Research shows SMBs will be instrumental to economic recovery in the UK.
There is no doubt that the immediate economic picture for the UK is challenging and is likely to get worse before it will get better. The Centre for Economics and Business Research (Cebr), for instance, is forecasting quarterly falls in GDP in the first two quarters of the year, with the economy set to return to growth in the second half of the year. However, despite the challenges that small businesses will undoubtedly face over the next twelve months, looking beyond, their survival during this economic downturn is more positive than appearances suggest.
A report from the Cebr, which assessed data from 2005 to 2021 and then looked to 2022 and beyond using forecasts, shows that SMBs will actually be the businesses that lead global growth over the next few years. By 2025, Cebr forecasts that the number of SMBs will grow on average 1.7% across the U.S., Canada, UK, Spain, Germany, France, Ireland and Portugal, creating millions of jobs. In the UK, growth in turnover for SMBs is expected to outperform the growth rate for all businesses from 2023 – 2025.
History is set to repeat itself
Cebr’s study also found that looking back, UK SMBs weathered the global financial recession of 2008 well. Despite a fall in 2010, the number of SMBs returned to their pre-crisis level in just under three years and grew markedly beyond their pre-crisis level in the period between 2013-2015, totalling a 12% increase cumulatively.
Between 2022-2025, it is predicted that similar SMB growth will take place. In the UK, Cebr forecasts there to be 342,000 additional SMBs in 2025, compared to 2022, bringing the total number to over 5.8 million.
Two reasons for this predicted growth over the next two years are attributed to SMBs’ innate agility and resilience. If we think about recent global events, such as the pandemic, SMBs were some of the fastest businesses to adapt. They were able to keep up with the changing dynamics of consumer habits and behaviours – whether it was redirecting resources online or finding completely new ways of working through lockdown.
The tech revolution has given SMBs a boost
Since the last recession, we’ve seen a myriad of tech advancements that have helped to support SMBs in their growth such as artificial intelligence, cloud computing and social media. More recently, tech has played an important part in the SMB growth story, with the pandemic having supercharged this revolution. From plumbers using smartphones to invoice customers and track expenses in real-time, to hairdressers and accountants using WhatsApp to log appointments and talk to clients, and manufacturers digitising their end-to-end processes in the cloud, the pace of change has been immense. Businesses that never used to be considered as “tech” are using digital tools to increase their revenues, minimise their costs, and save time.
For example, Tree Tops Caravan Park, a family business established in the 1950s and a customer of Sage, cited technology as a key supporting factor in strengthening the business during harder times. The SMB has digitised across multiple areas to improve efficiency when complying with the requirements of HMRC and removing large swathes of paperwork. Tree Tops now plans to move as many systems as possible onto cloud computing to operate in a more agile way.
According to Sage’s Digital Britain report, if SMBs unlock the full benefits of technology, they will boost the value of tech use to the UK economy by almost double to £448 billion annually.
More SMB support is needed
Collectively, we must make it as easy as possible for the SMB ecosystem to do business digitally and adopt technology that will unlock productivity. In the UK, a clear ambition for a competitive digital economy is needed to support a return to growth.
The recent postponement of the Making Tax Digital initiative is just one of the barriers holding back SMBs that want to modernise and innovate – a key growth element during a recession. If SMBs are given clarity and fully supported when it comes to initiatives such as this, they will lead that charge.
With the right support, policies and incentives in place, SMBs will play a vital role in economic recovery in the UK and beyond, just as they’ve done before.