Can we map out the future of SMEs?

From the internet to online banking, it's not hard to think of some of the changes that have affected the business world in the last two decades. Can we map out the future of SMEs based on what we've learned in the past 20 years? Data from Company Debt highlights the industries and businesses that stand to gain the most in the future

​From the internet to online banking, it’s not hard to think of some of the changes that have affected the business world in the last two decades. Can we map out the future of SMEs based on what we’ve learned in the past 20 years? Data from Company Debt highlights the industries and businesses that stand to gain the most in the future

Small and medium businesses have been at the forefront of change over the past two decade. With 24.3 million people employed by UK SMEs as of 2014, trends in this business segment dictate the general health level of the nation’s economy.

So what patterns and trends can we discern over the last two decades that could give us an insight into the world of SMEs, and how different enterprises might approach the challenges and opportunities of the next 20 years. Can we understand what impact the recession had on scientific enterprises, or how Jamie Oliver might have changed the food industry?

Company Debt has gathered research in an interactive tool visualising trends in industries and working practices in the future.

Key findings

Construction has been the biggest winner. Although most industries have seen overall growth, construction SMEs have experienced growth in turnover at an annual rate of about 12 per cent per business – about £23,163. The number of new construction-based SMEs has also been rising faster than in other industries, with 131 businesses born for every 100 that died in 2014.

The food industry is facing a decline in numbers of SMEs. The population of food manufacturers has shrunk at a rate of about 67 enterprises per year, over the last 20 years. This is 2.4 per cent per year or an annual increase of £67,671 per enterprise – higher than average.

Tech firms are increasing at rates not seen since the global financial crisis. In 2014, the number of new IT SMEs hit a high of 25,250 – higher than in 2007. Still, it’s not quite like the Dotcom bubble when the IT SME industry went from a boom of 18 per cent per year to a dramatic 56 per cent cut in numbers with the loss of almost 59,000 enterprises. IT seems to be a much more mature industry these days – growth in numbers averages 333 SMEs per year, and average turnovers have remained steady since 2007 at just under £800,000 per SME.

Consumer electronics SMEs seem to be suffering at the hands of the big boys. Although the boom in tech has been great for consumers, the number of SMES has contracted by a huge 46 per cent. For those businesses still left, the news is much brighter – revenue has increased by 67 per cent per enterprise over the same period – an average of £50,887.

Finance SMEs have grown slowly but steadily – and are on the rise. The annual increase in finance businesses is about 0.37 per cent per year over the last two decades. But since the recession, finance SMEs have been growing more quickly, with 2,070 new businesses born in 2014 – more than double the 905 created in 2004 – and they are working longer hours as well.

Science seems to be a risky business, but an increasingly lucrative one. Science SMEs struggle to survive, with the highest annual attrition rate of any sector – 17.1 per cent of enterprises shut down each year. However, turnover has been increasing rapidly, albeit with some significant fluctuations – average turnover reached £2.07 million per enterprise in 2015, which is doubly significant considering that the last two years have seen a significant increase in SME births.

Overall, SMEs are doing better than ever, and seem to be shaking off the recession. Although different industries show great variation in the terms of start-up survival, employment rate and turnover, survival rates seem to be improving. Businesses created in 2008 had the highest failure rates – about 14.8 per cent failing each year. But survival rates seem to be improving, and although are not quite at levels of 2006 and 2007, SMEs appear to have a brighter future ahead.

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

Related Topics