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The Entrepreneurial Exchange

Entrepreneurs More Upbeat About Recovery Than Big Firms, E&Y Survey Shows

SCOTLAND'S entrepreneurs expect the UK economy to start recovering by Christmas and are aggressively grabbing market share, in contrast to more pessimistic larger companies.
A survey published today by accountancy giant Ernst & Young (E&Y) reveals that entrepreneurs are expanding their business during the recession. The research compared the attitude of entrepreneurs with that of finance directors (FDs) of companies with a turnover of £20 million and over. The results show that entrepreneurs are markedly more upbeat in their outlook.

Two-thirds of Scottish entrepreneurs said they expected to see the first green shoots of UK economic recovery by Christmas. However, FDs were much more cautious, with 58 per cent saying they did not think there would be any signs of improvement until the second half of next year.

The optimism of Scottish entrepreneurs is being reflected in their approach to the business opportunities created by the downturn. Some 90 per cent of entrepreneurs are actively chasing acquisitions, compared with just 54 per cent of FDs.

Similarly, 89 per cent of entrepreneurs surveyed have either continued or increased their expansion into new geographical areas, whereas a third of FDs are cutting back. Annie Graham, audit partner at Ernst & Young in Scotland, said entrepreneurial companies had shorter chains of command, tended to be more agile and were willing to take more risks. "This enables them to adapt quicker to changes in the market," she said. "At the same time, positivity and the drive to succeed seem to be built into the entrepreneurial psyche."

Graham added that the entrepreneurs surveyed by E&Y recognised that while preserving the health of a business in a recession was important, it was also necessary to keep one eye on the future. They were aware their businesses must be "fit" for an upturn and in a better shape to steal market share, Graham said.

John Anderson, the chief executive of The Entrepreneurial Exchange, said the findings matched his conclusions from seeing what his members were doing every week. "For some time now our more experienced members have been taking steps to get into the best possible shape to take advantage of the opportunities that challenging times provide," he said.

While entrepreneurs have focused on grasping opportunities, the survey revealed that FDs were taking defensive steps to reduce costs and protect their businesses.

Of the 60 businessmen and women surveyed, 85 per cent of FDs, compared to 54 per cent of entrepreneurs, said that building working capital had become more important since the onset of the recession, as had selling off non-core assets.

John Richards, group finance director of the Miller Group, said: "I'm not surprised by the findings and the more cautious response from the FD group on the timing of recovery. The majority of the group's membership are in cyclical or service businesses which have experienced a difficult trading environment in the past 18 months."

Some 90 per cent of FDs said they were reviewing whether they had to cut staff, and more than half were considering introducing more flexible work arrangement to control over-capacity.

But Graham said companies must ensure that such cost reductions did not damage their strategy or their customers' experience of dealing with them.

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