Almost two-thirds (64%) of the 250,000 active manufacturing SMES in the UK have the ambition to grow into large businesses, which could deliver £83bn to manufacturing GVA over the next decade, new research has revealed.
This reality has the potential to propel the UK from our current 12th place to become the 7th largest manufacturing economy in the world, having recently dropped out of the top 10.
According to the new Make UK/Civitas report, The Growth Mission: A Blueprint for Scaling up SME Manufacturers, government must ignite growth by introducing a super-growth allowance (150% capital allowance) and create an enhanced Growth Enterprise Scheme (GEIS) to turbocharge Britain’s small and medium sized enterprises (SMEs.) Such tax reliefs would encourage SME businesses to reinvest in their growth, improve productivity, and adopt new technologies, helping them scale-up, create jobs, and boost progress towards the government’s growth goal.
Today’s scale up report reveals that a very large proportion of manufacturers are unaware of key support schemes designed to help businesses to grow. Indeed, 33% of SMEs do not know about the Business Growth Fund, while 37% are unaware of the British Business Bank, amongst others. Were those SMEs who currently do not engage with these government support bodies to access them at the normal rate, investment by Britain’s manufacturers would go up by £9.2bn.
In the drive to turbocharge economic growth through AI, Estonia is the world-leader in e-government, providing all government services through an AI enabled online portal. The UK Government should learn from this example by creating an Estonia-style British business Bürokratt software to streamline supports in one place. It would also allow of leverage the data collected by HMRC and ONS to micro-target companies with relevant information about these schemes at the exact point it is most relevant for their growth.
The scale-up report further reveals that four out of five SMEs say they struggle to access finance during the ‘make or break’ seed to early growth stages of investment. Solving the challenges to accessing finance could increase UK manufacturing investment again by £9.2bn annually.
Current support for SMEs comes in the main from The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). Both government initiatives are intended to encourage investment in small and early-stage companies by offering tax reliefs to investors, but businesses must be less than 7 years old to access them. However, setting up a factory and recruiting and training staff takes more than 7 years, so most start-up manufacturers are never in a position to access the funds aiming to help them grow. Removing the age limit would open-up the potential for investors to consider manufacturers with genuine scale up potential to access capital that was not previously available.
Exporting into new markets is again proving difficult for SMEs, stalling scale-up potential. If the UK economy is to achieve the government’s ambition of highest growth in the G7 list of countries, we need to increase exports, but just under a quarter (22%) of manufacturers export directly. Our research showed that 38% of SMEs said a lack of understanding of local regulations and bureaucracy prevents them exporting, while 36% of SMEs say better communication from government is needed to improve awareness of export advice and export finance support already on offer.
Stephen Phipson, CEO of Make UK said: “Using AI to leverage the wealth of data available in the UK to micro-target SMEs at exactly the right moment of their growth journey, where they will be most receptive to and benefit from the types of support to boost scale-up success will dramatically deliver quick-fire growth across the whole of the UK.
“Small and medium sized businesses already play a significant part in contributing to growth but, with the right support, they could do even more. Helping these firms to export and use data to pinpoint growth potential could result in huge dividends for the economy.
To boost SME exports, Government should introduce an Export Development Scheme to improve access to trade finance and expand Export Finance services to incorporate additional risk management support. Business awareness is at an all-time low and a lack of awareness is the greatest barrier to SME engagement.”
Other top barriers to growth include difficulties in adopting automation and lack of access to skilled labour, particularly skilled engineers and those employees with developed leadership skills. 41% SMEs want information/advice on adopting digital technologies/automation while 43% of SMEs want better support for apprenticeships to train the next generation of engineers and technicians. This shows why government must improve accessibility to skills funding provision with the transition to the Growth and Skills Levy.
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