New research outlined in the Ambition Index from Three Business – the B2B arm of the Mobile network Three – reveals that UK Small and Medium Enterprises (SMEs) are collectively planning to invest £252 billion in growth in 2024, a sum equivalent to the economy of Finland.
Contrary to the International Monetary Fund’s (IMF) gloomy outlook, UK SMEs are planning to invest over a quarter (27%) more funds in growth than they did in 2022, as seven in ten (71%) of those surveyed said they’re planning to ramp up the proportion of their revenue being invested next year.
SMEs in the construction sector are the biggest drivers of the trend, collectively planning to spend £25bn, followed by IT (£17bn), manufacturing (£17bn) and banking (£16.8bn).
Nearly a quarter (24%) of SME leaders say they are planning to prioritise investment in recruitment, with an estimated collective spend of £20.4bn, equivalent to an extra 630,000 jobs paying the UK average annual salary of £32,000 per year.
Other areas of investment focus in 2024 include:
- Marketing – £35.1bn
- Staff training and development – £27.2bn
- Customer service – £24.7bn
- Improving facilities or tools – £22.3bn
- Digital technologies, including AI – £19.7bn
Seven in ten UK SME leaders feel optimistic about the prospects for their business in 2024, and the same amount say growth is the priority for next year. The four most optimistic sectors were banking, where more than four in five (84%) leaders felt positive for the year ahead, closely followed by manufacturing (82%), IT (81%), and construction (77%).
This comes as SME leaders have shown agility in times of crisis, as nine in ten (90%) said they introduced changes to their business in response to the pandemic and almost three quarters (73%) saying they had to adapt to survive.
UK SMEs have also come out of the pandemic and subsequent economic uncertainty with a new sense of resilience:
- Three quarters (73%) now feel more confident in their business
- Over two thirds (68%) said the past three years have made their business more able to withstand shocks
- Two thirds (66%) feel more capable of dealing with the pressures of running a small business
Challenging times remain
While the future is looking brighter than it did last year, there remain a number of challenges for businesses of all sizes, which are often felt more acutely by SMEs.
Over half (57%) of those surveyed said that the challenges they face as a small business are different to those faced by medium or large businesses, and nearly three quarters (73%) say the uncertain environment has intensified the risks and pressures of running a small business. This was felt most acutely by the construction sector, whereby 84% of leaders were feeling the pressure from the current environment.
SME leaders are particularly worried about the cost-of-living implications on customers (30%) and their business (25%), high interest rates (25%) and potential rises in business rates (19%).
The optimism that SME leaders have about their own business prospects does not appear to extend to the broader political environment, with 29% saying they feel apprehensive and 24% feeling pessimistic ahead of the Autumn Statement, and 18% believing it will have no impact. Optimism for the Autumn Statement varies across different sectors, with 44% of IT leaders feeling more optimistic, compared to just 27% of those in manufacturing.
Of the issues the Chancellor is expected to address, SMEs most want to see an increase in the threshold for Small Business Rate Relief (36%), clarity on government policy (27%), measures to support the labour market, for example, childcare support and pension changes (24%), as well as rate relief to be extended past next April (24%).
Mike Tomlinson, Managing Director at Three Business said,“Small and medium businesses are the lifeblood of the UK economy. That’s why it’s so encouraging to see the strong sense of optimism and learned resilience that’s coming through among SME leaders, showing they’re ready to invest in their future, grow and take on the challenges of the next 12 months.
“At Three Business, we work in partnership with SMEs in all sectors and regions to make sure connectivity is an enabler for growth.”
Commenting on why she’s supporting the Ambition Index, business mogul, investor, mentor and TV star, Sara Davies said, “The last few years have presented numerous, often unforeseen challenges, but I work with some amazing businesses and leaders and have been so impressed by their resilience and how they have adapted.
“The UK’s SMEs are vital contributors to the economy and to their communities, and I’m genuinely excited looking ahead to next year knowing there is so much appetite for growth and investment, as The Ambition Index shows.”
John Chesterman, Director and Owner of Bush Hotel in Surrey said, “We had very little time as new owners before Covid struck, which certainly wasn’t in our five-year business plan.
“We spent the time fixing the basics, building a team, and establishing ourselves as a locally-run, independent business. It’s been an encouraging start as we are already booked out for almost a year. So, the priority over the next 12 months is to build on the foundations we have laid.
“As we build our team out further, we would welcome any Government support to make it more attractive for hospitality professionals to work in the UK. Hiring good, committed people remains one of the biggest challenges facing the hospitality sector.”
Lee Steele, Director of Rabbit Hole Cakes in Perth said, “We are excited for the next 12 months, with lots of opportunities for growth. As our business has grown, launching our e-commerce platform has been essential to our expansion.
“Without this connection to customers, we would not have been able to reach as many people as we have. We now serve people across the whole UK and are looking to step up our work with corporate orders to maximise our revenue through the current challenging environment.”