Startups drive growth in the SME sector, while larger companies stagnate
SME startups are underpinning the British economy, with small businesses in their first year of trading going from strength to strength. Quarter on quarter, the outlook for startups remains positive, with almost one in four (24%) saying that they will be focusing on significant expansion in the next three months – a substantial increase on the 13% in Q4 2014, according to Hitachi Capital’s British Business Barometer.
Nationally, the SME sector as a whole is still optimistic for growth, with 38% of businesses confident they will see some form of growth in the next three months. In contrast, larger companies with a turnover in excess of £10m are less hopeful than they were last year, with only 6% in the sector predicting significant growth, compared with 18% in Q4 last year.
At a time when business confidence in the UK is increasing and the outlook is generally positive, the research suggests that startups are injecting the much-needed confidence back into the SME sector. The research is part of a series of studies looking into what small businesses growth ambitions are and what, if anything, is limiting their growth.
Gavin Wraith-Carter, general manager, Hitachi Capital Business Finance said: “Regardless of size, all commercially-led businesses have one thing in common, being able to achieve and sustain growth over the longer term. It is particularly interesting that the research this quarter has highlighted the huge surge in confidence among SME startups. These businesses are essential to driving innovation and will, over time, develop into strong contributors to our economy and I hope to see this sector continue to thrive and evolve into more established SME’s, an area in which Hitachi is a huge supporter.”
The research from Hitachi Capital Business Finance’s quarterly British Business Barometer, asked 1,000 small businesses in the UK what their outlook was for their business over the next three months compared with Q4 2014.
Sector highlights:
– Manufacturing: Growth in the Manufacturing industry is the strongest, with 43% of small companies in the sector focusing on significant expansion and modest organic growth in the next three months, an increase from 35% in Q4 2014.
– Transport and distribution: These sectors have seen the greatest swing in their growth ambitions, with one in four companies (24%) hoping for modest organic growth, a significant decrease on the 41% of companies in that sector that reported significant and modest growth last quarter.
– Construction: This sector seems to be suffering the most, with almost a quarter (24%) of companies in the sector saying that they will have to scale down their growth ambitions and will struggle to survive, a significant increase on the 13% in Q4 2014.
Regionally
– Growth is very much top of the agenda, with London leading the way with 46% of small companies based in the Capital having a positive outlook for their business in the next three months – a rise on the 41% who reported the same optimistic outlook in Q4 2014.
– Small Businesses in Wales are less likely to feel as optimistic (27%), a fall from 34% recorded in Q4 2014. Equally, small businesses in Wales are the most pessimistic, with 14% of SME’s saying that they will have to scale down or they will struggle to survive in the next three months.
Gavin said: “In the UK, SMEs are essential to the growth of the overall economy, and the increased confidence within this sector is arguably the biggest indication that companies are feeling inspired to try different ways of expanding quarter on quarter. The research highlights that there is an appetite for growth in the market and demonstrates that investment is key to ensure continued development in the future. It is important for businesses to be aware that alternative finance options are available to them, and funders such as Hitachi work closely with a local introducer network to find the right financial solution to help SME’s achieve their growth ambitions.”