In the depths of the financial crisis, we were approached by a small house builder in the South East who was looking for finance to refocus his business towards the higher end market. A gamble at the worst possible time, you might say. But five years on, and his business is thriving. It’s a small example, but one that neatly illustrates that the spirit of courage, entrepreneurship, and foresight is still very much alive and kicking in the SME sector.
Small businesses are vital to our economy. They are the country’s biggest private sector employers, providing over 15m jobs, and generating £1.6 trillion in sales. And the number of SMEs that employ staff rose by 66,000 in 2013.
But we mustn’t take the sector’s success for granted. In my travels around the UK, there has been one common theme among those I spoke to: the threat of political uncertainty in 2015.
The government has recognised the importance of SMEs, capping business rate rises, introducing an employment allowance to help fund youth employment, and providing extra finance via the British Business Bank. But political uncertainty could derail SMEs this year, and with them our economic recovery.
Why? Business owners hate uncertainty. It makes them think twice about hiring new staff or investing in equipment. So many will be looking at the impending General Election with some trepidation, especially as Britain’s political fragmentation makes it harder than ever to predict the outcome. Moreover, key policies across the political spectrum have the potential to impact the SME sector. These range from possible restrictions on foreign workers to increases in the minimum wage – policies which, whether justified or not, could increase costs and red tape for businesses. Exporters will also worry about the implications of a vote on our EU membership.
And political uncertainty isn’t restricted to the UK, or even the EU. The US presidential election will loom large next year and, with it, a new set of unknowns for those SMEs looking to globalise their business. With so many factors outside of their control, what can small business owners do to help themselves?
First, they can work through excellent organisations such as the Federation of Small Businesses and the Institute of Directors to remind MPs from every party of the need to support business growth and job creation. SMEs must also make sure that they are getting the support they deserve from their banks, which, in turn, should be able to demonstrate that they actually understand their customers’ businesses.
I’d urge all SMEs to look beyond the overdraft and think seriously about other methods of finance, such as business angels, peer-to-peer lenders, or putting their balance sheet to work through invoice finance and asset-based lending.
They can also think big in 2015. There is nearly £200bn in government contracts up for grabs. These aren’t the reserved domain of large businesses, and there is plenty of advice on how to apply. Also, don’t be afraid to hire. There are government grants available for apprenticeship schemes – a great way to build up a skilled workforce. And with help from the government’s new support package for first-time exporters, look overseas for new markets.
We must all support the UK’s SMEs. They truly are the lifeblood of our economic prosperity.