Despite facing a host of challenges in 2019, UK SMEs feel positive about the economy, their place in it, and their strategies for the future – according to a global study conducted by Oxford Economics, on behalf of American Express.
The research, carried out annually among senior executives and decision-makers in SMEs across 15 countries, demonstrates UK SMEs’ resilience in the face of old and new business challenges. Over two thirds (64%) forecast policy, law or regulatory change as the greatest threat in 2019, followed by economic uncertainty – unsurprising, given current heightened concern around Brexit and trade relationships. Furthermore, cyber and data security is an emerging threat for the country’s SMEs; 31% ranked it in their top three external business threats this year, compared to only 11% last year.
SMEs are also under increased pressure to sustain their bottom line in 2019, with reported profit margins and revenue growth down at the end of last year compared to 2017. And, whilst growing revenue remains the most important long-term objective for UK SMEs, scaled down profit projections for the year ahead indicate that SMEs are being more realistic about what they can achieve in the current climate.
To weather the storm, SMEs will focus on productivity in 2019. SMEs predict that increasing productivity and operational efficiency will have the greatest impact on their financial performance over the next three years. They are also assured in their ability to achieve this – forecasting higher productivity growth than any other country globally. To realise these targets, UK SMEs say they plan to implement cost-saving programs (66%) and improve management decision making (59%) going forward.
SMEs are also using their small business advantages to drive growth, with 60% believing they are more likely to be a disruptor than disrupted – a significant increase from last year. This attitude is reflected in their appetite for risk, with 70% of UK SMEs – higher than the global average – saying they are willing to take big risks to gain big rewards.
Jose Carvalho, Executive Vice President of Global Commercial Services International at American Express comments: “Despite operating in turbulent times, and facing fresh challenges for the year ahead, the optimism and focused resilience shown by the country’s SMEs is encouraging. Our research shows that they are single minded in their approach to growth and 85% are assured about the strategies they have in place to meet their objectives.
Although confident, our SMEs are far from complacent. They’re realistic in their attitudes towards revenue growth – and must now invest in improving cost savings and decision making to meet their productivity goals.”
American Express’ study also revealed that applying the latest technology is the number one business challenge UK SMEs intend to address over the next three years, with over two thirds (65%) recognising its power to unlock business opportunities.
SMEs are shifting their focus from infrastructure to more value-added technology, ranking workforce productivity tools as the technology they’re prioritising implementing now and in future, followed by faster, more reliable communications systems. What’s more,while not reliant on them now, over 1 in 5 UK SMEs plan to use robotics (21%) as well as machine learning, smart algorithms, and artificial intelligence (22%) over the next 3 years.
Carvalho continues: “It’s clear that UK SMEs understand the importance of harnessing the latest technology to seize new opportunities, but the next step is for them to use their agility to tap into the tech that will help future-proof their business.”