Two thirds of SMEs plot growth in 2011

TWO thirds of small businesses are expecting to see growth during next year, a new report suggests.

According to the report, The year ahead: a view from Britain’s small businesses, many firms will take positive action such as exploring new markets and strengthening existing customer relationships.

Manufacturing, transport and communications, and the financial services sectors look set to lead the way. These sectors are the most optimistic about a profits increase in 2011, with financial services the most ambitious about their prospects (76%).

In terms of growth, manufacturing and financial services firms are the most likely to increase their spending on innovation (29%), with a significant number of businesses looking to expand into new markets (34%) and invest in products and services development (46%).  Businesses in the transport and communication sector top the rankings in terms of employment, with 25% looking to recruit next year.

The report, published by Barclays Business in conjunction with Kingston University Small Business Research Centre, also suggests many firms may be looking to take on new staff.

There is also good news for students with a fifth of SMEs (20%) planning to recruit graduates into full and part time positions next year.

Owner-managers are also focused on the opportunities that will allow them to diversify their customer base and drive efficiency. These measures include: anticipating an upturn in the economy (46%), the development of new domestic markets (25%) and the introduction of new technology (21%). Some are also expecting to benefit from the demise of their competitors or their withdrawal from specific markets (19%).

The research also suggests that despite the challenging economic conditions, SMEs are planning to invest next year, although they are being increasingly strategic about where they invest their cash, focusing on where it will have maximum impact.

Nearly half (43%) will look to increase spend on marketing to increase sales, while almost a quarter hope to increase spend on product development and innovation.

Travers Clarke-Walker, a director at Barclays Business, said: “The research reveals that owner-managers have been actively managing their businesses to reposition themselves for survival and growth in 2011.  

“This is far from the alternatives of retrenching, cutting prices and reducing their profits; strategies that are unsustainable and only add further to any downturn in the economy. In addition, the fact that SME are seeking to grow and to enhance their profitability suggests a sense of optimism and a stepping up to the challenge of recovery.”