SMEs struggle with skills shortage and growth capital by Rosana Mirkovic, Head of SME Policy, ACCA on 09-Oct-2013

Small and medium sized enterprises (SMEs) in the UK have identified a lack of access to growth capital and skills shortages as factors affecting their businesses, according to research complied by ACCA (the Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants).

The responses were compiled from the Global Economic Conditions Survey (GECS) between Q4 2011 and Q2 2013 to understand UK SME confidence and found that, compared to SMEs in other markets, concerns about skills shortages were expressed almost entirely by those in the UK, with 15% of UK respondents highlighting the issue.

Cash-flow problems were also flagged up by the UK’s SMEs, who were almost twice as likely to cite securing late payment as a problem than larger business. Despite SMEs across the globe reporting greater access to growth capital, small businesses in the UK did not see much improvement.

"Cash flow and access to finance difficulties are not new to SMEs, especially during what is a very fragile time of recovery for the smaller end of the business spectrum," said Rosana Mirkovic, ACCA’s Head of SME Policy. "However, our global analysis revealed trends that are very specific to the UK SMEs, most notably a skills shortage. Fifteen per cent doesn’t sound like much, but the fact is it barely registered as a problem with the small business communities elsewhere in the world. It is unique to the UK.

"We keep hearing that same old cliché about SMEs being the lifeblood of the UK economy, but right now they are facing obstacles that their overseas counterparts are not. In the USA, for example, access to growth capital has increased considerably over the last 21 months. That’s not the case in the UK."

GECS, the largest quarterly economic survey of accountants in the world which gauges the views of ACCA and IMA finance professionals working at the coal face of businesses, revealed that, although UK SMEs reported higher levels of confidence in their own businesses in the period analysed than their mid-market counterparts, they were far less optimistic about the global economic recovery.

In other markets, the opposite trend was more common, with SMEs having faith in the global economic recovery, but yet to see that recovery translate into optimism for their own businesses.

90% of UK SMEs reported experiencing negative business outcomes in the current economic climate, including problems securing prompt payment and access to finance was also an acute issue for smaller companies in the UK.

Rosana continued, "Late payment problems have actually increased significantly for small and micro-enterprises since late 2011 across the world, when 33% cited it as a business outcome compared with 48% in the first half of 2013. This increasing trend was partly driven by the smallest business in the UK, where 49% highlighted it as a pressure in the first half of 2013.

"We are hearing a lot about how UK is on its way to recovery, but a closer look at the financial and business picture within the UK’s small businesses would suggest that a lot of uncertainty still clouds the horizon."

"Right now SMEs need to consider a new approach, prioritising investment and seeking internationally-focused market growth, as they prepare for a more stable economy."

The research did, however, uncover an interesting trend, especially in the UK, in which SMEs were equally as likely to report business opportunities as large corporates. For the SME sector in the UK, those opportunities took the form of exploring niche markets, as well as looking at new markets and lowering costs of the business. Compared to the global average, the UK’s small businesses were ahead of the curve in that respect.

Please click here to read the full report [PDF format]: Surviving the recession and the recovery: the SME story.

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