New report shows that ‘Transport and Logistics SMEs’ (small-to-medium enterprises) think their ‘Corporate Competition’ are gaining advantage through Brexit uncertainty
Brexit uncertainty is placing a greater pressure on SMEs than on their corporate counterparts, according to a new SME benchmarking report.
Accountancy, Finance and Strategic Consultancy specialists Menzies has compiled a new report on the state of UK SMEs: the SME Benchmarking Initiative. Following Menzies business panel event and surveys of 1,000 UK small and medium-sized businesses, the report’s authors found that one in three business owners believe that increased competition from larger corporates is the primary impact on their own profitability.
A tough operating environment for UK SMEs
Julie Adams, Managing Partner at Menzies, says, “Things have become tougher for many small and medium-sized businesses over the past year and many are feeling the pressure. Whilst most business owners report static or improving sales, many also feel it has become harder to make a profit. Most have a positive outlook and feel optimistic about their SME advantages, but a significant number also believe that they have lost ground to larger corporates, which have the means to attract the best talent and invest in efficiency-driving technologies.”
The SME leaders questioned included representatives from the transport and logistics sector. They too expressed concern that multinationals and large corporates “have too much say” over the future viability of their business.
Worryingly, 67 percent of respondents in the logistics sector said they “feel unable to do anything about it”.
The role of Brexit uncertainty
In particular, the uncertainty around Brexit has made it difficult for SMEs to plan ahead.
The report goes on to state: “Dealing with Brexit uncertainty is a bone of contention for some SME business owners. Some believe that whilst large corporates are generally exposed to Brexit threats, due to their globalised operations, they have found it easier to access specialist advice, make contingencies and adapt their business structures.”
It seems that feelings differ, depending on the size of the business. Tim Dunn, Advisory Partner at Menzies, explains: “Many micro businesses believe they will be unaffected by Brexit, but other SMEs are aware that they are seriously under prepared and lack the resources to take preventative action. Brexit uncertainty has created a rift in terms of Brexit readiness and many SMEs believe they are at a disadvantage.”
This belief is certainly held up by the evidence: a survey by The Federation of Small Businesses (FSB) found that just 14 percent of small firms have started plans for a hard Brexit.
Transport and logistics SMEs and Brexit
Given the greater exposure to Brexit uncertainty for the transport and logistics sector, it is not surprising that the leaders of transport and logistics SMEs are equally split over the impact of Brexit. Just over half of respondents in the sector believe the period of prolonged Brexit uncertainty has favoured multinationals and other large corporates, allowing them to gain ground over SMEs. Brexit uncertainty was also given as the main reason it has become harder to make a profit over the past 12 months.
Sophie Said, Director at Menzies, said: “Small and medium-sized businesses in the transport and logistics sector have been suffering in the current climate of uncertainty and many believe large corporates and multinationals have been better able to prepare for Brexit and invest in technologies to give them a competitive advantage. Whilst they realise that being smaller and more agile is a bonus, SMEs are concerned that corporates will be more cash-ready to take advantage of any upturn that might come once the Brexit stalemate is resolved one way or the other.”
The other advantages large corporates share
SME leaders felt that corporate firms have a number of other key advantages over them in this kind of operating environment:
- bigger budgets to invest in technology
- better access to credit and finance options
- bigger budgets to attract talented people
- they can afford to take a long-term view
- better access to strategic advice
In response to their corporate competitors’ sizeable advantages, the report authors recommend that SMEs focus on leveraging their own strengths in order to take back market share.
Take back market share
SME owners identified the advantages they have over their corporate counterparts as:
- lower operational overheads and fixed costs
- quicker decision-making ability due to a lack of shareholders
- better equipped to react to market changes
- less red tape and compliance risk
- fewer legacy issues
The report authors state: “As well as prioritising cash-flow management and forecasting, they should keep their growth strategies under review and ensure they are ready to act quickly to strengthen their business model by improving its cash position or building in some additional resilience.”
Being able to act nimbly and focus on delivering personalised customer service are two other key areas of advantage SMEs can leverage over their corporate competitors, says the survey. Furthermore, the flexibility SMEs have to tailor the customer experience also enables them to tailor the employee experience – offering a further opportunity to steal advantage over corporates.
Here, we totally agree with the report authors. These are the same advantages that Same Day Couriers Direct seeks to leverage in order to offer a better service for our customers than our larger, one-size-fits-all corporate rivals. It’s what makes our service so personalised and responsive.
Looking for an exit route
One of the most surprising statistics of the survey is that one in five SME business owners said they are actively considering a complete sale of their businesses in the next 12 to 24 months. Business owners in the manufacturing and transport and logistics sectors are more likely than those in other sectors to be considering a sale.
However, there is a further obstacle for these SME owners: the challenging trading conditions means that deal-making activity has slowed.
Mike Grayzer, Corporate Finance Partner at Menzies, says, “Once we get clarity after Brexit, we could start to see momentum returning to the deal market, due to pent-up interest in deals which may have stalled earlier in the year. This is likely because there is no overall shortage of funds for many corporates and Private Equity and Venture Capital funds, and it is this strong cash position that ultimately drives activity.”
Read the full report here: https://www.menzies.co.uk/sme-benchmarking-report-2019/