time. Difficulties keeping up with the changes in the PR industry as a result of the increased use of social media. 10 Ambidextrous approach. Increased advertising effort in industry publications to promote the company and to increase turnover while reducing activity in previous channels. Introduced salary freeze in 2009 remains the case in Major overhead reduction by not replacing an employee who left. External finance used to acquire new machinery in The print industry was heavily affected by recession with the cost of paper increasing tenfold over the past two years Post-recession performance Adaptations unsuccessful. Sales & profit declined during & continued through Strong adverse influence of depressed property market prices on survey work & fees. Adaptations successful to a degree. Investments increased the quality of the frames for artists. Web design still in process. Sales & profits slightly lower in 2010 because of limited demand & investment made in Adaptations unsuccessful. Sales & profit declined during In , sales more or less the same; profits lower due to high overheads. In 2011, profits expected to slightly pick up due to lower overheads. Adaptations unsuccessful. Sales & profit declined during & continued dramatically through Adaptations unsuccessful. Sales & profits reduced slightly (estimated 10%) each year since Attributed to the impact of recession on some of their existing corporate clients. Note: (*) discussed as a case study in the text Source: interview data 8

9 Business 2 (Table 4): From Bad to Worse Business 2 is an example of a small business experiencing weakening performance during the recession in , relative to the pre-recession period, and further weakening of performance by Established in 1903, the business provides property services (chartered surveyors, estate, letting and management agents), and is located in East London, close to the 2012 Olympic Games site. Current employment is 8. The broader business environment has exerted a strong influence on business performance both during- and postrecession; indeed, the housing sector can hardly be said to have recovered yet. Both Halifax and Nationwide house price indices in July 2011 show a decline on a year previously (HM Treasury 2011a). The business first felt the recession in early-2008 when survey valuation work collapsed as a result of the impact of tightening credit on the property market. Sales decreased almost 25 per cent, and profits halved during the recession in Estate management work remains the firm s principal revenue-earning service after the housing market decline and consequent decrease in survey work and fees. Arguably, this has proved to be the main reason for business survival while, perhaps, also, constituting the primary reason why more fundamental adjustment has not taken place. During the business took a number of actions, primarily cost-cutting, to address decline, although modest measures to improve sales were also attempted. Terms with a range of suppliers were renegotiated, including IT, insurance and cleaning services and a range of expenses were cut, including advertising in local newspapers (relying on cheaper internet advertising instead), non-essential phone calls, a TV and a water machine were removed from the office, and a decision was made to continue running vehicles that ought to have been replaced. Despite the range of cost-cutting measures implemented, the owner did not perceive them as cumulatively important as there is a limit to how far resources can be reduced without adverse consequences for service quality; in larger enterprises, there is arguably greater scope to make major cost savings by divestment of non-core business because they are more diversified: Quite honestly, unless you re going to get rid of staff or go to cheaper premises, you can t cut too much. You can only cut to a limit. We re a service industry... If you don t provide that service, you don t get by. Since 2009, the owner has not drawn a salary from the business. Instead, he has invested personal savings; without which, the business would have performed even worse. The owner, in his mid-50s, would like to sell the business and retire but currently feels this is a distant prospect. Further action to reverse decline was implemented, including non-replacement of two staff who voluntarily quit. This achieved a major cost saving but has led to a reallocation of staff responsibilities and jeopardised quality of customer service. The employer would like to recruit one employee to maintain quality and to alleviate the extra staff work burden but feels constrained not to increase overheads. The range of services has been reduced, as competitors offer the Energy Performance Certificate service cheaper. Referring to a conversation with a consultant working for a property developer client, the respondent reported: My client has had a fee quote to do the work for seven and a half thousand. I said that s not much. He said if you can do it for seven, I can probably get you the job. When I was driving home, stuck in a traffic jam, I suddenly thought Goodness me!... In 2007, for that same valuation, I would ve readily been able to charge thousand, if not 45, and it would ve been paid