Accountants’ Views of the Issues in the Accounting Environment that Threaten the Long-Term Survival of UK Small and Medium Enterprises

UK SMEs suffer from a poor survival rate, with only about 61% still surviving three years after start-up, and only about 42% after five years (UK Office for National Statistics, 2020). UK SME long-term survival is therefore an urgent issue within the UK economy. This interpretivist study examines the phenomenon of poor SME longterm survival from accountants’ perspectives, adopting the Resource Based View (RBV) (Barney,1991) as its theoretical framework, and aiming to provide solutions to enhance SME long-term survival for the benefit of the UK economy and society at large. This thesis adopts a qualitative methodology. First, pilot interviews are used to identify the general reasons and threats relating to the poor long-term survival of SMEs. Responses from these pilot interviews provide the general context of SMEs’ operational issues and challenges. Subsequently, qualitative semi-structured interviews with a purposive sample of thirty highly-experienced accountants explore specific issues arising from within the SME accounting environment in much more depth and detail. The data from these interviews is analysed thematically. 

This research effort contributes to scholarly knowledge by offering an understanding and interpretation of the key issues threatening UK SME long-term survival, their relative severity, how they arise, and how SMEs react to those threats. Key findings include confirmation of previous findings in the literature in relation to the importance of accounting threats of poor cash flow, poor adoption of (or failure to adopt) internal financial and management accounting control systems, and lack of access to external finance. New accounting-related threats also emerge, such as tax evasion by unethical SMEs, the heavy tax burden, overtrading, and difficulties in recruiting accounting personnel. The findings of this thesis show that these threats are generally more severe for small enterprises than for medium-sized ones. Although there are many underlying causes for each identified threat, some common reasons emerge during the course of the thesis. Likewise, SMEs react to these threats in many ways, but there are identifiable differences in how small and medium enterprises react. Specifically, small enterprises may turn to their external accountant but also tend to ignore threats by underestimating their severity and hoping they will go away, or simply not recognising the presence of the threat in the first place. Medium enterprises tend to react to threats by dealing with them through their internal resources, including internal accountants, and also by acquiring knowledge from external sources such as local universities.

This thesis contributes to new insights into SME long-term survival by demonstrating that, other than the well-known threats faced by most businesses, special kinds of threats arise within the accounting environment that can affect SME long-term survival.

Implications emerge for SME owner-managers, practitioners and others having an interest in SMEs, in respect of accounting environment-related business threats, management strategies and SME support programmes. This research further contributes to the development of theory on the survival of SMEs by proposing a theoretical model based on the resources of profitability, cash liquidity and the astute management of cash as part of the SME working capital, further expanding the RBV.