Less than half of microbusiness owners with fewer than five employees expect their company to grow over the next two years compared to almost three quarters of larger scale SMEs, according to a new report.
The report, which is based on interviews with 1,000 SMEs and sheds light on the factors that create and impede growth, reveals a significant divide in confidence between small and larger scale SMEs across a range of key indicators.
Productivity and entering new markets
The majority of SMEs expect to register an increase in productivity in the next 24 months compared to one in three micro businesses. When it comes to their appetite for entering new markets, the difference is even more apparent: barely a third of microbusinesses are planning to expand into new markets over the next two years compared to almost double the number of medium-sized firms.
Finding skilled staff versus cash flow concerns
While companies with over five employees said that finding skilled staff was their greatest barrier to growth, cash flow and red tape were the biggest concern among microbusinesses, suggesting the former are facing problems generated by success while the latter are feeling more swamped by factors outside their control.
Raising finance
Microbusiness owners are much less likely to raise finance than larger SME firms: 82 per cent of businesses with less than five employees have made no attempt to raise finance in the past year and have no intention of doing so in the next year compared to two thirds of medium-sized firms.
Brexit
Microbusinesses sounded a more positive note about Brexit with 43 per cent predicting it will be help them enter new markets compared to 36 per cent of larger SMEs.
Patrick Reeve, Managing Partner at Albion Ventures: “SME is a much used label but it’s important to look beyond this as size plays a tremendously important role in determining business sentiment. The key point emerging from this study is that size really does matter and microbusinesses, many of which are sole traders in the ‘gig’ economy, appear far more concerned about their future growth prospects than their counterparts with more than five employees, which have the necessary scale to withstand market uncertainty. The message for policymakers is ignore microbusinesses at your peril given the vital role they play in driving the UK economy.”
