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A capacity for growth is essential if UK businesses can compete on the global stage. Britain has many internationally competitive companies, but lacks medium-sized businesses with the capacity to grow and explore markets overseas.
Increasingly the ability to compete domestically requires exposure to international markets and the key conditions for growth are also those which are necessary to compete effectively: access to finance, skilled labour, management and leadership and a lighter regulatory and tax burden. The factors that inhibit competition are also barriers to growth.
Creating the right conditions for competent businesses to grow is therefore a precondition for future economic success.
A new report, published by the British Chambers of Commerce, identifies the challenges facing small and medium-sized businesses as they seek to grow and expand.
“Growing Pains: What is Holding SMEs back?” looks at the barriers to growth that many owners face at different stages of their business' life cycle and identifies how they can be supported to enable their companies to grow.
The findings identified a number of constraints – risk, access to finance, skills, transport, business support and the UK’s regulatory and tax burdens – that apply to every business to a greater or lesser extent irrespective of size or sector.
Amongst the areas covered in the report are:
• Management confidence. Many small business owners are focused on business survival rather than growth. Whilst they have the drive and ambition to set up the business they do not have the confidence to recruit new members of staff in areas such as sales and marketing, which would enable their business to grow.
• Risk and debt management. Many SMEs over the first three years of the business are reluctant to take on any levels of debt, large or small, instead relying on investment from family and friends. There is a lack of knowledge about the schemes that are around such as the Small Firms Loan Guarantee that enable firms to borrow on terms that are not standard.
• Employment law. The administrative burden that accompanies employment is daunting. The increasing flow of responsibilities for employers and the constant change in existing regulatory requirements are a real hindrance on growth.
It is clear that a number of the barriers to growth can be overcome by the ability of owners to manage the associated challenges that arrive when a thriving business seeks to expand. Many of the problems identified in the report are problems that can be eased through intelligent and innovative management of resources and people.
David Frost, director general of the British Chambers of Commerce, said: “Not enough businesses are bridging the gap between being small and medium-sized. It is a precondition for future economic success that the right conditions for growth are in place and this report identifies the barriers that growing companies face.
“It is clear that a major impediment to expansion is the management capacity within firms to handle rapid growth. Managing so many conflicting priorities day-to-day whilst making the right strategic decisions tests many owner-managers and was recognised by the participants in our research as a major constraint on their business. Government needs to work with organisations like Chambers of Commerce to find innovative solutions to a serious problem.”
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