The UK is experiencing a “level of sustainable growth which is the envy of Europe”, Chancellor George Osborne suggested in his 2015 Autumn Statement speech.
The Chancellor pointed to Office for Budget Responsibility (OBR) data which forecasts the UK economy will expand by 2.4% this year, with next year’s figure also up to 2.4% and to 2.5% for 2017.
“Since 2010, no economy in the G7 has grown faster than Britain, and that growth has not been fuelled by an irresponsible banking boom, like in the last decade,” Osborne told the House of Commons as he delivered the Autumn Statement.
“Business investment has grown more than twice as fast as consumption; exports have grown faster than imports, and the North has grown faster than the South.
“We’re determined that this will be an economic recovery for all, felt in all parts of our nation.”
The Chancellor believes small and medium-sized enterprises (SMEs) are the lifeblood of the economy, and he has promised to do more to support them. The Autumn Statement and Spending Review pledged a one-year extension for the small business rate relief scheme, whilst Osborne also reaffirmed a reduction in corporation tax to 18% which will take place in 2020.
SMEs themselves are feeling optimistic and are ready to take advantage of a better economic backdrop to supercharge their growth.
A recent survey by venture capital investment firm Albion Ventures revealed 58% of UK small to medium-sized firms plan to enter new markets in the next two years, with the manufacturing sector leading the way.
The group’s research was based on interviews with a representative sample of 1,018 British SMEs, conducted in the third quarter of 2015.
Albion says the fact that one in three SMEs surveyed are looking to break into new markets overseas is evidence of an export-led recovery.
Some 30% of small firms surveyed plan on targeting untapped domestic markets, while 15% intend to grow through launching new products and improving their online services.
Access to funding has been one of the main challenges to SME growth since the financial crisis put the squeeze on bank lending; but there are now a number of new alternative financing options available to small businesses. Albion’s report notes that SME reliance on bank funding in the form of overdrafts and loans is declining, down from 76% in 2013 to 49% this year.
The challenges SMEs face are now much more likely to be related to building their businesses in order to take on the opportunities afforded by a more confident economic marketplace. Rather than limited access to funding, firms report that ‘red tape’ is now the main barrier to growth.
But, despite this, overall business confidence among SMEs remains high, with almost two thirds reporting that they expect to grow over the next two years, and only 4% saying they will contract.
Some 62% of companies have taken measures to improve productivity in the past year, including changing processes and investing in technology and staff training.
‘Threshold companies’, which are defined by the report as those with an annual turnover of between £500,000 and £1,000,000, are well on their way to evolving in to medium sized businesses. Albion’s research shows 25% of threshold companies are taking practical action to boost their growth, largely through new or increased staff training.
By Gary Edwards, KBS Corporate