without question. That shows the difference in how fees are being pegged down. Paradoxically, being in the property sector, and offering the particular portfolio of services they do, has both constrained and enabled business performance in recent years. Sales and profit performance declined further during There have been some signs of upward movement in the local housing market but the expected resurgence in property prices, and related services, has not materialised in the run-up to the Olympic Games. Competitors, including national chains and local independents, were reportedly hanging on, hoping for a revival in property prices. Credit constraints, combined with general economic uncertainty, are dampening consumer and business demand for property. But, because the business offers services in addition to surveying, they have been able, to some degree, to accommodate the sharp decline in survey work and fees associated with housing sales. This has provided some scope for adaptation within the wider constraints imposed by property market conditions but has, arguably, discouraged more fundamental reform of business practices and products. 9

10 Table 5 Weakening Performance During Recession and Stronger Performance During Recovery Products 3. Design/supply of bespoke corporate uniforms 6. Web design/development 8. Professional training/fitness software 9. Sound services for theatre & entertainment production companies 16. Business removal services 22. Eco-friendly furniture design 26. Recruitment agency (*) Workforce Principal mode of adaptation since 2008 size 9 Revenue-generation in late-2008/early-2009, followed by drastic cost-cutting in spring 2009, major redundancies & company insolvency in June Re-opened as a new legal entity in July Ambidextrous approach since reopening, combining identification of new markets, focus on high-margin garments, reduction in product range and closer control of costs. 8 Revenue-generation. Price competition has been really fierce making it difficult to win new customers. Won a major contract in late-2009 that influenced major internal restructuring & staff training to accommodate subsequent growth. Investment activities financed out of cash flow. 5 Revenue-generation. Emphasis has been on major investment in software development & launch, financed by private savings, R&D tax credits & subsequently by an external investor (a friend of the owner). Initial launch in October 2009 but withdrawn several weeks later because clients needed greater sophistication. Product re-launched in March Cost-cutting. Lower demand from entertainment companies led to major cost-cutting activities such as the owner deciding not to take a salary & the business moving to cheaper premises to ease cash flow in Cost-cutting. Trying to restore the balance sheet after experiencing major problems related to a furniture industry partner going into administration that left the business in enormous debt. Measures include renegotiating credit terms with suppliers & rescheduling tax & VAT payments in arrears followed by an increased sales effort towards the end of Business financed through factoring to support cash flow. 2 Ambidextrous approach. Major cost-cutting measure - sales manager made redundant to reduce labour costs. Increased sales effort by attending exhibitions, increased marketing & advertising expenditure. Financed through cash flow until early-2011 when external finance obtained with the aim to grow the business. The main challenge has been to try and grow quickly while the market was falling during Ambidextrous approach. Major cost-cutting measures including redundancy, moving into a smaller unit, cutting their staff commission plan & reducing advertising expenditure due to sudden drop in sales. Increased sales effort introduced new telephone sales & improved website, government initiative to reschedule VAT & Corporation Tax payments over longer periods. Massive increase in staff recruitment & marketing activity in 2010, increased training expenditure & relocated to larger premises. Financed using cash flow & Post-recession performance Adaptations very unsuccessful until mid-2009, subsequently successful. Sales & especially profit have grown steadily since 2009 reopening. Adaptations successful. Sales increased by a third in Profits increased markedly in 2009 but 2010 saw a slight loss due to reinvestment in staff & associated recruitment fees. No trading revenues achieved yet. Business costs are 230k per year, mainly employee salaries. Plans to break even by January Adaptations successful. In , sales were lower & the business made a loss mainly related to writing off equipment costs. In , sales were slightly higher & a profit was expected. Adaptations successful Sales have increased by 5% per year. The business made huge losses in 2009 & maintaining profit margin at 32% has been a challenge. Business is improving & aims to invest later in 2011 once the balance sheet has been restored. Adaptations successful. Sales more than doubled in 2010 after rapid sales decline in 2009, & are growing even faster in Still not profitable but a much better year than Adaptations successful. Sales increased in 2009 by 14%; profit also slightly up. Both sales & profit in 2011 have increased massively (30 & 25 per cent). 10

