The resilience factor

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At a time of domestic political flux and geopolitical shifts, the growth and robustness of UK businesses is more critical than ever.

Paul Beach, Head of Executives and Entrepreneurs at Arbuthnot Latham explains that SMEs are increasingly important, demonstrating resilience in the face of adversity, boosting innovation, creating jobs and generating wealth.

While the uncertainty caused by ongoing Brexit negotiations has placed a spotlight on economic growth and the competitiveness of the UK as a business hub, UK SMEs have shown remarkable resilience. Through managing a challenging backdrop of rising operating costs and shifting consumer demand, SMEs have only grown stronger. This has forged a steep learning curve for nascent entrepreneurs and a challenging path for businesses both large and small, across the UK.

However, the UK has the unique advantage of pre-eminent financial services, the expertise from widespread technological innovation, paired with robust and sensible regulation. SMEs and entrepreneurs are at the centre of this, primed to capitalise on these resources and ripe for growth.

Globally, the UK has one of the highest densities of SMEs. In 2018, the National Federation of Self Employed & Small Businesses found that SMEs accounted for 60% of all private sector employment in the UK and generated a combined annual turnover of £2.0 trillion, or 52% of private sector turnover. That is massive contribution and the pipeline of exciting new businesses is growing increasingly stronger…

While London is undoubtedly a hub of innovation, talent and entrepreneurial spirit is found throughout the UK. Manchester, Bristol and Exeter, among many others, are home to ambitious businesses, disrupting sectors and bringing meaningful contributions to the local and national economy.

In spite of lacklustre consumer spending, the pipeline of newly emerging viable businesses remains strong. Many success stories such as the Exeter based but UK wide Crowdcube, BookingLive, Nested and Push Doctor serve as an example of the heights within an entrepreneur’s reach.

At Arbuthnot Latham, we value innovation and creativity. SMEs in their nascent stages have exponential potential to scale and develop across sectors and channels, able to disrupt and revolutionise new markets, resulting in cost savings and efficiencies.  This optimism however does not mean that the path to success for SMEs is easy. The resilience of entrepreneurs is a reaction to the highly competitive business landscape and the challenge in accessing suitable funding and expertise, in a crowded pool.

Standing out above the parapet, there are several key sectors bucking wider economic growth trends and driving growth. UK intellectual property intensive industries, in particular gaming and entertainment, are world leading and are remarkably insulated from wider economic trends, enjoying growth while more ‘traditional’ sectors see constriction.

Not to be underestimated, the creative industries constitute one of the fastest growing sectors of the UK economy. Similarly, e-commerce businesses capitalising on the ‘right here, right now’ culture of consumption, such as Deliveroo and Just Eat, have accelerated to success from much more humble beginnings.

Fintech is one of the biggest sectors for SME growth, boosted by government support for innovation through the 2018 Fintech Sector Strategy and the development of smart and sensible regulation for emerging sectors, such as the more esoteric blockchain and digital assets in addition to AI and Virtual Reality.

Investment in UK fintech business has more than doubled in the past three years; not only a boost to employment and wealth creation, these businesses are revolutionising industries and creating the opportunity for more traditional sectors to gain a competitive edge.

Once businesses are established and generating revenue, the emphasis shifts from innovation and disruption, to innovation, disruption and resilience. This may seem like a steep challenge for upcoming entrepreneurs, but businesses can deploy several strategies:

  • Preparation is key – talent and innovation must be supported by an acute awareness of risks and exposures. This forms your safety net.
  • The political and economic environment is always shifting and that can have implications on costs and margins. To insulate your business, it is helpful to consider a variable operating cost structure.
  • No matter how successful or ‘expert’ you become, there is always room to learn and improve. Business leaders must be open to strategic adaptation and agility.
  • Never get too comfortable! Watching out and adapting to new trends and client expectations, ensures that you stay relevant.
  • Stay hungry! Always have appetite for disruption

To protect and promote innovation, we must support the UK’s entrepreneurs. My answer to anyone doubting the UK’s economy and productivity levels? Look out for our SMEs, with proven resilience they will continue to drive growth and create opportunities.