By Tara Kneafsey, SME Director at RSA.
SMEs are often held up as the “engine of growth” for the UK economy. They are regarded as a vital source of job creation, and heavily relied upon for the continued progression and development of our country.
The significance of this role was brought back into sharp focus quite recently by the Federation of Small Businesses (FSB) in the wake of new revelations about the extent of the horsemeat scandal. With more beef products testing positive for horse DNA, the FSB relaunched its ‘Keep Trade Local’ campaign which actively encourages shoppers to buy closer to home.
The campaign is designed to inspire consumers to use their high street butchers and other independent retailers, with the message that these businesses often provide better quality, locally sourced products. The initiative highlights the importance of the local high street and the strong role that small retailers can play in the UK’s economic recovery.
In the current financial climate, it is important to acknowledge just how big a role the small business sector plays in maintaining economic output. Recent research from RSA shows that SMEs contribute 52 per cent of private sector GVA (Gross Value Added). The Valuable Assets study also revealed that the average SME entrepreneur is worth almost £130,000 per annum to the UK economy, suggesting that there is more to be gained from encouraging an enterprise culture in local economies.
Despite these findings, the fact remains that ambitious entrepreneurs and private business owners face a great number of challenges, from larger competitors and late payment to rental rates and red tape. While there is much talk of nurturing an enterprise culture in this country, issues such as these, combined with a pervasive lack of funding, continue to plague small companies.
Creating the right climate for entrepreneurial firms to succeed, including access to capital and accessible business advisors, is essential. Sympathetic regulations and tax structures can also give small businesses a boost and a better chance of survival.
One recent initiative from the European Commission was a bold step in the right direction. The Entrepreneurship Action Plan aims to boost the role and strength of SMEs across the European Union, and to place them firmly at the heart of the region’s recovery. RSA’s research shows that 300,000 new SMEs are needed in the UK alone to restore our economy to pre-recession levels, making it clear that this type of support is needed in abundance to move things forward.
Regional disparity is another area for consideration. For example, RSA’s study shows that new SMEs are more likely to appear in certain entrepreneurial ‘hot spots’ around the UK, including London, the South East and the South West. With the regional picture still so unbalanced, it is clear that more needs to be done to foster entrepreneurial spirit across the whole of the country.
RSA often works with SMEs at the start of their journey, and has seen first-hand the challenges they face and the measures they must take to protect their business. As an essential element of our business landscape, it is crucial that SMEs are not only supported from inception through to growth, but that they can also maximise the opportunities that technology, and an increasingly flexible and a global workforce,can bring.
We need an ‘all hands on deck’ approach to getting our economy back on track, which will require easier access and more innovative approaches to funding from both the public and private sectors. Local Enterprise Partnerships, the Government and the wider business community all have a part to play — whether in practical, or in financial terms — in creating the right conditions across the UK for SME creation and growth.
Tara Kneafsey is SME Director at leading global insurer, RSA.
RSA works with SMEs of all shapes and sizes, operating in a range of different industries. It helps them mitigate risk by ensuring they have the correct level of insurance cover in place for their business. To find out more or for advice on protecting your company go to www.rsabroker.com or contact your broker.