11 personal savings. Note: (*) discussed as a case study in the text Source: interview data 11

12 Business 26 (Table 5): Riding the Recovery Business 26 is an example of a small business experiencing weakening performance during the recession in , relative to the pre-recession period, and stronger performance by Established in 1994, Business 26 is a recruitment agency specialising in placing permanent field-based sales professionals in the engineering, construction, building services, IT, telecoms and general commercial sectors primarily for bluechip corporate clients. After 3-4 years of planned growth, sales deteriorated rapidly in late-2008 as major clients stopped taking recruits. To adapt to an increasingly difficult trading environment, the company undertook major cost-cutting measures to reduce overheads - reducing staff and office size, withdrawing the staff commission plan, restricting advertising expenditure, renegotiating the cost of supplies and personally working longer hours. From early-2009, the company s fortunes began to turn around. Turnover increased 14 per cent in 2010 while profits remained stable. The company renegotiated Corporation Tax payment terms with HMRC to ease cash flow pressures. By early-2011, turnover had increased by approximately 30 per cent and profits by 25 per cent. In late-2010/early-2011, the company invested substantially in marketing activity, including major website development. Seven people were recruited in January 2011, increasing employment to 19, comprising a sharp increase in labour costs. Sales achieved are closely linked to employee numbers: Essentially, this is a sales operation. The more consultants I have, the more business I win, the more interviews I arrange, the more money I make. So, in we started slowly to add people. So, we did two things. We employed a marketing manager and a website expert, and we started to recruit more consultants... We increased turnover in 2009 by about 14 per cent. Profit wasn t massively different, slightly up, but of course we increased our costs, so not a major impact on profit. But this year [2011], our sales are massively up and our profit is massively up and we re recruiting much more aggressively now. The company financed activities through cash flow throughout 2010, without requiring their overdraft facility. So, the company currently has strong cash reserves. But the strong position of the company in early-2011 is tempered by recognition that retrenchment, while perceived as necessary to avoid collapse in , might also restrict the capacity to exploit opportunities during the recovery period. The owner reported that the key lesson learned during recession was that staff are the firm s most precious asset. Decisions to reduce staff should only be taken with very careful consideration. The respondent now regrets the decision to let one of the two staff go in 2008, an experienced employee: I probably would not have let one of my staff go. I think I panicked and let, only let two people go. But for a business this size, that s quite a decision. One of those people I probably shouldn t have got rid of... Right now, I could do with his experience People are, your people in your company are your most important asset and you really have to look after them despite how difficult things are. If [recession] ever happens again, the last thing you do is let go of good staff and you should try and let go of other things first. The trouble is, in the permanent placement employment agency, your wage bill accounts for 80 per cent of your cost. So you can t ignore it altogether in my sort of business. Business 26 entered the recession after several years planned growth. They survived the depths of the recession by cutting costs, particularly labour, but retained sufficient resource in order to return to their intended growth path by exploiting emerging opportunities as the economy moved falteringly into recovery, with the longer-term aim of business sale and retirement. The owner perceives major opportunities arising and is confident to attempt to exploit them but recognises that decisions taken during the recession may well have constrained them from taking advantage of such opportunities earlier. 12

13 Products 5. Servicing / installation of dishwashers 11. Manufacture of party products and accessories Table 6 Stronger Performance During Recession and Recovery Workforce Principal mode of adaptation since 2008 size 58 Ambidextrous approach. Implemented product & market diversification; financed using retained cash flow. Product diversification involved looking to service coffee machines whereas market diversification involved servicing a diverse range of public (i.e. city councils) and private sectors (i.e. supermarkets, breweries). These were combined with cost-cutting (employee pay freeze till 2010). 