Small and medium-sized businesses have had to navigate incredibly demanding and often hostile and unpredictable markets over the last few years. And as was the case for UK households, some have had it far worse than others. So, with George Osborne’s Autumn Statement expected to trumpet signs of a fairly dramatic upturn in the economy, it’s a good time to turn our attention to the current state of Britain’s smaller businesses. How well have they survived the economic crisis – and other extreme events – over the last five years? And are they in a good position to respond to improving conditions in their respective markets?
We’re conducting research on these issues for the next Quarterly Survey of Small Business in Britain. One interesting early finding is around the level of investment in equipment and technology, a useful indicator of the current state of a business, as well as its future prospects. The responses to this question suggest that almost half of businesses (45%) consider themselves fully-prepared for the next few years, while many of the others (20%) think they already have the necessary investment plans in place. Of the remainder, the majority (24%) seem to have retained their growth ambitions but are timing their investments cautiously. This leaves around one in ten respondents (10%) who do not have the equipment and technology they need. The businesses in this group are split fairly equally between those who have decided against making any investments and others who would like to invest but – for a variety of reasons – are unable to do so.
We also asked business owners and managers to explain the reasons for their responses. Looking at those who have decided not to make the investments needed for future resilience and growth, the explanations seem to focus around lack of resources and continuing uncertainty over the economy:
“We cannot afford to make any investment at this time but look towards making those investments during the second part of 2014.”
“We would like to invest in new equipment but do not feel the market is stable enough, nor the demand yet sufficient to take on debt to finance the purchases.”
“Boring old cash flow.”
Those businesses with an intention to make new investments in the near future seem to have very specific capital expenditures in mind:
“We have started our investment plan, acquiring new high tech automated plant, with a view to new additions early next year.”
“[We are] putting into place automated systems to reduce work load and so allow efforts in more constructive areas.”
“[We] will need larger refrigerated storage and a stock management system.”
And lastly, one of the striking features of the businesses that already have all the equipment and technology they need it that their investment plans seem to be part of a longer-term perspective on the business – both in terms of their aims and on what is needed to realise them:
“Careful and continuous investment over 10 years in our infrastructure.”
“We have continually invested in new kit and therefore our fleet of equipment is modern, efficient and adequate for the business.”
“We have invested heavily in our infrastructure which is now capable of supporting a significantly larger business.”
“We have invested heavily in plant and IT over last 5 years and now have a state of the art manufacturing facility.”
“Our business continues to re-invent itself and we have the finance and the personnel to make it happen.”
So, in conclusion, there do appear to be some grounds for optimism, based on this early result from the Quarterly Survey. It suggests that almost half of Britain’s smaller businesses have continued to invest through the downturn, and that many more have concrete plans to do so in the near future. However, there are also some grounds for concern, as a significant minority are either unwilling or unable to make the investments they need in order to remain resilient, or to grow their businesses over the next few years.
A note on the research: This is an early, provisional finding from a research study on SMEs, which focuses on the topic of organisational resilience and recovery. The Quarterly Survey of Small Business in Britain, Quarter 4 2012 report, “Resilience and Recovery”, will be published in January 2014 (www.open.ac.uk/quarterly-survey). The data presented here is based on a sub-sample of 475 responses to an online questionnaire, which was made available on The Open University website during October and November 2013. This sub-sample is not necessarily representative of UK SMEs by size or sector. The wording of the featured question was: “Do you think your business has the equipment and technology needed to be resilient and / or to support your growth targets over the next three years?”; the five options were followed by an open question that asked respondents to explain the reasons for their response. The full report will include a more detailed analysis of this question and a number of other questions that incorporates data from a larger structured sample obtained through telephone interviews. The survey has been supported by the following corporate sponsors: ACCA (the Association of Chartered Certified Accountants), Barclays Business, the Finance and Leasing Association (FLA) and The Open University Business School. However, the research is editorially independent and any views expressed may not reflect those of sponsoring organisations.