SME confidence grows, but challenges remain » SMEInsider

SME confidence grows, but challenges remain

A major new survey from the Dept of Business, Innovation and Skills has given a compelling insight into the state of the SME nation.

The headlines from the survey show an SME sector committed to innovation, confident enough to continue hiring staff, and increasingly interested in using digital channels to sell to customers, promote their business and train staff.

Sixty-nine per cent of SME employers said they aimed to grow the sales of their businesses over the next three years, with a further 26% of SME employers expected to employ more people in 12 months’ time.

Looking longer term, it seems that a large proportion of SME owners believe strongly in the prospects for growth. “In terms of planned growth-related activities over the next three years,” the research says, “70% of SME employers planned to increase the skills of their workforce, 49% planned to introduce new working practices, 47% planned to develop and launch new products or services, 44% planned to increase the leadership capability of managers, and 40% planned to invest in premises, machinery or other types of capital investment. Compared with SBS 2014, the proportion planning capital investment decreased by seven percentage points.”

However, it’s not all positive. There still remain significant obstacles to success. The survey shows that the main challenges were competition (49%), regulations/red tape (49%), taxation (43%), late payment (33%) and staff recruitment/skills (32%).

Additional key findings include:

  • Twenty-four per cent of SME employers employed more people than they had 12 months previously. 66% employed the same number of people, and 10% fewer.
  • Sectors that were more likely than average to have increased employment levels were information/communications (31%), manufacturing (29%), financial/real estate, professional/scientific, and administrative services (all 28%  t).
  • Thirty-eight per cent of SME employers had greater turnover (value of sales) than a year previously
  • Forty-five per cent of SME employers expected turnover to increase in the next 12 months, 43 per cent thought it would remain roughly the same and eight per cent thought it would be less
  • Overall, 50 per cent of SME employers had innovated in the last three years, be this the introduction of new or significantly improved goods or services, or the introduction of new or significantly improved processes. Forty-three per cent of SME employers had introduced new or significantly improved goods or services in the last three years (22% goods, 36% services). Twenty-five per cent had introduced new or significantly improved processes in the last three years.
  • The area of skills and training is a perennial concern, and the SBS offers some contradictory trends. Encouragingly 55% of SME employers had arranged or funded training or development for staff in the last 12 months (41% off-the-job, 44 per cent on-the-job). However, compared with SBS 2014, that means slightly less training overall (down two percentage points) less off-the-job training (down five percentage points), and more on-the-job training (up four percentage points).
  • Eighty-three per cent of SME employers were digitally engaged, meaning that they had a website, used a third party website such as Amazon, Etsy or Ebay, or have their own social media profile.

Commenting on the findings, Small Business Minister Anna Soubry said, “This survey shines a light on the small businesses that drive our economy and employ millions of people across the country – and it’s good news that small firms continue to employ more people. A strong economy underpins the success of our small businesses which is why this government continues to take the difficult decisions needed to keep our economy and businesses strong.”

Meanwhile, Mike Cherry, National Chairman for the Federation of Small Businesses, said the government needed to do more to tackle obstacles to growth. “Today’s survey provides an interesting snapshot of the small business landscape in the UK. There are many positives to be taken from the findings, including high levels of innovation and turnover growth among small and medium-sized firms.

“Yet the survey highlights a number of all-too-familiar barriers that are acting as a drag on business growth. Key obstacles include regulation, taxation, late payment and finding staff with the right skills – issues that come up time and time again in our own surveys, and must be prioritised by Government if smaller firms are to achieve their full economic potential.

“While it is encouraging to see that a quarter of smaller employers expect to employ more people in 12 months time, this figure is six per cent lower than the equivalent figure in the 2014 survey. This fall in hiring intentions reflects declining confidence levels among many small businesses, amid an ongoing period of economic uncertainty both at home and abroad and a raft of policy challenges that came into effect in early 2016.

“Equally concerning is the fact that the percentage of small businesses that export has remained constant since the 2012 survey, suggesting that Government needs to redouble its efforts to get more firms trading overseas if it is to have any chance of meeting its ambitious export targets.”