25 Revenue-generation. Emphasis on market diversification in the UK & internationally. Major investment in new labour and in internal infrastructure to accommodate growth. Use of invoice finance and clean import loans to ease cash flow. Retail industry customers (i.e. supermarkets, garden centres) have provided opportunities as they have taken more of their products. Post-recession performance Adaptations successful. Sales have increased 10% year-on-year; profits have increased substantially from 3 years ago when the company made losses. Market diversification largely successful but service diversification (coffee machines) failed. Adaptations successful. Last year turnover was the same but profits were lower because of upward pressure on supply costs & expensive shipping costs & investment in staff. 14. PR (*) 20 Cost-cutting. Problems in the property market led to staff redundancies & cuts in marketing expenditure, although a new person has been employed to handle late payments in Heavy investment in staff recruitment & advertising in 2010 with the aim of expansion, using cash flow. Adaptations successful. In the previous two years profits have been 200k mainly because of good management. 17. Cleaning, repair & maintenance of kitchens & security 18. Supply of corporate uniforms to businesses 120 Revenue-generation. Major increase of marketing/sales effort by opening a new tele-sales department in 2009, while reducing advertising in Yellow Pages, in order to expand. Introduced new eco-friendly products, invested in rebranding to promote the business, staff recruitment & training & renegotiated supply costs. Reduced costs because of the growing competition. The company financed itself through cash flow. 2 Ambidextrous approach. Website development & ensuring a prominent position for Google searchers aimed at increasing sales. Attended government funded training on PR & advertising. Salary freeze since 2008 & a decision not to replace staff who retired this was an overhead lost through natural means. Increased selling prices in response to the rising costs of materials. Financed through cash flow. Adaptations successful. Increased sales in 2010, profits remained the same because of the investments made in Adaptations successful. Increased sales in 2010, although profits were slightly lower than in 2009 due to lower profit margins. 19. Financial services 1 Ambidextrous approach. Major service diversification, switching to pensions & investment products to address the decline in mortgage sales. Financed by cash flow. Switched to working from home to cut costs. Adaptations successful. Increased sales & profits in Recruitment of broadcasting engineers 5 Revenue-generation. Refocused the business from system integration to recruitment services in 1998, supplying engineers to corporate clients. From 2009, taking on help from a business consultant, the company reduced numbers employed and moved to smaller premises not a specific response to recession but a realisation of not needing that many staff. Increased sales efforts in 2010 by contacting potential clients directly to expand customer base, invested in new Adaptations successful. In 2009 & 2010, sales increased while profits remained similar because of the investments into new equipment in

14 21. Professional advisory services (including law, accountancy & HR) 24. Television production company 25. Digital printing products 26. Recruitment agency (*) 28. Sale & hire of broadcasting equipment equipment, increased employee training & developed a business strategy for the next 3 years. Since 2009, the business operation is financed through invoice discounting. Benefited from a growing demand for good engineers, because of the current boom in high definition and 3D technologies providing opportunities to fill the hole in the market. 3 Revenue-generation. Continuation of previous practices aimed at business development: no major actions taken as a particular response to recession. Financed activities through cash flow. The company benefits from client problems during downturn as well as from macroeconomic growth because their services will always be needed. 20 Cost-cutting. Major cost-cutting measures - relocated to cheaper premises & eventually started working from home. New projects started to come in at the start of Attributed mainly to good contacts within the industry, rather than to any particular actions taken. Despite unsuccessful attempts to secure external finance from a bank and an investment company, they managed to survive, taking only a basic salary. As advertising dried up, there was less money in the television industry which affected them directly. 7 Ambidextrous approach. Major 100k investment in new machinery in 2009 with a view to expansion. Major cost-cutting measures including salary reduction and re-negotiating the cost of supplies. Introduced new product and service (fast turnaround printing) in Financed through cash flow, trade credit, overdraft, personal savings & support from family & friends. Government loan obtained in 2010 to buy new equipment received too late. Obtaining finance from banks and late payments by customers has been a major challenge over the past two years. 19 Ambidextrous approach. Major cost-cutting measures including redundancy, moving into a smaller unit, cutting their staff commission plan & reducing advertising expenditure due to sudden drop in sales. Increased sales effort introduced new telephone sales & improved website, government initiative to reschedule VAT & Corporation Tax payments over longer periods. Massive increase in staff recruitment & marketing activity in 2010, increased training expenditure & relocated to larger premises. Financed using cash flow & personal savings. 