Strong levels of growth predicted by SMEs

Latest figures from the Santander Corporate & Commercial Business Growth annual survey show that senior decision makers from small and medium enterprises (SMEs) are forecasting strong levels of growth over the next five years.

The survey found that SMEs with fewer than 250 employees are predicting an average turnover growth of 37%, the equivalent of £2.4M over the next five years.

Small businesses have the most optimistic outlook, expecting an average increase in turnover of 69%. Medium sized companies meanwhile are predicting a lower figure of a 25% increase in turnover over the same period.

Over half of business owners have the confidence to concentrate on organic growth as the key short-term priority. The survey also reveals that companies are eager to keep key employees as the economy continues to recover, with one in three companies stating that staff retention is a short-term priority.

There has also been a shift from last year’s figures in terms of the percentage of SME senior decision makers citing the survival of their company as the top short-term priority. The figure has dropped from 57% down to 30%, suggesting that the focus has now shifted to concentrating on company expansion.

Introducing new products is a priority for 27% of firms, while 18% were prioritising increasing staffing levels, up from last year’s figure of 12%.

The increased confidence from SMEs has led to more companies seeking opportunities internationally, up to 18% from 2014’s 6%.

In London, 29% of SME decision makers are looking to expand internationally in comparison to just 12% in the East Midlands.

Regional growth continues to be the most popular overall business aim with figures of 28%, while 11% of respondents saying selling the business was a key focus.

Tough challenges still remain for businesses however, with a tough trading environment seen as a major challenge by 27% of the respondents, although this figures has dropped from last year’s 47%.

Holding on to key members of staff remains a concern for 17% of SME decision makers, up 3% on 2014.

There was a drop in the number of respondents concerned about gaining access to capital down from last year’s 25% to only 11% this year.

SMEs working in the hospitality and leisure industry are the most optimistic in terms of different business sectors, predicting an increase in turnover of 99% over the next five years. This is followed closely by the retail sector, who forecast 85%. Those in construction (27%), manufacturing (19%) and IT and telecoms industries (15%) are also forecasting significant growth over the next five years.

When examining the survey results by region, SMEs based in the East Midlands are the most optimistic, predicting an average increase in turnover of 109% over the next five years. SMEs in the North West and South East are the most conservative, forecasting 14% and 18% growth respectively.

Mike Reeves, Joint Managing Director of SME Banking at Santander, described level of confidence from SMEs is “encouraging”. He said: “It’s extremely encouraging for UK plc that SMEs, the lifeblood of the economy, are predicting strong growth over the next five years. It is particularly promising that nearly a fifth are focused on international expansion, as exporting our products and services overseas is key to ensuring a stable, resilient economy.

“Santander is committed to helping businesses prosper and has been a consistent supporter of businesses in the UK, with lending over the last four years growing by an average of almost 9% per year. Our innovative Breakthrough product suite, which was upgraded earlier in 2015, is designed to support the UK’s most ambitious, fast-growing businesses while unique tools and services such as the Trade Portal and our Trade Missions have been designed to help more firms export and trade internationally.”

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