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UK SMEs unphased by seesaw year PDF Print E-mail
Wednesday, 23 November 2016
Forget the Scottish Referendum, the leadership contests within the main UK political parties or the UK’s decision to leave the EU. While 2016 has, for some, been the year of years to worry about market uncertainty and instability – the proportion of UK SMEs that bemoan external barriers to growth has actually fallen in the last 12 months.  

While many think tanks and major international brands have commented on the apparent negative impact of Brexit - and the associated tax, economic and regulatory impact, not to mention rumours of companies leaving the UK - the position with the SME sector seems remarkably different. New nationwide data from the Hitachi Capital British Business Barometer, which significantly tracks small business outlook, reveals that:

• The percentage of SMEs citing barriers to growth has fallen since October 2015 from 77% to 72%.

• The proportion of businesses flagging general market uncertainty as a problem remains unchanged, despite 2016 being a year of volatile political and economic events.

The findings suggest a greater resilience and agility exists among the SME community, who could well become the flag carriers for the UK business community as it responds positively to the UK’s new place in the world economy.

Despite these relatively heartening year-on-year findings, the new Hitachi Capital data suggests it is the country’s fledgling businesses (those trading for less than five years) that are most likely to be experiencing barriers to growth (73%). Challenges they are most likely to bemoan include: volatile cash flow (15%) and uncertainty over their future plans (15%). More established firms (those between five and 10 years old) were most troubled by the ability to secure skilled labour (15%) to support growth plans. Mature businesses (those running for 10 years or more) – usually larger enterprises – were most worried about red tape (16%) and broader macro economic uncertainty (26%).

In the months after the EU Referendum vote, where London stood at odds with much of the country at large. The new data reveals SMEs in London were those most likely to cite factors holding their business back (76%) and to report worries over macro market uncertainty (31%), red tape and regulation (17%) as well as uncertainty over their own business’s future (18%). In contrast, SMEs in the Midlands were most concerned about late payment from clients (14%) and the impact of having out of date equipment (8%). In the South, ventures were the most likely to bemoan access to skilled labour (13%) and the risk of volatile cash flow (12%) as factors limiting growth prospects.

Industry sector highlights

· SMEs in the manufacturing sector and retail were those most likely to cite one or more factors holding their business back (83% and 85% respectively). Those in the manufacturing sector were most likely to express concern about macro market uncertainty (32%), the value of sterling (20%) and the challenges of having old or out of date equipment (16%). Small businesses in the retail sector, where margins are often tight, were the most likely of all the sectors surveyed to express concern over the impact of volatile cash flow (18%) and high bank fees (11%).

· In the construction industry, where two in three businesses mentioned one or more obstacles to growth (67%), concerns were most strongly felt over the cost of finding skilled labour (21%) and the issue of late payment from clients (25%) - both bigger issues here than in other sectors polled.

· With the hospitality and leisure sector, businesses were most likely to mention perceived excessive bureaucracy and red tape (25% to a national average of 15%) – this coming at a time when there has been widespread concern over the closure of clubs and small grassroots venues. Enterprises in this sector were also the most likely to express concern over the future of their own business (19%).

· In contrast to manufacturing and retail, financial and accounting was the sector where the fewest smaller businesses could identify one or more factors that held their business back (59%).

Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance comments: “Without question, 2016 has been a year of monumental events and whilst this does create uncertainty, it would be wrong to presume uncertainty is always a bad thing. Our tracking study of the UK small business community reveals a stoic bullishness from many and, while running a small business always brings challenges, it is important not to overstate or presume that the uncertain world we live in inevitably makes things worse. Many are seeing it as an opportunity and the task for our sector is to back this spirit of enterprise with the right support. The next few years could well be a golden age for Britain, as the nation’s smaller ventures demonstrate the positivity, tenacity and innovation that is required to grow businesses at a time of change.”

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