Small Firms Plan Grand Designs on Overseas Markets

• 58% of UK small to medium-sized firms are planning to enter new markets in the next two years
• 34% are targeting export-led opportunities, more than those looking at the UK
• London-based small firms are leading the way in tapping into new markets

In a further sign of economic optimism, well over half (58%) of UK small to medium-sized firms (SMEs) plan to enter new markets in the next two years with the manufacturing sector leading the way, according to a new study by Albion Ventures, one of the largest independent venture capital investors in the UK.

Evidence of an export-led recovery is provided by the fact that one-in-three (34%) SMEs are looking to break into new markets overseas of which 19% are casting outside the EU and 15% within the single market.  This is higher than the 30% targeting untapped domestic markets.  A further one-in-six (15%) small businesses plan to grow through launching new products and improving their online services.

The third Albion Growth Report, designed to shed light on the factors that both create and impede growth among over 1,000 SMEs, shows that medium-sized companies are more likely to be looking to expand into new markets (77%) than small businesses (53%).

In sector terms, three-quarters (75%) of manufacturing firms are planning to enter new markets, the highest of any sector and also top for expansion within the EU at 28%. Businesses in media, marketing and advertising (68%) and IT/ telecoms (56%) were second and third respectively.

Entering new markets is not without its challenges; in fact over half (52%) of firms who have taken the plunge reported experiencing problems, the biggest were lack of expertise (13%); too many regulatory obstacles (13%); strong competition (12%); and lack of demand (12%).

Companies in the education sector were the most likely to encounter problems (61%) when trying to enter new markets, followed by those in manufacturing and transportation & distribution (59% and 57% respectively).

Patrick Reeve, Managing Partner at Albion Ventures, said: “The search for new markets among small businesses is gathering pace with much of the effort focused outside the UK.  Given the EU’s continuing economic travails, it’s of little surprise that other overseas markets are proving more popular.

“Breaking into new markets is easier said than done and all too often small firms lack the necessary expertise to overcome established competitors. This is an area where external equity investors such as Albion can provide valuable hands-on support; for those small firms who get it right, conquering new markets can have a transformational impact.”

On a regional basis, London-based SMEs are the most likely to enter new markets in the next two years with 66% followed by those in the South West (62%) and Scotland and the North East (59%). Small firms in Wales are the least inclined to break into new markets with only 50% planning to do so.

Source: Albion (October 2015)