SMEs are less optimistic than a year ago and cite finding skilled staff, red tape and political uncertainty as their biggest barriers to growth, according to research from Albion Capital, the independent investment manager.
The findings, from the Albion Growth Report, reveal 59% of SMEs believe they will grow in the next two years. However, this compares to 63% of SMEs that expected to grow over the same time-frame in the previous Growth Report, which in turn was lower than the previous year.
Stagnating productivity is likely to be a significant factor contributing to reduced optimism. Albion’s research found less than half (44%) of SMEs expect their productivity to increase in the next two years, as opposed to 57% who predicted an increase when the survey was conducted a year earlier.
Political uncertainty has risen from fourth to the third highest barrier to growth for SMEs, following a tumultuous 12 months which included an unexpected General Election and ongoing Brexit negotiations. Meanwhile, lack of access to finance is a falling concern and now ranks 14 out of 16 factors assessed by the Report.
The research also uncovers the following growth trends:
• 35% of SMEs expect to increase headcount in the next two years, a fall from 50% who expected to increase headcount in the previous Growth Report
• Manufacturing (71%), finance and accounting (71%) and media and marketing (63%) SMEs are most likely to expect to grow in the next two years
• Education (15%), hospitality and leisure (15%) and retail (12%) SMEs are most likely to expect to downsize or close their business in the next two years
• SMEs in London (64%), the North West (64%) and Yorkshire (59%) are most likely to expect to grow within the next two years
• SMEs expect technology (30%), skill levels (28%) and market changes (27%) to be the top drivers of their productivity growth
Patrick Reeve, Managing Partner, Albion Capital, says: “Political uncertainty has unsettled SMEs across a range of sectors over the last year, with the election and inconclusive Brexit talks making it challenging for businesses to determine strategy.
“We expect this uncertainty to dissipate over the course of the next 18 months as we gain more clarity around the UK’s future relationship with the EU, providing SMEs with a clearer base from which to assess their requirements. It is encouraging to see that access to finance continues to fall as a barrier to growth and that the support is there for SMEs with ambitious growth plans.”