9 Revenue-generation. Becoming a SONY dealer of broadcasting equipment at end-2009 was a major product diversification. The aim is to grow to become a 5m company within 3 years & 10m within 6 years, in order to sell. Attended a university course to change their way of thinking. Used trade credit to acquire new SONY cameras on a 2-year lease. Lack of support from the government and difficulties in recruiting the right staff have been major challenges. Adaptations successful. Sales slightly down in 2010 compared to 2009 but quite consistent over the past few years. Adaptations successful. Sales increased significantly from 400k to 2.4m in and 3.3m in Attributed to maintaining good relationships. Adaptations successful. Sales remained about the same in 2009 and 2010 with slightly reduced profit margins, but in 2011 the business is growing rapidly. Adaptations successful. Sales increased in 2009 by 14%; profit also slightly up. Both sales & profit in 2011 have increased massively (30 & 25 per cent). Adaptations successful. Sales & profits increased by 25% since late Note: (*) discussed as a case study in the text Source: interview data 14

15 Business 14 (Table 6): From Strength to Strength Business 14 is an example of a small business experiencing stronger performance during the recession in , relative to the pre-recession period, and further stronger performance by Established in 1999, Business 14 is a PR company, assisting property developers, house builders and retailers to obtain planning approval for projects. Current workforce size is 20 (including five contractors). The business grew gradually until 2008 but appeared vulnerable when recession struck because of strong links to the property industry. The company promptly implemented major cost-cutting actions during in order to avoid overcapacity and survive the recession: two employees were made redundant and the marketing budget was reduced substantially. Faced with the worst period in terms of customer late payment, an employee was hired to manage credit control; this has proved largely successful although they are still chasing 40k from Such action was perceived as not only necessary to deal with short-term recession-related challenges but also supports growth in the long-term. In , once the uncertainty of recession passed, the emphasis switched to investment and expansion. Seven people were recruited in early-2011 with five more expected in 2012, and the advertising budget has been increased substantially. Internal systems have been adapted in anticipation of growth, including an induction pack for new recruits, a procedures manual, a code of conduct and the development of formal, in-house training. We are a people s business and in order to ensure that everyone performs consistently to the best of their ability, and to get the right results for our projects, we needed to make sure that we gave them training. Those policies are part of the training, as well as Delivery Quality Standards training sessions that we do every couple of weeks. Consequently, business performance has improved. The 1m turnover threshold has been crossed and the aim is to double this in the next couple of years. Profits remained high during the recession due to management efficiency. It s been a good learning experience, the recession. I think everyone has to go through one, and touch wood, it s been ok. I ve learned how to deal with a recession which is good... We have now taken the decision that we are going to do things differently. We are putting more effort into marketing, we are tooling up and in terms of our projects, we are constantly learning to do things differently because we do our training in-house... I m quite happy with what we have done and what we are doing. We know where we need to go. Business 14 entered the recession in a strong position and, despite looking vulnerable because of links to property markets, has managed to improve performance further. The company was able to cope by cutting costs promptly as soon as the recession impacted the business and subsequently by implementing internal changes and by exploiting market opportunities and with a view to further expansion. Business 4 (Table 7): Against the Tide Business 4 is an example of a small business experiencing stronger performance during the recession in , relative to the pre-recession period, and weakening performance by Established in 2007, Business 4 develops online games and experiences with a story-telling element. Current employment is 4. Originating in response to broadcasters needs, Channel 4 and BBC were among their major customers, with large projects, in the 1-2m range. The company has gone through several upheavals in the past few years, as client demand has shifted away from large-scale projects for major television broadcasters towards smaller-scale projects for publishers. Initially experiencing recession in September 2008 when the project budget was cut by 60 per cent, in February 2009, another project was cancelled. The directors then realised that their strategic response required reconsideration. A number of actions aimed at cost-cutting and generating new business were implemented: greater use of contractors instead of permanent employees; delaying VAT payments; borrowing, rather than buying, equipment; and increased sales effort, participation in networking events/conferences and sales training. [Recession] slowed things down. Project size is not as big as we d have hoped, and so it will take us longer to build up a larger company. So, instead of being 10 million revenue this year, it would be less. It is still higher than last year... it would be much more gradual. So, every year we would get a few more clients, a few more games to release and make money from. It slowed us down but we should still grow during this time. 15

