New research finds the UK’s SMEs are optimistic about the global economy and their role in it – and indicates that they are going ‘back to basics’ to unlock ambitious growth over the next 12 months.
American Express has partnered with Oxford Economics to survey SMEs from around the globe, to understand the threats they face and the business opportunities and strategies they will take advantage of in the year ahead. The research makes for positive reading, showing that UK SMEs – the backbone of the economy – will focus on core strengths to support confident growth plans in the coming year.
The research finds 41 per cent of UK SMEs point to using their advantages as an SME – such as agility, innovation and strong customer relationships – as one of their top three strategies for fuelling revenue growth in 2018.
Respondents also prioritised agility as the most important capability to develop over the next three years for meeting business challenges, and are planning to consolidate their operational effectiveness in 2018. Just under half of those surveyed (47 per cent) put increasing operational efficiency in their top three contributors to financial performance over the next three years.
UK SMEs also recognise that staying close to customers’ changing demands will drive growth this year. In fact, the UK is the most customer-centric market out of the 12 countries surveyed, with 45 per cent of British SMEs saying this is important for revenue growth compared to a global average of 36 per cent.
This back to basics approach comes at a time when the UK’s SMEs feel confident about the global economy, and predict strong revenue growth. Confidence levels among the UK’s SMEs have more than quadrupled in the last year, with 57 per cent of SMEs feeling optimistic about the global economy over the next 12 months, compared to just 14 per cent going into 2017.
Confidence levels in the UK are 10 per cent higher than the global average of 47 per cent. And UK SMEs have ambitious growth targets – with almost a quarter (23 per cent) of UK SMEs (compared to the global average of 19 per cent) predicting they can achieve revenue growth averaging over 10 per cent for the next three years.
Though enjoying a positive glow about the overall economic prospects for the future, UK SMEs remain alert to changes in the outlook; more than half (54 per cent) rank economic uncertainty in their domestic economy as the biggest external threat to their business. Economic uncertainty replaces political uncertainty, which was cited by SMEs as their biggest challenge 12 months ago. Similarly, 2018 also marks a return to concerns over changes to policy and regulation. The switch to the more traditional business concerns suggests that SMEs are confident about doing business in an increasingly stable environment in 2018.
Jose Carvalho, senior vice president at American Express Global Commercial Payments, comments, ‘After a challenging few years for businesses of all sizes, it’s encouraging to see such high levels of confidence among the country’s SMEs. Our research shows that the UK’s smaller enterprises are primed for success in 2018 by focusing on their special advantages, staying close to their customers, and improving efficiency. As an integral part of the economy, and the frontline of British business, SME optimism should instil confidence in other UK businesses and stakeholders.’
The research also indicated that while many SMEs are focused on consolidating their current market share in 2018, they shouldn’t forget international opportunities. While only 24% of the SMEs American Express and Oxford Economics spoke to are currently exporting, these businesses are experiencing – and expect to continue experiencing – improved financial performance. They are also more confident about the economy and better innovators, suggesting that there’s an opportunity to increase profit and capability by looking abroad.
Carvalho continues, ‘While expanding internationally isn’t easy, the rewards can be huge. The UK’s SMEs are in a prime position to make inroads abroad by taking advantage of their natural agility and attention to consumer demands. Our research shows that building market intelligence and making the most of government advice and support is key to export success.’