When UK SME leaders were asked about the challenges they face in the next 12 months, half cited talent management as one of the biggest. Confidence in business growth: For their own businesses, 70 percent are confident that sales will increase over the next 12 months alongside profitability (52 percent). A further 55 percent believe headcount will increase. Comment Roger Martin-Fagg, Vistage Chief Economist.
Low faith in economy: When it comes to faith in the economy, 39 percent confirm that economic conditions have declined for them over the past 12 months, half believe this trend will continue over the next year. Just 7 percent are optimistic. Brexit proofing UK businesses: This is not a major concern; just one in four leaders of UK SMEs claim they have increased prices, 22 percent have reduced overheads, 20 percent set up bank accounts in alternative currencies, 12 percent have frozen headcount, 10 percent have frozen salaries and 8 percent have made redundancies.
EU still considered an opportunity: Half see the EU as the biggest long term opportunity, more than double those that cite the US (25 percent) closely followed by Asia at just 17 percent. The latest ‘UK SME Confidence Index’ from Vistage, the international membership organisation for business leaders, reveals that talent management will be a major challenge for half (47 percent) of UK SMEs over the next 12 months. The research, which was carried out across 410 UK SMEs after the 8th June election, also reveals that businesses remain confident about growth over the next 12 months. In fact, 70 percent claim they expect sales to increase during this period alongside profitability (51 percent). This is despite inflation hitting the highest levels for four years (2.9 percent) alongside the drastic fall in sterling which has impacted companies trading overseas. These factors, coupled with Brexit negotiations and political turmoil, are not eroding the confidence of UK SME leaders in their future success.
Roger Martin-Fagg, Vistage Chief Economist comments; “It’s no great surprise that SMEs across the UK are nonplussed about the ongoing Brexit negotiations. What’s happening now is simply a process to agree the divorce settlement. This will continue until March 2019 when we officially leave the EU. It’s at this point the future trade relationship will be agreed, this is when the changes that could impact business in the UK will be implemented. Reaching this deal is crucial; no deal would be a disaster for our economy.”
Talent Management is key for UK SME Leaders
When the leaders of UK SMEs were asked to cite the biggest challenges facing their business in the next 12 months, almost half (47 percent) cited talented management. This includes hiring, retaining and training employees. Industry figures show that this could be a growing problem over the next seven years as 14 million employees are expected to retire but just seven million people of working age will enter the market, leaving a seven million deficit.
Roger Martin-Fagg, Vistage Chief Economist continues; “When it comes to talent management this is about finding and retaining the right people to take your business to the next level. With employment levels at an all time high I suspect business owners will have to offer new talent packages above current market levels to get them through the door, along with finding more innovative ways of targeting people that aren’t looking to move jobs. This is why UK SME leaders are citing this as a top concern, after all your business really is about the people that run it with you.”
Brexit proofing UK businesses
When asked what changes have been made as a direct result of Brexit negotiations, it seems businesses are focussed more on trading costs more than staff. Over one in four (26 percent) have responded by increasing prices and a further fifth (21 percent) plan to do this.
Other changes include;
22 percent have reduced overheads, 24 percent plan to
20 percent have set up bank accounts in alternative currencies, 3 percent plan to
12 percent have frozen headcount, 6 percent plan to
8 percent have already made redundancies, 5 percent plan to
9 percent have frozen salaries, 7 percent plan to
9 percent have paused investments and just 4 percent have stopped looking for investment
Low faith in the economy
The research also revealed that the overall economic turmoil in the UK is a concern for SME leaders. Four out of ten (39 percent) concede these conditions have declined in the past 12 months and a further 50 percent expect this trend to continue. In stark contrast, SME leaders surveyed by Vistage across the pond feel far more positive about their economy in the US under Donald Trump’s leadership. In fact, 55 percent say the US economy has improved over the past 12 months and 38 percent believe this will continue in the next year.
EU still considered an opportunity
Half of UK SMEs still consider the EU to offer the greatest long term opportunity in terms of an effective trade deal with the UK, double those that cite the US (25 percent). This is closely followed by Asia Pacific at 17 percent. Again, our research in the US shows over a third (35 percent) of business leaders believe a trade deal with Europe should be a priority for Trump’s administration compared to just 11 percent citing the UK.
Jan Chmiel, Managing Director of Vistage concludes; “It’s great to see leaders of SMEs across the UK unshaken by the ongoing Brexit negotiations. This is a long and slow process and whilst it’s sensible to be prepared, we can’t second guess what the final deal will look like. However, we can’t ignore the fact that confidence in the economy and its prospects for the next 12 months is very low. With this economic uncertainty unlikely to waver, it’s important that leaders of UK businesses continue to regularly monitor and review running costs. Changes will need to be made to limit any negative impacts of Brexit, but a failure to remain vigilant could also lead to opportunities being missed along the way.”