Report reveals over 70% of SMEs plan to secure their growth trajectory

In a display of resilience, UK small businesses are charting a course towards growth even as they find their way around economic uncertainties.

Recently released data by Novuna Business Finance unveils a surge in small businesses' commitment to specific initiatives aimed at propelling their future prospects. A reported 71 per cent of these businesses are engaged in targeted plans to secure their growth trajectory – a notable growth over the past three years.

Further analysis of the data revealed a spike in the percentage of small businesses channelling resources into dedicated growth efforts. This momentum is visible across diverse industry sectors, including manufacturing (86%), construction (75%), agriculture (74%), hospitality, IT/telecoms (74%) and finance/accounting (70%). Conversely, the commitment to growth initiatives registers lower in medical services (58%) and real estate (60%).

At a juncture marked by a cost of living crisis, skyrocketing inflation and a series of interest rate rises, small business leaders are handling these headwinds with strategic poise. Amid these challenges, these entrepreneurs are pivoting their focus to cost-containment strategies, thus positioning their enterprises for growth.

Of note, 58 per cent of respondents have made curtailing fixed expenses their paramount goal, a marginal increase from the earlier 57 per cent at the year's outset. This is closely followed by endeavours to enhance cash flow (30%) and the imposition of stricter late payment policies (a three-year high at 26%). The emphasis on staff reduction has receded to 21 per cent, down from its pinnacle of 28 per cent in Q1 2022.

The statistics showed a 12-month high for the number of small businesses seeking assistance to fund new equipment (18%) for those intending to invest in their growth capacity. In addition, 12 per cent of small businesses were re-evaluating their lending arrangements.

This was especially noticeable in three industries: agriculture (18%), media (18%) and hospitality/leisure (14%). Examining funding partners revealed a substantially larger issue in the North, with 29 per cent of businesses in the North East and 14 per cent in the North West prioritising this, compared to 11 per cent of enterprises in the South East or South West (12%).

The allure of international expansion for growth has waned, with the likelihood of tapping new global markets dropping to a three-year low of 17 per cent. This decrease suggests that the looming impact of Brexit is casting a shadow over the growth initiatives of many UK small businesses, as this figure stands in contrast to the considerably higher levels observed in 2016 and 2017 (between 25%and 28%).

Jo Morris, Head of Insight at Novuna Business Finance, sheds light on the consistency in the percentage of small businesses foreseeing growth (31%) across three successive quarters. Morris anticipates that this new study serves as a harbinger of upcoming trends. Should business owners initiate growth plans now, an upswing in enterprises reporting growth is anticipated during the autumn and winter months.

Furthermore, Morris underscores that in addition to cost control, businesses are looking to invest in new equipment and reevaluate their funding partnerships. The commitment of Novuna Business Finance to support established businesses striving to adapt, grow and achieve their potential amidst challenging conditions is a cornerstone of their mission.

Meanwhile, as businesses struggle with a cost of doing business crisis amid soaring expenses and monetary policy complexities, a research conducted by small company lender, Bibby Financial Services, unveils a sobering perspective.

Nearly half of small and medium-sized firms (SMEs) believe that the present business climate is harsher than during the pandemic, painting 2023 as potentially the most challenging economic environment for SMEs in the last 15 years.

Insights from the 2023 Global Business Monitor further illustrate the hurdles facing business growth this year. This survey, encompassing SME owners and decision-makers from nine nations, underscores inflation (55%), energy costs (49%) and local economic uncertainties (28%) as significant hindrances.

Nevertheless, optimism abounds within the SME sector. The vast majority (85%) express optimism about their prospects for the remainder of 2023, and nearly two-thirds (64%) foresee improved sales in the coming months.

Jonathan Andrew, Global Chief Executive Officer of Bibby Financial Services, highlighted the dual challenges of the surging costs and monetary policies aimed at addressing them. Despite these hurdles, he explained that the fact that a considerable number of SMEs remain optimistic about their own future prospects speaks volumes about the tenacity and determination of business owners on a global scale.

A closer look at regional differences presents a nuanced narrative. While SMEs in the Republic of Ireland radiate extreme positivity, with 90 per cent expressing confidence in their future, Polish SMEs portray a more pessimistic outlook, with over a fifth (21%) anticipating a challenging remainder of the year.