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September 18, 2015

Small firms face "problems of success", not failure

Small firms face "problems of success" not failureSmall business owners are facing "problems of success", such as staff shortages, but remain optimistic according to new research.

The annual Albion Growth Report published by Albion Ventures has revealed that 61% of SMEs plan to grow "dramatically" or "moderately" in the next two years. Only 4% think they will shrink or wind down.

On a regional basis, SMEs in Yorkshire and the South East are the most confident about the future, with 66% anticipating growth over the next two years, closely followed by those in the North East (65%) and London (64%). The transport and distribution sector is the most buoyant, with 79% expecting growth.

The research also revealed that:

  • 39% of small firms are looking to increase their headcount over the following year compared to just 8% who plan to cut jobs;
  • Finding skilled staff is now the second biggest challenge, up from fifth place in 2014;
  • 62% of firms have taken steps to improve productivity in the past year - rising to 86% among medium-sized firms;
  • 50% expect to increase productivity over the next 12 months and 36% expect levels to stagnate.

The proportion of companies that have secured finance to develop their businesses has risen to 44% this year, up from 26% in 2013. However, bank loans and overdrafts as a source of external finance have continued to fall in popularity, down to 49% this year from 76% in 2013.

The popularity of using third party equity or other long-term finance has soared from 6% in 2013 to 34% in 2015; and a third of firms would now consider raising external equity finance.

Patrick Reeve, managing partner at Albion Ventures, said: "This year's report is particularly encouraging as it shows that many of the current barriers to growth are problems of success rather than failure. Concerns about access to finance have given way to shortages of skilled staff and insufficient management expertise. While red tape remains, as ever, the biggest concern, what has emerged very clearly is a trend towards long-term financing horizons and the growth of the equity culture."

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