More than two in three (68%) small business owners have put plans in place to grow their business over the next three months – and even 59% those that fear they will struggle to survive in an uncertain year are working on positive plans to turn their business around – according to new research from Hitachi Capital Business Finance.
The findings come at a time when the proportion of UK small businesses predicting growth has hit a five-year low (down from 39% to 34%). Nonetheless, despite prolonged Brexit uncertainty, the new Hitachi data reveals a tenacity and determination among the UK small business community to keep calm and carry on, even through an unprecedented period of political and economic change for the country at large.
The Hitachi data also suggests it is Britain’s youngest small businesses that are the most can-do in putting growth plans in place for the first three months of 2019.
Overall, 87% of business owners aged under 35 have been working on new growth plans (compared to 55% of those aged 55 or over). Further, the UK’s youngest businesses (those trading for less than five years) were most assertive in working on new growth initiatives (71%). With London and Manchester growing as the UK’s top tech hubs (and cities for tech jobs), the Hitachi research also noted that London (78%) and the North West (71%) were the regions where small businesses were most likely to be tackling Brexit uncertainty with proactive growth plans.
What are small businesses prioritising to achieve growth?
As part of the latest instalment of Hitachi Capital Business Barometer, which tracks small business outlook and confidence over time, Hitachi asked a nationally representative sample of 1,177 small business decision makers which initiatives they were considering in order to achieve growth in the three months to April 2019. The results paint a picture of what the small business community will be prioritising during the critical Brexit transition period in the weeks ahead.
Keep costs down and carry on
The number one issue for small businesses was controlling fixed costs. During a period of rising rents, business rate hikes and a weak pound, 41% of respondents said cost control was a top priority to help their business grow in uncertain times. As the perceived importance of cost control hits a five-year high, a further 18% of respondents said they intended to tackle late payment. Despite recent moves by the Government to tackle this issue, there is no evidence that anything as dampened this issue for small business owners. Concern over tackling late payment is at its highest level since the start of 2017.
Cashflow remains king
Improving cash flow has also hit a five-year high as a priority for small businesses to tackle (22%). The perceived need to tackle this issue was most prevalent in the manufacturing (40%), distribution (38%) real estate (38%) and retail (33%) sectors. It was also a bigger issue among larger SMEs with a turnover of £10 million or more – ventures that have more complex infrastructures and bigger cost bases to manage.
Expanding the business footprint
Expanding into new overseas markets (16%), hiring more people (15%) and investing in new equipment (12%) were all popular initiatives to secure growth – although in all these areas there was a slight dip on 2018, suggesting some small businesses could be putting on hold physical expansion plans until there is greater certainty on the Brexit outcome.
Looking an industry sectors, small businesses in agriculture were most likely to be planning to invest in new equipment (31%). Expansion into new overseas markets was led by the IT and telecoms sector (49%) and enterprises in the media and marketing sector (34%). Small businesses in the IT and telecoms sector were also those most likely to be hiring new staff in the months ahead (35%).
Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance, commented: “We are all living with political and economic uncertainty at the moment – and getting used to living with it will become the new norm for most businesses in 2019. It is heartening to see so many small businesses going towards uncertainty and seeing it as a time to improve their business, get it in better shape and achieve growth. For smaller businesses that can adapt faster and move quicker, 2019 could be a year of great opportunity.
“That said, finance is going to be key – possibly more so than ever. At a time of uncertainty, cutting fixed costs and strengthening cash flow will be a fundamental requirement for many small businesses in order to simply operate. Beyond that, getting the right kind of finance deals and support is crucial. More than ever before, small businesses need access to specialist financial solutions that can nurture growth and expansion without placing undue pressure on cashflow. At Hitachi Capital Business Finance we have a range of financial products that do just that. Our heritage is in manufacturing not banking and as a leading finance provider we are in the business of helping small businesses growth through all the stages of an economic cycle. It makes business sense to help business customers stay in business and grow – and we will be expanding our support for the small business sector during 2019.”