The future is bright for SMEs overall, says Company Debt
Following recent research conducted by Company Debt, it appears that the UK SME sector as a whole is doing very well, but individual industries appear to be struggling.
The research looked at six industries (construction, food, IT, finance, computers, and science) to see how they performed against six key metrics (net foreign direct investment, business demography, 2009 SME survival rate, average hours worked, turnover per enterprise, and business survival rates). As a sector, over the last decade between 2004 and 2014, an average of 12 businesses were being started for every ten that closed and annual turnover per SME increased at an average of £19,552 per year.
If you look at the information for the construction industry, however, it suggests that business start-ups are decreasing, with only 131 being born in 2014 compared to the 142 born in 2005. Similarly, the food industry SME population appears to have shrunk by approximately 67 enterprises per year for the last 20 years.
Revenue for both the construction and food industries, however, doesn’t reflect this decline in business start-ups. For the construction industry, the annual turnover per enterprise grew at £23,163 per year, which is 12% higher than the average. The food industry didn’t see the same fast growth as the construction industry, but the annual turnover per enterprise has increased by approximately £67,671 per year. The consumer electronics industry also saw an average increase in turnover of £50,887 per enterprise per year; the SME population in the consumer electronics industry has contracted 46% over the last 20 years.
The recession had a huge impact on businesses and the UK economy. The finance industry, in particular, has seen the slowest growth, growing on average at a rate of 0.37% each year. The finance industry also has one of the harshest year-on-year survival rates across all of the industries studied, with only 31% of SMEs living longer than five years. The recession, no doubt, had some sort of impact on the growth of the finance industry, but Jamie Oliver may have had an even bigger impact on the food Industry.
Although the food industry has shrunk over the last 20 years, the revenue per enterprise has vastly increased. Part of this could be attributed to Jamie Oliver’s food revolution, enforcing healthy school lunches and generally getting people more interested and involved in their food and food production.
Possibly the largest impact on businesses over the last 20 years, particularly those in IT, was undoubtedly the Dotcom bubble burst. When this burst, the number of IT SMEs shrank by 56%, resulting in a loss of almost 59,000 enterprises. Although since then the industry has steadied out a little bit, there are still nowhere near as many start-ups as there were before the burst, with growth happening at an average of 333 SMEs a year since.