40 per cent of businesses plan to develop new products or services over the next year due to fall in sterling

40 per cent of businesses plan to develop new products or services over the next year

The number of small businesses planning to expand their UK customer base has risen in the last year, from 42 per cent to 51 per cent, despite the post-Brexit fall in sterling making it cheaper for businesses to export internationally, reveals research by Moore Stephens.

Moore Stephens, in their annual survey of owner managed businesses, finds that despite favourable economic conditions for exporters, only 17 per cent of the 691 business leaders surveyed were very likely or certain to increase export activity during 2017, a figure consistent with the 17 per cent that planned to do the same during 2016.

Moore Stephens explains that the increased focus on investment into the UK, rather than overseas, could indicate that small businesses are unlikely to feel as much of the positive impact of the fall in sterling post Brexit as big businesses.

Moore Stephens says that, in order to expand their customer base, businesses may increase marketing efforts to target different demographics, or offer new products or services to attract new customers.

Moore Stephens adds that 40 per cent of the businesses surveyed planned to develop new products or services over the next year.

Boost online presence

Increasing businesses’ online presence – whether through social media, or developing e-commerce offerings – is likely to be another key route owner managed businesses take to expand their customer base.

Moore Stephens explains that by growing their online presence and focusing on domestic markets, owner managed businesses will have access to a much wider pool of customers rather than being limited to a particular region.

Mark Lamb, partner at Moore Stephens comments, ‘Small businesses are growing in confidence and are increasingly looking to expand their businesses into new markets within the UK.

‘Ensuring their online presence is up-to-date is a simple yet effective way of opening the business up to a wider range of customers.’

Lamb adds, ‘Developing new products and services will also enable businesses to target new demographics outside their usual customer base.

‘Following the fall in sterling after the Brexit vote we might have expected there to be an uptick in export activity however, this has not been the case. Small businesses are still choosing to invest in the UK rather than expand their presence internationally.’

Moore Stephens adds that despite an increase in businesses planning to expand their UK customer base, only 7 per cent plan to open new sites or offices in the UK, compared to 10 per cent last year.

Lamb continues, ‘Many small businesses have faced pressure as costs to businesses rise following the introduction of the Living Wage, upwards pressure on business rates as well as the cost of imports and raw materials increasing following Brexit. Therefore, expansion plans which require a significant amount of capital have been put on hold.’

Strength of UK economy a key concern for SMEs

Moore Stephens’ survey reveals that 68 per cent of owner managed businesses viewed the strength of the UK economy as a key threat to growth in 2017, compared to 52 per cent in 2016.

Moore Stephens says that the fall in the value of sterling meant that many owner managed businesses were negatively affected by the rising costs of imports and therefore how the UK economy will fare in the next year as Brexit negotiations begin remains a key concern.

Lamb continues, ‘Owner managed businesses, with weaker negotiating powers, are much more susceptible to changes within their business environment than larger corporations.’

Another key threat to growth for the businesses surveyed was cyber-security and the threat of a data breach. A quarter (24 per cent) of businesses viewed a cyber-attack as a key concern.

Lamb concludes, ‘Whilst larger corporations are often the target of high profile breaches, smaller businesses are increasingly at risk.

‘A cyber-attack can be a significant cost to businesses, both financially and on reputation. Investing in cyber-security is therefore an additional expense that smaller businesses will need to budget for.’

Further reading on sterling

Nominations are now open for the British Small Business Awards 2017, the leading event celebrating the brightest stars in the SME sector. Click here to enter. Good luck! 

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