The nation’s small firms are at a tipping point. Coming out of a difficult winter, and heading into a spring that on one-hand offers hope and optimism, but also has many challenges on the horizon.
As fears of UK recession subside, and with forecasts that inflation will also come down by the end of the year, there is a sense of cautious optimism in the air. While small businesses are responsive to this, they are also bruised and battle-weary, not just from this winter’s major challenges, but from those of previous years. Many urgently need help to navigate the route ahead.
Small Business Britain recently launched a new report with Square and Clearpay, looking at how entrepreneurs can progress into a period of growth and success.
Overall, the research showed positive signs that many entrepreneurs are pressing on, with more than half (61%) believing they will experience growth this year. Yet scratch beneath the surface and there are some key areas of concern, particularly news that the vital Christmas period was lack-lustre for many small businesses due to economic woes.
Over a third (36%) said the season was not as good as usual, but they got by, while 10% of businesses reported a poor festive period which left them worried about the future, and 7% found Christmas trading to be a major issue.
Why does this matter for future growth? Seasonal trade not only provides important reserves for the year ahead, but also informs confidence.
Broader small business confidence has definitely taken a knock, with 87% worried about recession. We can see this nervousness translate into caution, as nearly 40% of businesses think they will either not grow, or even decline, in 2023. As such, many small businesses are delaying growth plans for their business, to manage short term cash challenges. Almost one fifth (17%) have delayed expansion and 13% have delayed hiring.
Achieving growth in the UK starts with the nation’s small businesses believing that they can grow. By nature entrepreneurs tend to be a uniquely positive group, and have shown incredibly inspiring courage and tenacity to succeed over the past few years. But even this has been tested as we have gone from one crisis to another. While there is huge scope for turning the story around for small businesses, in a world of perpetual uncertainty the conversation for small businesses must also change.
We need to hear more talk of hope and opportunity. This is what will inspire and fire up the nation’s 5.5 million small businesses to be the engine of growth, jobs, and innovation that the UK so badly needs. And this effort needs to be driven by leaders across the economy; from government, from big business, from supply chains and customers too.
This new narrative must build on the ongoing conversation around resilience that has developed over COVID, Brexit, cost of living crisis and more. These lessons learned have been hard on businesses, so making the most of learnings will help businesses get to where they need to be. With rocky roads likely to happen at some point again, businesses need to create a resiliency with back up plans and diverse routes to market.
Digital plays a critical role at the heart of growth and resilience, and businesses need to be open to new things; new technology, innovation (even small things) in digital and also in finance.
While we have generally seen a broader, positive trend for businesses to embrace digital throughout the pandemic and since, there are concerning signs that investment in this, and other vital areas for business growth, are stalling, or even falling. Our data shows that 54% of small businesses have not invested in digital skills, or added new technology in the last year. This hunkering down mentality needs to be converted into a greater openness to trying new things.
And this is not the only concerning area of cut-back. Many small businesses have responded to the current challenging market conditions by managing spend – specifically in the critical area of marketing. Almost one third (31%) of businesses have delayed marketing spend, whilst 27% have cut it. While the need to reduce costs is understandable, cutting marketing activity is counter-productive, as it also jeopardises an important sales and revenue driver.
To overcome this challenge, we need to adopt innovative approaches to marketing that won’t break the bank. There’s also a need for more help and advice on how to manage costs better, whether that be sustainability savings or evaluating and negotiating supply chains.
Indeed sustainability, represents a vast area of opportunity for small businesses to reduce costs while attracting a growing customer base that value eco-friendliness.
After a turbulent period with more than its fair share of challenges, it is time for small businesses to move on and put their best foot forward.
Undoubtedly there will continue to be bumps along the road, but by remaining optimistic, looking for opportunities, and building engagement with digital tools, marketing and sustainability, small businesses can drive a positive upward spiral of success and growth. There is every reason to be hopeful for a better year.
Small Business Britain’s ‘Moving Forward’ report can be downloaded at https://smallbusinessbritain.uk/moving-forward