Increased competition during the economic downturn is a key concern for small business owners, according to a survey by the small enterprise research team at the Open University Business School.

The study of more than 350 companies, drawn primarily from manufacturing, business services, retail and distribution, found that 60 per cent claim increasing competitive pressures is the main issue or one of the key issues they now face.

Businesses based in the Midlands appeared to be most affected by competition, with 71 per cent ranking it as either 'strong' or 'heavy'. This compared with 52 per cent in the north and 57 per cent in the south.

By industry, business services companies are undergoing the most pressure with three quarters claiming that competition was either 'strong' or 'heavy'. The average for manufacturing, retail or distribution companies was 53 per cent.

Worryingly, 19 per cent of businesses interviewed were not sure how they were faring in relation to their primary market.

The survey, which was commissioned by Lloyds [Get Quote] TSB, also shows that many companies are trying to do something about their current difficulties.

Fifty-six per cent said they were taking steps to cultivate new markets, 44 per cent had increased their promotional activities and 49 per cent planned to cut costs.

Although 38 per cent said they were focusing on the opportunities they had through flexibility and innovation, 33 per cent said they were victims of competition and saw no real benefits to the current situation.

John Maltby, managing director of Lloyds TSB Commercial, said: "Our experience as a bank with more than 600,000 small business customers is that it's those businesses that seek advice and guidance that have the best prospects."

Companies are also concerned about other factors, apart from competition.

Pressure from shrinking markets was cited as a major issue by 55 per cent of respondents while 52 per cent said they were feeling the squeeze from rising supplier costs. Increased labour costs are a problem as well, with 35 per cent claiming this was a source of concern.

Copyright The Financial Times Limited 2009