What Rachel Reeves can learn from France when it comes to supporting SMEs: Rashmi Dubé

Recent global trade tensions have led to heightened import tariffs, significantly impacting UK SMEs that rely on international supply chains. These tariffs have increased the cost of imported materials and products, squeezing profit margins and hindering competitiveness. A study by Bibby Financial Services highlighted that UK SMEs identify high tariffs and trade barriers as primary obstacles in their overseas trading efforts.

The government’s recent budget introduced higher National Insurance contributions for employers, adding more financial strain to SMEs. This increase means additional annual costs per employee, forcing businesses to think again about hiring plans and potentially restructure their teams. The manufacturing sector, already in recession for three years, has been particularly affected, with many firms planning layoffs or hiring freezes in response. ​

The rapid advancement of AI presents both opportunities and challenges for SMEs.

While larger corporations are swiftly adopting AI to enhance efficiency, many SMEs struggle with implementation due to limited resources and expertise. The Department for Business and Trade reports that only 24 per cent of UK SMEs have a formal AI strategy, compared to 67 per cent of large enterprises. This disparity risks widening the productivity gap, potentially rendering non-adaptive SMEs obsolete within a few years.​

Increasing demands when it comes to environmental compliance are having an impact too, with requirements such as the Enhanced Producer Responsibility scheme now affecting a broader range of businesses. Many SMEs are blind sided by the reporting requirements and implementation costs, with typical compliance expenses ranging between £7,000 and £15,000 in the first year. These regulations add complexity and financial burden, challenging SMEs to balance sustainability with profitability.​

So where to now? How do we navigate these turbulent times? Some suggested strategies…

1. Diversify Supply Chains: Reducing reliance on single suppliers or regions can mitigate the impact of tariffs and trade barriers. Exploring local sourcing options may also enhance supply chain resilience.​

2. Invest in AI and Technology: Adopting AI can lead to significant productivity gains. SMEs should start with specific processes where AI can deliver immediate benefits without major disruption.​

3. Embrace Sustainability: Compliance with environmental regulations can be turned into a competitive advantage. Marketing eco-friendly practices can attract environmentally conscious consumers. Although not a popular thought in some countries at the moment, it will make your business resilient.

4. Explore International Markets: With domestic pressures mounting, international markets offer growth potential. SMEs should leverage government export support programs to expand their reach. Look to different countries than you have done in the past. The landscape has changed and is changing on a daily basis.

5. Collaborate and Network: Joining industry cooperatives and networks can provide shared resources and knowledge, helping to spread compliance costs and technology investments.​

So where to next?

​SMEs are firmly in the hands of the chancellor. The life of the SME has never been easy. Let’s face it - as a start up, the odds are stacked against you and it is not enough to just have a dream. Much like the growth of a baby tree, it needs a community and support and that support has to continue.

I was surprised to learn that other countries approach the start up with open arms, looking to improve their economy and innovation.

France for instance has implemented the French Tech Visa for Founders, a programme designed to attract international entrepreneurs by providing a simplified procedure to settle in France. This initiative offers startup founders a multi-year residence permit, encouraging innovation and entrepreneurship.

Such support has made France an attractive destination for entrepreneurs seeking a nurturing environment for their ventures. Perhaps this type of support can be offered more in the regions to help growth. But for the now, our thriving and growing SMEs need to keep their eyes open.

They need to be in a position of agility to pivot and move quickly with changing winds in the economic, technologically, environmental and political landscape. If you can make it in the next five years, your business is likely to have longevity.

The question is who is at the helm and how blinkered are they as to what is happening and what could happen?