By Marianne Gilmore, below, UK CEO, Moneycorp
Although the UK has narrowly avoided a recession for now, the latest OBR and IMF figures indicate we’re going to spend the majority of 2023 teetering on the edge. During volatile times like these, agility becomes the name of the game. The problem is, all too often, we think of pivoting and a challenger mindset as the preserve of scaleups, big tech and the fintech darlings. When in reality, the humble SME is just as able to be responsive to change – if not more so. Thanks to their size, structure and ability to adapt, SMEs are a true engine of economic and social growth. Given the crucial role they play, it’s time we gave them the credit they deserve as the original innovators.
Disrupters by necessity
SMEs are built to disrupt. From pivoting to survive during the pandemic (as 71% did, according to Salesforce) to driving industry change through innovation, with over a third of UK SMEs in the process of planning to develop a new product or service as of 2020.
Throughout the economic turbulence of the past few years, SMEs have pivoted by necessity. In fact, survival remains the top challenge for 67% of SME executives, according to research from WEF. But how to achieve that without a huge scale and very deep pockets?
With fewer resources and safety nets to keep them afloat, SMEs need to think outside the box in order to stay alive. They need to keep moving and keep reacting to changing market conditions. And the key here is their smaller size – it actually makes them better placed to do so.
Small in stature, big on agility
Many SMEs rely on an agile business model. Not only can this empower employees and help deliver high-quality products and services to the market, but the leaner structure that comes with it is a secret weapon.
These businesses are well-geared for rapid, reactive decision-making thanks to smaller, tighter-knit teams and a lesser degree of internal bureaucracy. Without the obstacles of cumbersome processes, layers of corporate sign-off and sheer headcount, they’re free to pivot at the opportune moment and strike when it counts.
What’s more, history has shown time and again that constraints breed creativity. Being intrinsically faced with more of these than their larger counterparts – whether budgetary, resource-based or otherwise – forces SMEs to tirelessly come up with novel solutions and workarounds. It’s this kind of conditioning that fosters a default to innovation.
Between the rocketing inflation and faltering consumer confidence of the past year, SMEs have seen costs soar and revenues fluctuate – making their constraints even more pronounced. This prolonged turbulence has compelled them to keep developing new ways of operating, marketing their products or services, and differentiating themselves from larger competitors to reach their target audience.
Masters of human touch when it matters most
And during periods of uncertainty, the value of human touch and anticipating the needs of your customers at every touchpoint only increases.
SMEs have a unique advantage here. They are able to cultivate customer relationships that feel meaningful – taking the time to get to know the people they work with on a personal level and truly understand them. Leveraging these customer connections, SMEs can create a feedback loop that enables them to respond promptly and adjust their product or service offerings to meet changing demands and needs.
With personalised experiences, SMEs can show their partners and customers they truly care. This, in turn, ensures they stay satisfied and loyal, helping all parties continue to thrive even in the face of uncertainty.
Helping SMEs realise their full potential
To put it simply, even when times are hard, SMEs are the backbone of a healthy economy. By way of illustration, across Europe, they make up 99% of all businesses, they employ some 100 million people, and they’re instrumental in driving growth, contributing over half the continent’s GDP. So how can we better champion SMEs and help them reach their full potential?
It begins with confronting the most pressing challenges these organisations face. For instance, SME finance is at risk with the Bank of England’s plans to change UK bank capital rules, which could compromise £44bn in SME lending. Paired with upcoming regulatory uncertainty, conditions for SMEs are far from favourable.
As the WEF suggests, policymakers and investors must initiate reforms to tackle these issues. But there is still a long road ahead for the UK. A recent survey of 500 SMEs conducted after the UK Budget revealed that 80% of them feel that the government’s support for SMEs is currently inadequate – hardly a surprise given corporation tax shot up, R&D tax relief was slashed, and the Energy Bill Relief Scheme (EBRS) came to an end, which alone could force 350,000 SMEs to restructure, shrink or cease trading altogether.
Alongside addressing these issues, to help UK SMEs to remain competitive, it’s important to harness their strengths and foster collaboration between them and larger businesses. Such partnerships allow SMEs to expand their reach, venture into new markets, and attract a wider customer base. At the same time, collaboration allows large businesses to leverage the innovative thinking and agile ways of working offered by SMEs – it’s fertile ground for fostering mutual growth.
We would do well to remember that – while they might not boast trendily vowel-less names and a roster of Silicon Valley investors – SMEs have been challenging the status quo and driving innovation for decades. As we navigate an increasingly uncertain business landscape, it’s time to give them the recognition and support they deserve.