By Daniel Hunter
British small businesses are among the most optimistic among their peers globally about future market prospects, according to Zurich Insurance Group.
This new research found that over a third (33.5%) of UK SMEs are confident that their ability to diversify, with new ranges of products or services, is one of the three biggest opportunities to the business at present. The global average is 18.8% which suggests small businesses in the UK are better placed to meet the changing challenges they face.
The new research from Zurich (conducted in the UK by YouGov and elsewhere globally by GfK) Results from an online survey of SME decision makers from Britain conducted by YouGov alongside a study of CEO’s conducted across a number of global markets using CATI by GfK, examined the challenges, risks and opportunities for SMEs around the world.
The opinions of over 500 managers and owners from British SMEs were gathered alongside those from small business CEOs in Australia, Brazil, Germany, Indonesia, Ireland, Italy, Mexico, Portugal, Spain, Switzerland and United Arab Emirates.
Around 1 in 7 (14%) of small businesses in the UK said that they had reduced prices, and 9% said that they have reduced wages in the last 12 months.
Over a third of the small businesses surveyed in the UK feel confident about making the most of new customer segments, with 34% stating this as another one of the three biggest opportunities to their business. Indeed, in the past 12 months, over a quarter (28.6%) of respondents say their businesses expanded activity to target new customers in domestic markets. This is perhaps the reason why almost a quarter (23%) have diversified their product range and a similar amount (23.9%) felt confident enough to raise their prices in the past year.
However, British SMEs are concerned about risks in their markets, with almost half (46%) of saying that high competition / lower prices impacting sales margins is one of the three key risks to their business in 2013. Over a third of respondents are concerned about lack of consumer demand, with 33.7% stating this as a key risk, which may be a reason for the focus in diversification and why only a small number (7.7%) say their business has obtained additional financial investment or extended credit terms in the past 12 months. Around a sixth of respondents are concerned about a failure of partners and suppliers, with 16.6% stating this as a key risk to their business for 2013.
Globally outside the UK, the research for Zurich found that strong competition and low consumer demand are the two most significant risks facing SMEs.
Although BRIC countries may feel that they are able to reduce their cost and expenses, (51.6% of SMEs say this in Brazil for example) this is far higher than the global average of 25.7%. For European countries ex-UK, Italian SMEs (36.4%) are some of the most confident of their European counterparts, for example when compared to that of Portugal or Spain (32.4% and 25.6% respectively).
Interestingly, many European SMEs in this survey saw diversifying their product range or services as a low opportunity moving forward. For example, only 17.2% of SMEs in Portugal and 17.6% in Ireland said this was the case, with the global average being 18.8%.
Similarly, SMEs in Brazil and Australia (51.6% and 45.2% respectively) said that targeting new customer segments was a key opportunity, whereas none of the European SMEs were above the global average of 32.8% (Germany 25.6%, Italy 28% and Portugal 19.6%).
The average number of global SMEs saying they had expanded activity to target new customers in their own markets was 22.7%, the highest response being in Brazil (32%) and the lowest being Italy (7.2%). However, 32.4% of Irish SMEs said this was a big opportunity moving forward and just over a fifth (20.4%) of European SMEs said they had diversified their product range or services.
Although only 10.1% of countries surveyed said that they had been able to increase their prices over the past 12 months, 19.6% of Germany’s SMEs said they have been able to — which is the highest amongst those surveyed - and perhaps reflects the country’s buoyant economic growth.
The highest risk today for global SMEs is high competition / lowering of prices impacting sales margins (an average of 36% of global SMEs said this was a key concern) with it highest in Switzerland (40.4%) and Germany (39.6%). In Spain, 42% of SMEs are worried about a lack of consumer demand and on average, more SMEs globally are worried about theft (average of 19.1%) than a failure of partners and suppliers which averages of 12.8% globally and 11.7% amongst those in Europe.
Richard Coleman, Director of SME at Zurich Insurance, said: “It is clear that there is a strong return to economic growth across the globe. Britain is predicted to have one of the strongest rates of growth during the second half of this year* and although there are still difficulties within the Eurozone, there is a clear sense of optimism amongst small and medium businesses in the UK.
“A key part of being a successful small business owner is the ability to take measured risks, and this is what many SME owners are regaining the courage to do.
“As the economy improves and competition increases, businesses need to maintain a strong focus on retaining the best talent, or risk losing them to forward-thinking competitors.”
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