Christmas cheer for UK small businesses

Despite facing many financial pressures this year, UK SMEs still believe 'tis the season to be jolly, when it comes to Christmas.

According to new research from Alliance & Leicester Commercial Bank, small businesses will still be getting into the festive spirit by spending generously on gifts and parties for staff and customers.

Of the many costly Christmas traditions small businesses plan to honour, nearly a third (30%) expect to spend extra cash shutting down to celebrate the festive season, almost a quarter (24%) will spend cash on client gifts, more than one in five (22%) on that all-important Christmas party and 11% on staff gifts. Small businesses expect to spend, on average, an extra £430 to cover costs incurred during the Christmas period.

London SMEs look set to spend the most, with bosses in the capital expecting to spend an average of £716 on Christmas this year, shortly followed by Scotland with £679 and the South East with £495. Meanwhile, adopting a more Scrooge-like approach to Christmas, business owners in the West Midlands are planning to spend the smallest amount, an average of only £241, just beating business bosses in the East of England who are shelling out £281.

Steve Jennings, Director of Business Banking at Alliance & Leicester Commercial Bank, said: “It is clear from our research that, on the whole, small businesses are still prepared to spend extra cash on celebrating Christmas, despite being burdened with economic uncertainties.”

Jennings adds: “This is really positive news and shows that SMEs recognise the importance of building long term customer relationships and rewarding their employees for their contribution over the last 12 months.”

However, the research also reveals that nearly one in four (28%) small business owners have actually set aside a sufficient budget to cover these extra Christmas costs, while a huge 65% admitted to having not saved at all. Worse still, of those who haven’t prepared, nearly a third (30%) will have to delve into company profits, just under a quarter (23%) will use their own personal funds and a fifth (20%) have decided to simply worry about it when the time arrives.

Jennings continues: “It is worrying that many business owners are expecting to pay for the cost of Christmas with their own personal finances or company profits. Business owners need to ensure that they are always prepared for the unexpected, such as the hidden cost of Christmas. Small businesses can prepare now for 2008 by looking for smart ways to reduce outgoings and planning ahead, putting them on a surer financial footing for the future.

“Something as simple as making sure that they are with the most competitive banking provider can make all the difference to a business’ finances. Our research shows UK SMEs are currently missing out on over £500 million each year by not shopping around for the best business current account – money which could fund a number of uses, including funding extra Christmas costs.”

For companies with an annual turnover of less than £1 million Alliance & Leicester Commercial Bank offers the award winning Free Business Current Account which offers market-leading returns on small businesses’ hard earned funds, free and unlimited day-to-day banking and £4,000 free cash deposits each month.

For balances up to £1,000 the account offers a market leading return of 6.26% AER, with Alliance & Leicester guaranteeing that customers will receive 0.60% above the Bank of England base rate until 31st December 2008.

Small business owners can manage their business account through Internet banking, over the phone, via the post and pay-in and withdraw money at any Alliance & Leicester branch or at over 14,000 Post Offices across the UK – more outlets than all the Big Four banks’ branches added together.

Alliance & Leicester Commercial Bank also makes it easy for business owners to calculate how much their business could save by visiting freenotfee.co.uk, typing in the average monthly transactions and the website will calculate how much they could save per month by switching.

For further information on the Free Business Current Account, small business owners should visit freenotfee.co.uk.