New research in 2013 points to cautious optimism for UK small and medium sized firms. Business owners and managers can take steps now that will help them benefit from rising confidence and minimise the impact of any relapse.
The latest edition of the Lloyds TSB Commercial research of UK SMEs offers some encouragement for small business owners. The 41st edition of Business in Britain highlights the areas that suffered during the last six months of 2012 but also points to across the board cautious optimism for the first half of 2013.
Mixed fortunes during the latter half of 2012
It seems that manufacturers in the West Midlands, South West and Wales with turnovers greater than £5m per annum suffered the most in the final half of 2012. Smaller companies elsewhere in the country were experiencing something of a recovery, albeit a mild one as the diagram below shows:
Cautious optimism for the first half of 2013
The research suggests that all sectors, business sizes and regions expect, on balance, to see more favourable trading conditions in the first six months of 2013. Firms have slightly more positive expectations for orders, sales, profits, staff hiring and capital spending.
In terms of challenges, the biggest concern is weak domestic demand. Additionally, firms have stated that regulation is becoming an increasing burden. Any knock to consumer sentiment could shatter the cautious levels of optimism seen in this research.
On the export front, it seems firms are satisfied with the EU’s promise to do whatever it takes to keep the Eurozone stable. However, any change to the EU’s ability to honour this commitment could see a return to volatility which, given that the region faces fresh bail-out concerns and looming elections in 2013, is a bit of a worry.
In the meantime, SMEs will be looking for the UK government to push forward with infrastructure projects and see progress from schemes like Funding for Lending.
How to make the most of this optimism
As a small business owner or business manager, you will want to make the most of these early signs of optimism. You could start by targeting those industries expected to benefit from government initiatives or companies that seem unaffected by current economic conditions such as these growth businesses.
You will also want to ensure your sales and marketing activities are cost effective too. Relying on traditional advertising and trade shows for lead generation can be an expensive and unproductive option. Blogging, social media and content marketing all appear to be more cost effective lead generation techniques without any compromise in lead quality.
Now is the time to review your marketing plans. Ensure your activities will make the most of the growing sense of business optimism. Check that your staff are addressing these new marketing techniques effectively and can track performance. Alternatively, if your human resources are already stretched, consider using outsourced professionals.
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Freelance copywriting and outsourced marketing for SMEs
A CBI report highlights what businesses in London expect for early 2013. Small businesses elsewhere in the UK can use these findings as an aid to making their investment decisions for the New Year.
A report from the CBI provides some useful guidance that UK small businesses can use when planning for 2013. Based on a survey of 168 firms in London, the findings may help SMEs elsewhere in the UK too. The survey was conducted between September and October 2012 and 64% of respondents were SMEs. Some 56% were in professional services, hospitality, leisure, retail and the financial sector.
Perhaps the most positive finding was that 53% of SMEs felt more optimistic about the economic outlook for the first part of 2013 with only 13% more pessimistic (down from 22% in 2011).
Identifying the requirements needed to drive growth, SMEs in the survey mentioned:
1. More competitive tax system (36%)
2. Stimulate bank lending (31%)
3. Push ahead with infrastructure projects (19%)
4. Support for small business innovation (18%)
In a separate report, the UK Federation of Small Businesses has indicated cautious optimism amongst its members for 2013; they see slight growth but are concerned about rising cost pressures.
How these findings could influence your decision making for the early part of 2013
The diagram below attempts to understand the inter-relationships between the concerns raised in the CBI survey and the priorities highlighted as requirements for growth. The government may well be influenced by reports like those from the CBI (despite the small sample size) and the FSB, so these findings could indicate the direction of short-term stimulus.
From this chart, you could conclude that the threat of recession will remain a serious undercurrent well into 2013:
* The Eurozone crisis looks unlikely to change quickly for the positive
* Traditional bank lending likely to remain unchanged until structural reforms are introduced
* Schemes like Funding for Lending are unlikely to show any benefit until well into 2013
* Little sign yet of additional measures to stimulate growth
Any significant government stimulus looks to be focused around infrastructure projects so unless your business is closely involved with the construction sector, any immediate ripple effect from these projects will take time to work through.
SMEs will probably need to constrain investment to self-funded activities or investigate the emerging trend towards peer-to-peer lending. In all probability, SMEs will need to rely on targeting local or niche firms for new business, particularly those identified for growth.
At the same time, small firms will need to continue keeping a close eye on the effectiveness of their investment in people, equipment and marketing. With business confidence fragile and funding set to remain tight, SMEs will need to strive to improve both the effectiveness and efficiency of their existing new business generation activities.
Doing more for less is likely to remain a key mantra for a long time yet. Consider switching those marketing and lead generation activities that are no longer performing as well as they used to, towards newer and possibly less expensive tactics like digital and social media.
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Freelance copy writing and marketing support for SMEs
The Telegraph published a list of 1000 UK mid-sized companies, with sales between £5m to £500m, that look set to keep the economy moving forward in 2013. These are the firms that will be placing orders and driving the ripple effect. This post highlights how you can find them.
The Telegraph collated the list in association with NESTA and D&B using information available in August 2012. Entitled “Britain’s brightest businesses”, the list probably represents many of the firms that will be placing orders in 2013 and so represent real opportunities for the smaller firms that exist around them.
The geographic spread of these businesses is visually mapped. The image below is taken from the Telegraph link but you can drill down to view the individual firms by street location, sales value and business activity. A really interesting tool that’s worth a look.
The Telegraph refer to these as mid-size firms although about a third fall outside that classification depending on which definition you use. HMRC appear to define SME as a business with up to 250 employees and a turnover up to €50m or about £40m.
Looking at the Telegraph data, 326 firms on the list have sales greater than £40m (39 firms do not show a sales value). The table below shows the locations where six or more firms from the top 326 businesses are situated:
When you split-out the top 326 from the list, you start to see more varied geographic clusters. The table below shows those locations featuring four or more firms from the up to £40m group:
The list is a little inconsistent in terms of industry / business activity definition to make meaningful analysis possible without a lot more work. However, a manual trawl through the list will soon reveal companies from the list in your target industry area.
No doubt competition to be on the preferred supplier list of these 1000 companies will be fierce but this group probably represent the nearest thing to a growth economy that we can expect in 2013. If you are a small firm that can align to this list of 1000, even if at second or third level removed, you should be in a strong position to benefit from the ripple effect.
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Freelance copy writing and marketing support for SME's
