Optimistic SMEs predict 37% growth by 2020

Senior decision-makers from SMEs are predicting strong levels of growth over the next five years, according to latest Santander Corporate & Commercial Business Growth annual survey.

The study reveals that small and medium-sized businesses with up to 249 employees are predicting average turnover growth of 37% – the equivalent of £2.4m.

Small businesses are the most optimistic, forecasting an average increase in turnover of 69%. This compares to medium-sized businesses, which are predicting an average increase in turnover of 25%.

More than half (52%) of business owners are confident enough to focus on organic growth as the most important immediate short term priority.

The findings also show companies are keen to retain key staff as the economy picks up – nearly one-in-three (31%) businesses state that retaining existing staff is a priority in the short term.

The survival of their business, which was the top short-term priority in 2014 (57%), is now a priority for 30% of SME senior decision-makers, suggesting more companies are now focusing on growth.

More than a quarter (27%) of firms said they were focused on introducing new products while nearly a fifth (18%) said they were looking to hire new staff – compared to 12% who were prioritising this in 2014.

This improving business confidence is leading to more companies looking internationally for growth than any point in the last four years. Nearly one in five (18%) describe international expansion as the ultimate aim for their business compared to just 6% in 2014.

Regional growth (28%) remains the most popular overall business aim, with selling the business (11%) also a popular choice.

What is the ultimate aim for your business?
  20151 20142 20133 20124
To build it regionally 28% 25% 34% 21%
To build it internationally 18% 6% 3% 3%
To sell it 11% 3% 5% 2%
To sell it and retire 10% 17% 19% 25%
Source: Santander Business Growth surveys, 2012-2015

Despite the strong optimism and renewed business confidence, businesses still report facing challenges. A tough trading environment was seen as a challenge to growth by UK businesses, cited by 27% of respondents, although this is down from 47% in 2014.

The ability to hire and retain the right staff also remains a challenge, cited by 17% of business owners, compared to 14% in 2014. Access to capital (11%) was another concern reported by SMEs; however, the number reporting this as a challenge is down significantly from previous years (25% in 2014; 26% in 2013).

Joint managing director of SME Banking at Santander, Mike Reeves commented: “It’s extremely encouraging for UK plc that SMEs, the lifeblood of the economy, are predicting strong growth over the next five years.

“It is particularly promising that nearly a fifth are focused on international expansion, as exporting our products and services overseas is key to ensuring a stable, resilient economy.

In terms of the regional picture, SMEs based in the East Midlands are the most optimistic, predicting an average increase in turnover of 109% over the next five years. SMEs in the North West and South East are the most conservative, forecasting 14% and 18% growth respectively.

Regional growth – expected five-year annual growth (%), ranked by region*
East Midlands 109%
East of England 64%
Yorkshire and Humberside 60%
South West 51%
Scotland 38%
GB 37%
London 34%
West Midlands 24%
South East 18%
North West 14%
Source: Santander Business Growth 2015*