The changing landscape, trends and insights of UK SMEs

The Covid-19 pandemic has ushered in a new era of change that has impacted every aspect of life. The way people live and work has been profoundly altered, creating a challenging and transforming environment for businesses and consumers alike. The pandemic has forced brick-and-mortar stores to abandon their physical shops, and many have struggled to reopen amidst the crisis.

The 4th edition of Salesforce's SME Trends Report revealed that 65 per cent of SME leaders feel that local orders by the government to cease or scale back operations pose a significant threat to their company's survival. With change being the only constant, businesses must adapt and innovate to navigate these unprecedented times.

In addition, a significant 59 per cent of respondents feel that public health regulations have placed an undue burden on individuals. For businesses, compliance with new laws and regulations is a top priority. These companies now require new ways to engage with their customers, many of whom are unfamiliar with digital shopping channels.

While the British government's financial assistance was helpful in supporting businesses during the pandemic, it was not enough to ensure their long-term success amidst the converging challenges they now face, including the need to internationalise, decarbonise and secure the right talents. More than ever, today's SMEs are required to be adaptable and resilient to survive. Many businesses still standing today have had to handle enormous difficulties, quickly realign to keep up with a changing marketplace, and adopt new working methods. But how exactly are SMEs coping with the daunting challenges that have faced them in the past few months?

The current SME trends are driven by optimism

Despite the difficulties and unpredictability of the past few years, many companies have stabilised their operations and have now approached 2023 with a renewed understanding of the significance of engaging their customers. Surprisingly, surveys have revealed that businesses are generally optimistic about their chances for growth in the current economy.

Although the shockwaves of the pandemic jolted the foundations of many businesses then, 78 per cent of SME leaders were upbeat about their company in 2019, 80 per cent in March 2020 and 72 per cent in August 2020, according to Salesforce's fourth edition Small and Medium Business Trends Report. Additionally, there was little change in the proportion of SME leaders who described themselves as "not at all optimistic" between March (4%) and August (5%).

Despite a challenging second half of 2022, data from the Barclays SME Barometer shows an uptick in the number of small and medium-sized firms (SMEs) feeling optimistic about their future. Only 15 per cent of respondents say they are gloomy, while almost two-fifths (41 per cent) say they are enthusiastic about their personal company prospects. This is the highest level in nine months since Q2-22 (43%). Compared to the same quarter last year, more than half (55%) of SMEs anticipate business growth this quarter.

According to the study, this positive increase will likely result in more employment as 33 per cent of SMEs plan to invest in hiring new employees over the next 12 months. Businesses anticipate adding seven new employees on average during the upcoming quarter. When compared to the same period last year, there is one more new hire. This illustrates how the SME market is changing.

Businesses in the UK have increased their expectations for economic activity over the past five months by a net amount of more than 20 per cent. The UK's economic future continues to appear obvious at this time. An increasing number of experts appear to think relief is in sight for the first time in a while.

Digital Presence

The majority of the globe is attempting to go digital, a trend that has gained momentum in the wake of the epidemic, and SMEs not considering the digital space run the risk of falling behind and having a weak digital presence.

Digital presence refers to the online image of a company. Various commodities can affect this, including the company website, search engine optimisation, email marketing, or online customer care.

Seventy per cent of SMEs increased their use of digital technologies in the initial months of COVID-19. Many firms did not go back to how things were before the pandemic. Even though going digital has changed the game for many SMEs, research from the Organisation for Economic Co-operation and Development (OECD) claims that smaller businesses need to catch up in the switch to digital.

SMEs still need to improve their online presence while using the capabilities of new tools to stay relevant. According to research conducted by Cisco in 2021, 54 per cent of SMEs said growing their online presence was essential to their future growth. Businesses now know that developing or optimising their websites is only one aspect of implementing a successful online strategy. This means that businesses have to answer all the queries about who they are, what their business does, where they are located when they are open and why they do what they do. This is also an important component of digital presence.

Consumers now access brands on digital platforms through pertinent keyword searches online or through the company's presence in virtual touchpoints, which can be a blog, a social media account, or a paid advertisement on a search engine results page (SERP). Many businesses have already begun using this. By enhancing your company's internet presence, it can be simpler for clients to interact with your business when they want to learn more about your brand, products, or services.

British SMEs are becoming more visible to prospective clients, thanks to their strong online presence. Potential customers can now more readily access brands, whether they are previously aware of them or not. In all industries and regions of the UK, Sage's research from 2022 found that eight out of 10 SMEs today depend on digital technologies to launch, maintain and expand their businesses.

