- 37% entered new markets in past 12 months – down from 53% last year
- 43% of small firms experienced a range of problems when entering new markets
- Small firms in London and North West have strongest appetite for breaking into new markets
Fewer SMEs Expanding Into New Markets
Less than four-in-ten (37%) of UK small and medium sized businesses (SMEs) have entered new markets over the past year compared to 53% in 2013 according to a new study1 launched by Albion Ventures, one of the largest independent venture capital investors in the UK. This suggests that more opportunities exist in their core areas of operation than 12 months ago.
Significant Challenges Faced by SMEs
The research shows that almost half (43%) of SMEs experienced a range of problems in trying to enter new sectors and geographies, underlining how difficult it can be. Specific challenges they have faced include a lack of expertise around their target market (16%), finding the competition too strong (11%) and lacking the financial resources (8%).
According to the 2014 Albion Growth Report, which is designed to shed light on the factors that both create and impede growth among UK SMEs, businesses that have tried to enter new markets are more confident about their growth potential than those who have focused exclusively on servicing their core customers.
Regional Differences in Market Expansion
Regionally, firms based in London and the North West were the most likely to break into new markets in the past year with the majority, 52% having done so. Businesses in these regions were also the most confident about the future with 82% and 81% of firms in the North West and London respectively predicting growth in the next two years.
In contrast, just 23% of businesses in Scotland attempted to launch into new markets, the lowest of anywhere in the UK.
Expert Insights on Market Entry Barriers
Patrick Reeve, Managing Partner at Albion Ventures said: “Entering new markets can be an exciting yet daunting challenge for many businesses and it’s not surprising that nearly half have encountered problems along the way. As the UK economy recovers it’s understandable that small businesses are less willing to take the risk as more growth opportunities appear closer to home.
“Taking the plunge into a new sector or geography says a lot about the mindset of the business owner; those that decide to go ahead are far more likely to be more optimistic and entrepreneurial in nature. While there’s a significant chance they will fail by getting it right their business can be truly transformed. Nothing ventured is nothing gained.”
Emran Mian Director of Social Market Foundation said: “There are some important puzzles about UK SME growth and this report provides valuable clues. The highest level of confidence is found in the North West, closely followed by London. Across business sectors too, we see a balance that belies the alarmism of those who suggest that we are in a solely consumption-led recovery. The big question is how to enable these businesses to make the most of the opportunities that they see ahead of them.”
| Difficulties faced in accessing new markets | 2013 | 2014 |
| Lack of expertise about the new market | 10% | 16% |
| Competition is too strong | 22% | 11% |
| Lack the financial resources | 15% | 8% |
| Too many regulatory obstacles | 6% | 10% |
| Lack of demand | 23% | 8% |
| Didn’t have the right number of staff | 0% | 5% |
| Unable to operate in new markets profitably | 9% | 4% |
Source: Albion Growth Report 2014