16 Table 7 Stronger Performance During Recession and Weakening Performance During Recovery Products 1.Power supply systems Workforce size n/a Principal mode of adaptation since 2008 Revenue-generation. Emphasis was on attempting to win new business. Clients unwilling to commit to investment in expensive large-scale construction projects. Financed primarily by directors equity investments. Enterprise Finance Guarantee loan obtained but problems with acquisition and use. Post-recession performance Adaptations very unsuccessful. Company went into administration in Feb 2011 after a protracted period of low sales & profits. Company sold for 1 to a new buyer. 4. Online games development (*) 4 Ambidextrous approach. A variety of cost-cutting measures include use of external labour, delaying VAT & rescheduling tax payments, hiring rather than buying equipment to ease cash-flow. Revenue-generating actions include government training initiatives to improve management skills. Failure to win a major contract in late-2009 led to all staff being laid off. One of the founders, the main salesman, quit, leading to difficulties winning new business. Adaptations successful to a degree. Sales in drastically lower than in 2009 but still profitable. The future direction of the company is uncertain. 12. Training services 6 Revenue-generation. Sales constrained by government spending cuts & priority given to larger enterprises with money to support the training programmes. Emphasis on networking to generate new business & major diversification of training courses in Financed using cash flow & personal savings. Adaptations initially unsuccessful, then subsequently successful. Sales & profits declined during but have improved slightly in Software/web development & consultancy 27. Print & web design, marketing and branding 2 Revenue-generation. Software development & diversification into training services financed using cash flow. Diversification proved unsuccessful & costly. Recession has offered opportunities because software/web development is not something businesses would cut during a recession. 9 Ambidextrous approach. No particular action taken in response to recession in , the business was not affected until April Major adaptation to declining sales in 2010 by cutting overheads, including reduced employment & 10 per cent salary cuts. Consequently increased sales efforts through website development & monthly bulletin to existing clients. Financed using personal savings. Public spending cuts affecting their clients and the decline of printing have been the main challenge. Adaptations successful to a degree. Higher sales & profits (20% increase) in turned into a decrease of 10% in Adaptations unsuccessful. Sales declined April- December Started to pick up in 2011 & made a profit for the first time. Note: (*) discussed as a case study in the text Source: interview data 16

17 Despite their actions and optimism, by November 2009 all eight staff were made redundant because of losing a major contract. Contractors were used to complete contracts. The external environment posed major challenges to the company. Concentrating on clients in a single industry, broadcasting, rendered the company vulnerable to changes there. One of the founder s took the decision to leave the business because of the instability. His role combined sales and production functions and this had contributed to poor sales performance and to the redundancy decision. In June 2010, the founder was replaced with a sales person, who did not perform as well as expected; he was made redundant a few months later. The CEO was a bad hire on our part. We thought he had the experience and the connections to actually make it work. But the reality was, he didn t understand enough about the art industry and that this is a very creative selling process. The experience of the past two years has shaken the company. Changes in client budgets impacted on projects and the associated revenues. Sales dropped drastically from several millions pounds to almost nothing in four years. The company has adapted to the changed circumstances by market diversification, seeking new clients outside their traditional comfort zone and two employees have been hired following the mass lay-off a couple of years ago. The two remaining founders are currently considering strategic options, including venture capital or a shift to consultancy. CONCLUSIONS The purpose of the paper has been to investigate the