What SME’s need to do to boost the UK economy?

In 2008, HM Treasury commissioned some research in order to understand the growth challenges facing UK based SME’s. Interestingly, they did so by running a comparative study against equivalent US firms.

It’s a long 10o page report  but there are some fascinating insights. For instance, they found that less than 10% of SME’s are growth orientated, the vast majority happy with steady state performance especially those in retail and catering type businesses. Not surprising perhaps but it reveals how few firms there are on which the US and UK can depend on for growth. In the UK  only 5.8% of SME’s were growth orientated. Perhaps Mrs Thatcher was right, we are just a nation of shopkeepers…?

What was interesting was business owners’ experience of growth. Despite their efforts at planning, many owners were surprised by “episodic and irregular” growth spurts which didn’t meet their high growth expectations. And here’s where the US:UK comparison was interesting: 61% of US firms achieved their growth objectives whilst only 23% of UK firms did.

I haven’t heard much about what the Government are doing to stimulate this vital part of the business sector . But despite growth businesses being a small proportion of all SME’s, even 5.8% represent a large number of businesses. But what distinguishes them from their North American counterparts is strategy planning: when it comes to competitive strategy, the US firms are more likely to have a strategy and plan about customer growth than UK firms.

Is this why UK firms don’t achieve their growth plans? Is it possible what the UK economic recovery needs is businesses with better strategy?

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