SME owners are concerned about corporate competition

company insolvency

Two-thirds of SME owners are concerned that multinationals and other large corporates ‘have too much say’ over the future viability of their business, according to new research.

About one in four SME owners are intending to boost their own competitiveness by cutting costs and raising finance to re-invest in their businesses and a further 15% are looking for ways to spread risk. However, almost one third of SME owners said they felt unable to do anything about it.

Just over half of respondents of the research believe the prolonged period of Brexit uncertainty has favoured multinationals and other large corporates, allowing them to gain ground over SMEs.

James Hadfield, partner at accountancy firm, Menzies LLP, that commissioned the research, said: “Small and medium-sized businesses have been suffering in the current climate of uncertainty and many believe large corporates and multinationals have been better able to prepare for Brexit and invest in technologies to give them a competitive advantage.

“Whilst they realise that being smaller and more agile is a bonus, SMEs are concerned that corporates will be more cash-ready to take advantage of any upturn that might come once the Brexit stalemate is resolved one way or the other.”

About half of SME owners believe it has become harder to make a profit in the past year, despite most reporting static or improving sales. Whilst Brexit uncertainty was the main reason given for this, one in three SME owners also blamed ‘more competition from multinationals and other large corporates’.

“SMEs are feeling the heat of competition, and some believe that large customers are holding too many of the cards, which is putting pressure on their cash flow and operating margins. Some also think large corporates have scale, geographic reach and market dominance on their side,” added James Hadfield.

SME owners identified five key advantages that corporates have over them in the current climate as follows: ‘bigger budgets to invest in technology’; ‘better access to credit and finance options’; ‘bigger budgets to attract talented people’ and ‘they can afford to take a long-term view’ and ‘better access to strategic advice’.

Two thirds of SME owners also know they have some advantages compared to large corporates. The top five were identified as follows: ‘lower operational overheads and fixed costs’; ‘quicker decision-making ability due to a lack of shareholders’; ‘better equipped to react to market changes’; ‘less red tape and compliance risk’ and ‘fewer legacy issues’.

Looking ahead, whilst most SME business owners are in ‘wait and see’ mode, one in five is considering a complete sale of their business in the next 12 to 24 months. Those in the manufacturing and transport & logistics sectors are most likely to be considering taking this action.

SME business owners also identified the top three challenges for the year ahead as follows: ‘predicting future demand’; ‘cash-flow forecasting’ and ‘uncertainty surrounding Brexit tariffs and trading arrangements’.