A ‘winter of growth’ ahead for UKs small businesses

The Importance of Winter for SMEs predicts £400bn of revenue for the UK’s small businesses during winter 2013/14, representing a 7 per cent increase on the same period last year, and 12 per cent up since winter 2010/11

Wholesalers have the largest opportunity, with an estimated £130 billion of potential revenue available, whilst retail and manufacturing businesses are looking to share a slice of £24bn and £42bn respectively.

The winter growth opportunity varies by SME sector. Educational businesses have the largest proportion of turnover in winter, as the long school and university summer break pushes work into other parts of the year. Winter is quietest for construction firms, who see their annual turnover slump between December and February.

Yet the winter months also present a number of significant challenges for SMEs. The lead up to Christmas brings bumper sales for many retailers and other businesses, but this is typically followed by lower revenues in January and February.

Severe weather can compound the pressures on small businesses. Cebr have forecast that a repeat of the kind of supply chain disruption caused by snow and colder weather in 2010 would cost the economy more than £1.9bn this winter, wiping half a per cent off UK economic growth.

Angela Needle, Head of Propositions at British Gas Business, who commissioned the research, said: “This research reveals a positive outlook for small businesses this winter. As growth returns, the businesses we work with up and down the country are looking to capitalise on this opportunity.”

Colin Edwards, Senior Economist at the Centre for Economic and Business Research, who authored the report, said: “Our research has shown that winter isn’t just an important period for retailers, but is also make or break for education businesses which see well over 27 per cent of turnover fall in the period.

The unique peaks and troughs resulting from Christmas create both opportunities and risks for all small businesses, with many more liquidations and bankruptcies falling in Q1 compared with any other time of year”.

Winter is ‘make or break’ for smaller retailers, who typically see around 10% of annual sales in December alone. This winter, SME’s retail sales in the same period look set to push over £24bn.

The research also reveals that online shopping will play a major role in SME growth this year. Retailers without an effective digital sales channel stand to lose out on a share of the £1 billion due to be spent online every week in December alone.

Whilst retail dominates the headlines, manufacturers also rely heavily on the winter season, with just under a quarter of annual turnover falling in December, January and February.

Many SMEs continue to face significant difficulties in accessing the finance necessary to realise the growth opportunity. Over the past three years, small and medium-sized businesses have borrowed more than they have paid back in only three given months, indicative of an unfavourable credit market.

However, research shows that credit conditions are on track to have made their most significant improvement in two years in Q4 2013. With new Funding for Lending measures coming into force in January 2014, the Centre for Economic and Business Research forecast that credit conditions will continue to improve.