In many ways the beginning of the year looked pretty bleak for SMEs, with a continuation of economic uncertainty, a slowdown of growth in China and the looming EU referendum, a lot of which would have a huge impact on SMEs. However, many SME owners felt confident in achieving growth in 2016 despite the political and economic uncertainty. So now that we’re a third of the way through the year, we look at how SMEs have been performing in 2016.
The 2016 Budget
The Chancellor of the Exchequer’s 2016 Budget aimed to bring in a number of supportive measures for small businesses in the UK to build on the 62.8% of British SMEs that enjoyed revenue growth in 2015. He announced a new £15,000 threshold of rate relief, which was over double the previous amount of £6,000. He also increased the smaller rate from £18,000 to £51,000 which meant that over 600,000 SMEs would no longer have to pay any business rates.
Tax thresholds are to be raised, corporation tax is to be cut and Osbourne continued to maintain the fact that the UK is growing “faster than any other advanced economy in the world.” While the Office of Budget Responsibility has had to revise down forecast growth figures, the economy is still expected to grow by 2% in 2016, helped along by the performance of SMEs. To top all of this off, the UK unemployment rate is still at a 10 year low, again helped by the increasing number of SMEs looking to employ staff.
The majority of small businesses have reacted positively to this news, especially regarding the business rates. The policy director at the Federation of Small Businesses (FSB) said “FSB members have campaigned hard to make small business rates relief permanent and expand it – and the chancellor has heeded our calls, taking many small firms out of the system altogether.”
The government also plans to kick-start exports from 100,000 businesses by 2020, and so the Lloyds Banking Group have announced new plans to help thousands of SMEs become first time exporters. They will be helping 5,000 small businesses which will grow to 25,000 by the end of the decade, alongside a £1 billion boost to SME lending.
How Are SMEs Performing?
The London Stock Exchange have produced their annual Inspire Britain report to celebrate some of the fastest-growing and most dynamic SMEs in Britain by examining the 1000 most successful companies, as well as looking at general overviews and statistics in the country. The CEO of the London Stock Exchange Group, Xavier Rolet, said that the Inspire Britain report was created to “shine a light on what we knew to be true: that these companies are the engine of the UK economy.”
He continues that “our unique methodology…reveals once again a community of UK businesses richer and more varied than we believe ever identified in any other exercise of this type.” The 1000 companies that are listed in the 2016 report are currently growing at a rate of an average of 50% per year, and over 600,000 new business were created last year alone, which sets a new record.
Scottish companies are the fastest growing, enjoying over 80% annual revenue growth, while there are 25% more companies represented from Wales and Northern Ireland this year in terms of revenue as opposed to the previous year. This is supported by statistics that show that Wales is now one of the fastest growing UK regions for tech startups outside of London.
The Small Business Finance Markets 2016 report from The British Business Bank also states that the UK now has a population of 5.4 million SMEs, which is a record for the country. But on the flip side, it also reports that fewer smaller businesses have scaled-up compared to similarly sized businesses elsewhere. The UK also still sits near the bottom of the OCED’s table of the number of start-up business that grow to more than 10 employees after three years of existence.
Companies such as Kano however have been thriving so far, and have been named as the UK’s fastest growing tech startup at the recent Tech5 UK event. The other finalists included Festicket, Bloom and Wild, MyShowcase and Crowdcube, and other companies who have been listed as ones to watch were Veeqo, Duedil, Vector Watch, TransferGo and Ometria.
What’s Next For British SMEs?
As confidence in the market is growing, alongside the British economy itself, it seems that things are only looking up for small British businesses. There were a record number of companies created last year and more and more people seem to be taking the leap to becoming their own boss. However, with the impending EU referendum, there is still much uncertainty surrounding the future of not only SMEs, but all businesses within the EU. SMEs are likely to be hit hardest by a Brexit due to reduced employment prospects and import and export partners, and so it will be interesting to see how the yearly review at the end of 2016 looks for SMEs.