What Makes SMEs Tick?

Policymakers Told To Find Out More About SME Challenges

22.05.2014

Fergal Dowling, Partner | +44 (0)121 214 5476

A new report from Leeds-based brand consultancy Propaganda compiled on behalf of the Management Consultancies Association (MCA) has highlighted the need for politicians to support growth among small to medium-sized enterprises (SMEs).

While many policymakers pay lip service to the importance of this part of the economy, there are concerns that they fail to grasp the real challenges facing the sector.

According to the MCA's report, one problem lies in treating SMEs as a homogenous grouping by not recognising their diversity and 'segmentation'.

It noted the term SME can refer to any number of organisations, from one-man bands to companies employing upwards of 200 people and consequently these different firms will face different issues and be focused on different concerns.

Politicians "should attempt a more thorough segmentation of the SME landscape. This would help to ensure its growth interventions, as well as potentially everything from tax to regulatory policy, are suitably adapted to the needs of its targets", the report argued.

Furthermore, it needs to be understood that some smaller firms are not actually seeking to grow, having reached the level they feel comfortable at - this is often ignored by government rhetoric, which tends to focus on the importance of expansion, international exports and so forth.

Kirsty Birks, a director at Propaganda, argued that innovation is still possible - especially among mid-sized businesses.

"With digital systems reducing the costs of risk-taking, they are able to move more quickly and more cheaply than before and are unconstrained by the governance structures of large PLCs," she declared.

However, such firms still need a supportive regulatory and financial environment from the top levels of government.

Encouraging policymakers to understand the complexities of the SME sector is one way to drive growth, the MCA study concluded.

Earlier in the year, the Zurich SME Risk Index noted increased confidence among smaller companies, particularly in areas such as recruitment and web trading.

Assuming the economy keeps on improving this is set to grow further, the insurer concluded.

Expert Opinion
The term of small and medium enterprise is an increasingly being identified as a very broad definition which wrongly places a huge variety of organisations of all sizes into a single bracket.

"It is clear that the needs of a very small-scale operation can be very different to those of a large organisation employing hundreds of staff. Because of this, it is only fair that steps are taken to recognise the diversity of such businesses and ensure that the needs of the various forms are met.

"However, one single issue which does unite all SMEs is the need to have the right support in place to advise on a range of key issues, with legal expertise being particularly important to ensure that organisations are meeting all of their regulatory responsibilities and are in the best possible position to thrive in the future."
Fergal Dowling, Partner