By Daniel Hunter
Over half small and medium-sized enterprises (SMEs) have attempted to grow by entering new markets in the past two years, according to new report by Albion Ventures, one of the largest independent venture capital investors in the UK.
Underlining the advantages of taking an entrepreneurial approach to succeeding in a tough economic environment, over three quarters (73%) of the 450 SMEs interviewed for the report faced no difficulties in their attempt to tap into new markets.
Of those that experienced challenges in expanding into new markets, the biggest were a shortage of demand, excessive competition and a lack of financial resources and expertise to successfully put their plans into practice.
Looking ahead, the report reveals that 60% of SMEs have ambition to grow dramatically or moderately over the next two years but it is the microbusiness community—companies of up to five people that collectively make up 95% of UK firms and employ seven million workers - that expect the highest level of dramatic growth. One in six microbusinesses (16%) looks forward to dramatically growing their business, compared to just 10% among all firms.
On a regional basis, Midlands-based firms have the biggest growth ambitions with 66% expecting to expand while those in the South West and Wales are the least hopeful. Reflecting the particularly acute economic challenges facing these parts of the UK, 10% of businesses in the South West and Wales are looking to downsize, the most anywhere and three times the national average.
The report also demonstrates a stark contrast in growth expectations among different industries. Only 33% of construction firms anticipate a period of expansion over the next two years compared to companies in Transport and Communications (66%) and Business Services (65%), which are twice as optimistic.
“It’s encouraging to see so many small firms successfully expanding into new markets both domestically and overseas," Patrick Reeve, Managing Partner at Albion Ventures said.
"This will be welcome news to the Government, which is aiming to increase the number of companies in the export business by 100,000 by 2020 - generating an estimated £5.6 billion of business.
“It is encouraging that from a bleak economic landscape, the majority of small firms expect to grow their businesses. Yet at a regional and sector level the results are strikingly uneven. Reasons for this range in ambition could include regional investment in help and support for small businesses, as well as cultural attitudes to entrepreneurial success.”
Hayley Conboy, CBI’s Head of Enterprise, said: “Small and medium-sized businesses are critical to the UK’s economic recovery. We find it immensely encouraging that 60% of SMEs have growth ambition over the next two years and it’s vital that we support these businesses to realise their aspirations.
"The Albion Growth Report shines a further light on the barriers to expanding into new markets particularly a lack of financial resources and expertise. By ensuring that small and medium-sized businesses can access to the right type of finance and are properly equipped with the right internal skills and capabilities, they will be much better placed to overcome the challenges of breaking into new export markets.”
Cormac Hollingsworth, Director at New City Network comments: “This report is of interest to policy makers and investors alike as it identifies the pockets of regional and sector success and underperformance in the UK. Given the perceived reliance on London and the south east it is good news that small firms in the Midlands emerge from this survey as having the biggest growth ambitions. The track record of how successful public policy has been in promoting SME health is hotly contested and these findings provide further evidence to draw from.”
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