I was asked today for my on-the-record reaction to the question: what are the big issues facing SMBs (yes, ghastly terminology – small and medium-sized businesses). This was my reaction, based not on surveys and statistics but on talking to dozens of entrepreneurs and business owners each month.First, it’s a mixed picture. Many, legacy businesses are struggling. Their key issues are: weak demand (confidence is weak; the main export market is depressed). This, more traditional sector is also hampered by its pre-crisis model: ie, often carrying too much debt (and thus, now, unable to source finance); and, critically, often carrying too much cost (ie, staff, property, pension provisions etc). By contrast, we have quite a vibrant “new economy” – businesses built around digital technology and thus, carrying fewer costs, and able to respond more rapidly to changing consumer demand. Look at the performance of businesses built around ecommerce vs their legacy, offline competitors, and you see the issue: established retailers going bust, while online retailers (Better Bathrooms, Amazon, Sofa.com….) are thriving. That’s the real story about our SMB sector. However, there are many more. In no particular order:
- Europe, our main export market, is in crisis. We do not yet have enough SMBs working with the faster-growing economies in Asia and Latin America.
- Finance is all in the wrong places – banks have tightened up access to debt finance; the new lending models are still in their infancy; large corporates are holding onto cash; the public sector is inefficient in engaging with SMBs.
- Consumer demand is very weak, and will be affected even further by yesterday’s Autumn statement.
- Our commitment, as a country, to rebuilding our economy around digital technology and social media, is still not strong enough. Once we do, we can start rebuilding our economy and communities. Rural business, for example, could be rejuvenated by world-class broadband etc.
- Related to this, our workforce is not adequate for the real-time demands of a new digital, globalised world.
- Broadly, the cost of doing business in the UK is too high – regulation adds cost; our workforce is not flexible enough; taxes, business rates etc constrain business and the appetite for risk.
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