The pandemic has been a horrible experience for everyone – and small and medium-sized businesses have been hit by lockdown, reduced demand in many cases and problems with supply chains.
However, new research by Sage, a provider of cloud business management services, suggests that the SME sector is heading for a boom period, creating millions of new jobs. A survey from Sage has found that more than three quarters (79 per cent) of SMEs in the UK believe that businesses will be back to normal profitability by the end of summer 2021. Respondents believe that they’ll create 1.2m new positions.
Despite the hit to the profits of many smaller companies because of lockdown and consumer fear about their own financial prospects, the Sage survey suggests that businesses expect to return to pre-pandemic profitability by Q4 of 2021, thanks to an increase in consumer confidence and greater efficiencies. Nearly a third (32 per cent) are confident about increased spending by consumers.
The findings show how agile and resilient SMEs have been with over a third (35 per cent) cutting overheads to stay afloat, while 27 per cent relied on savings. Over half (52 per cent) used new technology to sell more and stay connected with customers or improve how the business operates.
What should SMEs do to continue this momentum?
- The end of the furlough scheme will mean wage bill rises for many SMEs. Some two thirds have benefited from the scheme, according to new data from fintech SME lender CapitalBox, and business leaders need to prepare for this change.
- While many employees are looking forward to going back to the office, there will be those who find the experience stressful and anxiety provoking. A surprising 37 per cent of respondents to a survey by The Chartered Institute of Personnel and Development (CIPD) said that stress-related absence had increased in the last year. Travelling on crowded buses and trains and mixing with colleagues again can be worrying and organisations such as the Mental Health Foundation are advising employers and business leaders to have a plan in place to prevent the return to the office leading to a spike in mental health problems. The human impact aside, such a rise could drive up absentee rates and affect productivity unless action is taken to avoid it. The CIPD publishes a guide for good health and well being.
- According to a previous survey of SMEs published by Sage in summer 2020, 80 per cent believe that digital adoption would be critical for an enterprise-led recovery and job creation. However, only a relatively small proportion (33 per cent) said that they had the bandwidth to invest in technology across key business processes. Ensuring that funds – when they are available – are invested in technology should therefore be a priority as smaller businesses benefit from the upturn.
- The optimistic outlook alongside the focus on technology is borne out by similar findings in a survey for Barclaycard last year. In Q4 2020, half (50 per cent) of SME leaders surveyed, said that they had invested in digital upskilling for themselves or their staff, and in Q1 this year, nearly a quarter (24 per cent) were planning to continue this investment. According to the Barclaycard report: “Finding new ways to work and maximising the opportunity with new technology has enabled some businesses to build greater engagement with customers.”
- A third survey, this time for small business platform, Xero, revealed these two key trends. According to respondents 40 per cent of retail revenue is now driven from online sales, while a quarter (26 per cent) of SMEs have invested in cloud-based technologies such as Dropbox, Slack and Xero. Almost a third (31 per cent) have removed the use of paper invoices and a quarter (26 per cent) have abandoned paper payslips.
