Micro businesses lack confidence compared to larger SMEs, report shows

Less than half (45%) of micro business owners with fewer than five employees expect their company to grow over the next two years compared to almost three quarters (73%) of larger scale SMEs.

According to a new report, the majority (57%) of SMEs expect to register an increase in productivity in the next 24 months compared to one in three (33%) micro businesses.

Capital investors Albion Ventures, which commissioned the report, said that barely a third (31%) of micro businesses are planning to expand into new markets over the next two years compared to almost double (61%) the number of medium-sized firms.

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The report said that while companies with over five employees said that finding skilled staff was their greatest barrier to growth, cash flow and red tape were the biggest concern among micro businesses, suggesting the former are facing problems generated by success while the latter are feeling more swamped by factors outside their control.

But micro businesses sounded a more positive note about Brexit, with 43% predicting it will be help them enter new markets compared to 36% of larger SMEs.

Patrick Reeve, managing partner at Albion Ventures, said: “SME is a much used label but it’s important to look beyond this as size plays a tremendously important role in determining business sentiment.

“The key point emerging from this study is that size really does matter and microbusinesses, many of which are sole traders in the ‘gig’ economy, appear far more concerned about their future growth prospects than their counterparts with more than five employees, which have the necessary scale to withstand market uncertainty. The message for policymakers is ignore microbusinesses at your peril given the vital role they play in driving the UK economy.”

The Albion Growth Report is based on interviews with 1,000 SMEs.

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