relationship between SME responses to the recession and post-recession performance. The recession, the worst since the 1930s, involving the nearcollapse of the banking system, led to a severe contraction in GDP. The recovery since late-2009 has proved faltering and the output lost has yet to be regained. SMEs adapted to the recession in a wide variety of ways implementing practices aimed at cutting costs as well as generating revenue - but how have small businesses managed the transition to recovery? What influence have the particular adaptations made during had on subsequent performance? Did they help or hinder subsequent performance? Several findings are presented, although these should be treated as preliminary until more detailed analysis is undertaken. First, the data demonstrate a wide variety of linkages between firms positions at the onset of the recession, actions taken during the recession and subsequent performance. Decisions made during recession influence firms future capabilities and performance by changing the resource base and/or the wider environment. Firms have been categorised as strengthening or weakening their position, first, during the recession, relative to the pre-recession period, and, second, during the recovery phase, relative to the recession period. Some businesses retrenched by cutting costs and assets during the recession, while others sought to expand through investment, innovation and diversification. Some firms adapted to adverse recession conditions by cost-cutting; others by implementing measures intended to increase revenue. Both cost-cutting and revenue-generation refer to a wide variety of practices varying in character and scale. Attempts to increase business revenue are often likely to require considerable planning over a period of time whereas cost-cutting might be a one-off or low-risk adjustment. The choice of a two-stage research design is vindicated by the survey and interview results. The survey data permit categorisation of firms mode of adaptation and performance at particular points in time, and to correlate the findings. The qualitative interview data provide deeper insights into processes of adaptation and changes in respondents projects, practices and perceptions of their environments. Survey data are less able to capture process changes in response to unstable or fluctuating environmental conditions. Even over a short 2-year period, firms adapt products and processes in response to changing circumstances, contingent on owners objectives and perceptions of the particular challenges experienced or anticipated. Where revenue-generation or cost-cutting approaches do not produce the desired levels of performance, business owners often seek to switch strategy. Several owners reported switching approach as success failed to materialise; Businesses 3, 10 and 26 all did so. Even respondents reporting performance improvements as a consequence of actions taken also indicated that some decisions produced adverse impacts by reducing the capacity to adapt quickly or effectively as the economy moved to (fragile) recovery; Business 5 is a good example of this. Second, cost-cutting and revenue-generation modes of adaptation do not connect to performance in an obvious way. Cost-cutting and revenue-generation activities were perceived by business owners as appropriate in particular circumstances, but not all adaptations proved successful in terms of performance. There is no guarantee that adaptation, or any particular form of adaptation, will succeed. What proves successful in one context might not do so in another. Performance is not simply a consequence of the actions businesses take; environmental circumstances, including product, labour and capital market conditions, 17

18 facilitate or hinder performance. Circumstances which are disabling will frustrate firms adaptations. This was evident in Business 2, where attempts to cut costs and to switch the emphasis within their existing portfolio of property services made survival possible, but did not stimulate sales and profit growth, due to the depressed state of the housing market, leading to the depletion of the owner s personal wealth as he continued to draw on savings to bail the business out. Third, market and product diversification have been the most successful forms of adaptation. Market diversification usually involved selling the same product, or one with minor modification, to a new, or wider, client base to avoid dependency upon a now-dwindling group of potential buyers. Major product diversification occurred but less frequently, and with less probability of success. Recessions affect different markets in different ways. Where firms remain trapped in specific hard-hit sectors, like property and finance, improving performance might be very difficult; Businesses 2 and 13 are good examples. Conversely, where businesses have been able to develop new goods and services, or to identify new client bases for existing products, and been able to mobilise resources effectively to access and exploit such markets, performance levels have been maintained or increased. Businesses 3, 5, 11, 19 and 22 all exemplify this kind of approach. But product and market diversification do not guarantee