To attract more internet users and improve brand awareness and recognition, SMEs depend on SEO and search engine marketing (SEM) capabilities. For instance, a recorded 4.3 billion people use Google, and 49 per cent of users utilise it to discover or search for brands and products.

Expanding SMEs are more likely to be focused on enhancing their digital skills than those that are stagnant or falling in an age where maintaining connections with staff and consumers is essential. Technology has a significant role in separating businesses that can adapt to the new environment from those that are falling behind.

We may see how big of an enabler technology is by comparing developments for expanding companies with those for stagnant or declining ones. Growing SMEs are more likely to indicate that technology influences their cross-functional collaboration, staff productivity, and customer interactions than stagnant or declining SMEs.

Artificial Intelligence

Using Artificial Intelligence (AI) systems is also an emerging trend among SMEs.

AI is the capacity of a digital computer or robot operated by a computer to carry out actions frequently performed by intelligent beings. The phrase is widely used to describe the effort to create AI systems that possess human-like cognitive abilities like the capacity for reasoning, meaning-finding, generalisation and experience-based learning.

AI benefits businesses in various ways from sales to marketing to operations to customer support to accounting and human resources, among others. It enables the automation of non-routine operations, according to OECD. Automation could aid SMEs in boosting productivity by focusing efforts on tasks with a higher added value or by cutting costs. Additionally, such solutions enable small enterprises to boost responsiveness and get around administrative bottlenecks.

Not only is AI making workers more productive, but it has also completely changed how we conduct business. In reality, a survey by PwC revealed that 86 per cent of CEOs reported that AI is a fixture in their workplaces, although it takes the shape of software to manage day-to-day tasks rather than robots or complicated technology. AI in business has become indispensable in ways that we have never seen before — from predicting customer behaviour to minimising manual data entry.

According to research by Harvard Business Review, businesses that use AI for sales can increase leads by more than 50 per cent, cut call times by 60 to 70 per cent and lower costs by 40–60 per cent.

Rise in mindful spending

Another common trend among business owners in the UK is the rise in prudent purchases. This has to do with consumers purchasing what is needed and choosing to live sustainably due to the economic crisis. Many SMEs made sustainability-related investments in 2022 and planned to make more this year. The most significant incentive is to change consumer behaviour.

According to Deloitte, concerns over ecology and the rising cost of living are leading consumers to make more conscious decisions about how they live and what they buy. Additionally, they are avoiding brands that don't share their ethical and environmental beliefs in favour of those who do. Particularly when it comes to the items that are purchased the most frequently, such as food, beverages, clothing and home and beauty products.

ESG Strategy

Also, businesses are now considering the Environmental, Social, and Governance (ESG) strategy, which is a significant trend for SMEs in 2023. An ESG plan demonstrates your efforts to run a strong and transparent firm that is environmentally and socially acceptable. Although ESG is not required for small businesses, it nevertheless has several advantages. Building trust is especially important when many customers are sceptical of companies' stances on environmental and social issues.

Companies that can optimise their workforces will prosper in these times because new challenges demand new talents. Imagine having a highly skilled workforce in various disciplines, capable of taking on challenges at a moment's notice, and capable of automating repetitive chores so they can focus on more essential responsibilities.

Whether acting in the capacity of a consumer, an employee, a supplier, or a collaborator, people prefer to work with businesses that reflect their values. When businesses concentrate on their ESG approach, they can demonstrate to everyone — from consumers to investors — why they should select such businesses as reliable, environmentally friendly companies.

Suppliers will be required to assist brands in achieving their environmental goals. Brands are increasingly striving to make their supply chains greener as the world advances towards net zero. By 2050, 82 per cent of FTSE 100 firms in the UK are aiming for net zero emissions.

The entrepreneurial landscape in the UK has been shaped by a complex interplay between economic, social, technological, ethical and environmental variables in the past few months. SMEs need to be agile and creative in adapting to changing consumer behaviours and technological advancements while staying mindful of ethical considerations and the impact of their operations on the environment.

By staying attuned to these trends and insights, small business owners can identify emerging opportunities and position themselves for long-term success. They can leverage new technologies to streamline operations, expand their customer base and improve the overall customer experience. They can also embrace sustainable business practices and engage with their local communities to build strong and resilient businesses that contribute positively to the wider economy.