SMEs will drive the economic recovery

Nia Williams

November 26, 2010

A new report, “The year ahead: a view from Britain’s small businesses”, published by Barclays Business in conjunction with Kingston University Small Business Research Centre, reveals the views of owner-managers in key areas including ambition and optimism for the year head, planned growth, areas for investments and employment plans.

According to the report, two thirds (66%) of owner-managers are expecting to grow in 2011, with positive action being taken in areas that include entering new markets (35%) and strengthening existing client relationships to potentially increase sales and improve credit management conditions (34%).

This optimism is reflected in owner-managers’ recruitment plans, with business expecting to increase the number of full time employees and part-time employees in order to meet demand. The report also spells good news for graduates, with a fifth of SMEs (20%) planning to recruit graduates into full and part time positions next year.

Owner-managers are also focused on the opportunities ahead that will enable them to diversify their customer base and drive efficiency, including: anticipating an upturn in the economy (46%), the development of new domestic markets (25%) and the introduction of new technology (21%). Some are also expecting to benefit from the demise of their competitors or their withdrawal from specific markets (19%).

The research also suggests that despite the challenging economic conditions, SMEs are still planning to invest next year, although they are being increasingly strategic about where they invest their cash, focusing on where it will have maximum impact. For example, nearly half (43%) are looking to up spend on marketing to increase sales, whilst almost a quarter hope to increase spend on product development and innovation. Two thirds (66%) intend to at least maintain their investment in innovation, underlining the forward thinking mindset of the country’s owner-managers.

Commenting on the findings, Travers Clarke-Walker, a director at Barclays Business, said: “The importance of SMEs has been acknowledged for some time, but never more so than at now, with their performance forming a central component of the recovery, its speed and outcome.

“The research reveals that owner-managers have been actively managing their businesses to reposition themselves for survival and growth in 2011. This is far from the alternatives of retrenching, cutting prices and reducing their profits; strategies that are unsustainable and only add further to any downturn in the economy. In addition, the fact that SME are seeking to grow and to enhance their profitability suggests a sense of optimism and a stepping up to the challenge of recovery.”

Professor Robert Blackburn, small business research centre, Kingston University, continued: “Our analysis shows that SMEs are able to make a significant contribution to the economy in terms of their employment, sales and innovation activities. Thus the emphasis by the Coalition Government on the central role of SMEs and the economy is not misplaced, as these firms have the potential to meet the expectations that the government has for them during the recovery.

“However, it is worth noting that whilst owner-managers are proactive in terms of planning for survival, development and growth, their success is partly dependant on the level of demand in the economy for their goods and services. Government supply-side measures, including the increased provision of finance, appear to be less popular amongst owner-managers than stimulating demand for goods and services.”

Sign up to our daily email