success; the market may not respond as intended. Businesses 4, 7, 10 and 15 each implemented some forms of diversification with limited success. To conclude, the recovery, as with the recession preceding it, represents both a threat and an opportunity for UK small enterprises. Many business owners have no doubt welcomed the faltering macroeconomic recovery as an opportunity to rebuild and win back the customers lost during the recession. Others will perceive continued opportunities to exploit advantages first secured during the recession. But all are also vulnerable to the threats posed by new entrants and incumbent firms to exploit any opportunities emerging during the recovery. Failure to adapt to the fragile recovery might be just as risky as failure to adapt to the recession that preceded it. REFERENCES Bank of England (2011a) Trends in Lending: July 2011, online at: Bank of England (2011b) Credit Conditions Survey: Q2, 2011, online at: British Chambers of Commerce (BCC) (20011) Quarterly Economic Survey: Q2 2011, Summary, online at: Churchill, N. and Lewis, V. (1984) Lessons for Small Business From the Recession, Journal of Small Business Management, 22, 2, Confederation of British Industry (CBI) (2011) SME Trends Survey - July 2011, online at: 17cf2/$FILE/CBI%20SME%20Trends%20July%2011.pdf DeDee, J. and Vorhies, D. (1998) 'Retrenchment Activities of Small Firms During Economic Downturn: An Empirical Investigation', Journal of Small Business Management, 36, 3, Department for Business, Innovation and Skills (BIS) (2010) Small and Medium-sized Enterprise (SME) Statistics for the UK and Regions 2009, statistical press release, 13 October, online at: Department for Business, Innovation and Skills (BIS) (2011a) BIS Small Business Survey 2010, online at: Department for Business, Innovation and Skills (BIS) (2011b) Business Population Estimates for the UK and Regions 2010, online at: Federation of Small Business (FSB) (2011a) Late payment still hurting small firms shows FSB research, press release, July 11, online at: 18

19 Federation of Small Business (FSB) (2011b) FSB response to the SME banking figures released by the BBA Taskforce today, press release, July 11, online at: Federation of Small Business (FSB) (2011c) Targeted VAT cuts needed to restore growth, says FSB, press release, July 18, online at: Geroski, P.A. and Gregg, P. (1997) Coping with Recession: UK Company Performance in Adversity, Cambridge University Press, Cambridge. GLAEconomics (2011) London s Economy Today: July, Issue 107, online at: HM Government (2010) Local Growth: Realising Every Place s Potential, Cm 7961, online at: HM Treasury (2009) Budget 2009: Building Britain s Future, online at: HM Treasury (2010) Budget 2010, online at: HM Treasury (2011a) Pocket Databank, 8 September, online at: HM Treasury (2011b) Budget 2011, online at: HM Treasury/BIS (2011) The Plan for Growth, online at: Insolvency Service (2011) Insolvencies in the First Quarter 2011, Statistics release, 6 May, online at: International Monetary Fund (IMF) (2009a) World Economic Outlook Update: Contractionary Forces Receding But Weak Recovery Ahead, July 8, online at: International Monetary Fund (IMF) (2009b). World Economic Outlook: Crisis and Recovery. Online at: Kitching, J., Smallbone, D. and Xheneti, M. (2009a) Have Small Businesses Beaten the Recession?, paper presented at the 32 nd ISBE 2009 Annual Conference, Liverpool, 4-6 November. Kitching, J., Blackburn, R., Smallbone, D. and Dixon, S. (2009b) Business Strategies and Performance During Difficult Economic Conditions, online at: Skills.pdf Latham, S. (2009) 'Contrasting Strategic Response to Economic Recession in Start-Up versus Established Software Firms', Journal of Small Business Management, 47, 2, Michael S. and Robbins D. (1998) Retrenchment among Small Manufacturing Firms during Recession, Journal of Small Business Management 36, 3, Office of National Statistics (ONS) (2010) Quarterly National Accounts: 4th quarter 2009, statistical bulletin, 30 March, online at: Office of National Statistics (ONS) (2011) Quarterly National Accounts: 1st quarter 2011, statistical bulletin, 28 June, online at: Open University Business School (OUBS) (2011) Quarterly Survey of Small Business in Britain, Q2, 2011, online at: Reid, G. (2007) The Foundations of Small Business Enterprise, Routledge, London. 19

20 Shama, A. (1993) Marketing Strategies During Recession: A Comparison of Small and Large Firms, Journal of Small Business Management, 31, 3, Smallbone, D., Kitching, J. and Xheneti, M. (in press) Vulnerable or resilient? - SMEs and the economic crisis in the UK, in B. Dallago, C. Guglielmetti and M. Rondinelli (eds) Vulnerability and Resilience: The Consequences of the International Crisis on European SMEs, Routledge, London. Smart, E. (2011) The New Business Register Employment Survey: Changes in London s Jobs, 2008 and 2009 Compared, GLAEconomics Current Issues Note 30, online at: Storey, D. (2011) Optimism and Chance: The Elephants in the Entrepreneurship Room, International Small Business Journal, online at: Wickham, M. (2010) London s Labour Market in the Recent Recession, GLAEconomics Working Paper 44, online at: 20

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