Region’s SMEs still optimistic in the long term

The average firm with turnover of £20m or less in Yorkshire and the Humber region expects to grow turnover by 56 per cent over the next five years, according to a survey by banking group Santander.

That SME growth forecast is down from a 109 per cent expectation recorded a year ago.

The medium-term growth outlook among Yorkshire SMEs is weaker than the national average, with firms across Britain expecting to grow by an average of 88 per cent over the next five years. This is down from 104 per cent a year earlier.

Firms in London and the South East are the most optimistic on growth, with forecasts of 153 per cent and 140 per cent respectively.

Yorkshire firms are innovating to drive growth, with a quarter saying introducing new products to boost expansion is an immediate priority.

Another 11 per cent of Yorkshire firms surveyed said their business has never been in better shape.

However, Santander said Yorkshire SMEs are considerably more optimistic than the Office for Budget Responsibility, which has a wider UK GDP forecast of 11 per cent growth between now and 2016.

Neil Williams, regional director for Santander Corporate Banking in Yorkshire, said: “While business owners in Yorkshire and Humberside remain cautious in the short term, focusing on survival against an uncertain economic background, they are clearly optimistic in their longer term prospects. Many people think survival is about holding onto their cash but in order to promote longer term growth, businesses need to continue to invest.

“There are many ways companies can look to improve the quality of their business and ensure they are well placed to take advantage of opportunities to grow.

“Given the low anticipated growth in the UK over the next few years, companies looking to meet their aspirations will need to focus on the fundamentals such as cash flow, customer service and strategic planning to ensure they can realise their ambitions.” Some 61 per cent of Yorkshire businesses cited the trading environment as their biggest challenge.

Companies’ weaker growth hopes tally with the Bank of England’s latest agents’ report, which found a “general sense of stepping back from expansion plans, due to concerns about the prospects for demand going forward”.

The central bank said firms’ investment intentions “remained positive but had softened a little”.

The service sector reported broadly flat conditions, according to the agents’ report, with some firms gaining market share as competitors quit the industry.

Manufacturing output growth had weakened after picking up during the spring, as exports slowed. Among construction firms there was a further decline in output, in part due to wet weather, and also due to the squeeze on public sector spending.

The survey by BDRC for Santander covered 502 companies with turnover of £50,000 to £20m.

The lifeblood of the economy

Small and medium-sized firms form the lifeblood of Britain’s economy and account for 99 per cent of all businesses in the UK.

Nationally, there are around 4.5m SMEs, according to trade body the Federation of Small Businesses.

It estimates they employed about 13.8m people and had an estimated combined annual turnover of £1,500bn in 2011.

London has 748,000 enterprises, more than any other region, while Yorkshire has 332,000 businesses.

SMEs together accounted for more than half of employment at 58.8 per cent in 2011 and almost half of turnover in the UK private sector at 48.8 per cent.

SMEs have driven the growth in Britain’s company base, increasing in number from 3.5m to 4.5m – a 31 per cent increase – between the start of 2000 and the start of 2011.