Business growth ambitions amongst SMEs

The research was commissioned in October 2011 by the Department for Business, Innovation and Skills (BIS), Scottish Enterprise (SE), the Welsh Government and InvestNI, to investigate growth ambitions amongst small and medium-sized enterprises (SMEs). The report aims to provide a better understanding of the scale and strength of growth ambition amongst UK SMEs, how this affects actual growth performance and the factors affecting growth ambition.

The methodology consisted of: a review of existing UK and international academic and policy literature; a telephone survey of 1,250 UK businesses; case study interviews with 61 business owners across the UK; and a workshop involving business stakeholders.

The study found that 46 per cent of SMEs who reported a higher level of ambition had increased turnover in the past three years. Eighty per cent of SMEs reported their intention to grow their business over the next three years. English SMEs were found to have the highest level of ambition (23 per cent), followed by Northern Ireland (19 per cent), Scotland (18 per cent) and Wales (13 per cent). Lack of access to finance was identified as the largest barrier to growth, while the provision of business advice and the development of management skills were highlighted as having the biggest capacity to heighten ambition. The impact of the economic climate was reported as being the most common reason for both increased and decreased ambition in the last three years. Smaller businesses (1-4 employees), those run by male owner/managers, and those with owner/managers in the 25-34 age group were identified as being more likely to have high growth ambition. A higher proportion of SMEs have seen their employment decrease (27 per cent), rather than increase (19 per cent) over the last three years, although a lower proportion saw their turnover decrease (33 per cent) rather than increase (35 per cent). SMEs with a business plan in place were found to be more likely to achieve growth.

The report suggests in order to address the issues raised by the study, policies could be introduced that are aimed at: raising the levels of ambition amongst SMEs; and/or increasing the likelihood of ambitious SMEs realising their potential.