SMEs Are Missing Out On Business Opportunities By Not Investing In Advertising, Report Reveals

Failing to invest in advertising is having an adverse effect on sales growth at small and medium-size enterprises (SMEs) in the UK, according to new research.

The 'Advertising Pays 2: How advertising can unlock UK growth potential report' from the Advertising
Association and Deloitte found that SMEs make up only 18% of total advertising spend by UK firms, despite accounting for half of jobs and 40% of revenue generated.

However, firms that do invest in advertising can enjoy eight times the relative impact on sales growth compared to bigger firms for every £1 they spend, the study showed.

Just 30% of UK SMEs opt to advertise and the study is being used to encourage smaller companies to reap the benefits of using advertising and marketing to help their brand reach a wider audience.

"Advertising pays, no matter the size of the business. There are sharp lessons here for entrepreneurs, policymakers and crucially for advertising itself," remarked the chief executive officer of the Advertising Association, Tim Lefroy.

Director of Deloitte Sam Blackie added SMEs are "crucial" to maintaining the increase in advertising expenditure that has been seen as the wider economy returns to growth, but noted more needs to be done to "ensure that these businesses are taking advantage of the opportunities that advertising can offer".

Ed Vaizey, creative industries minister, explained advertising in the UK has a "tremendously strong" reputation around the world and noted it can play a key role in the economic recovery, especially for SMEs that are not taking full advantage of the opportunities it presents.

According to the research, an uplift in SME advertising will have wide-ranging positive effects, including increased jobs and growth, a surge in innovation, and improved exports.

At present, only 19% of UK SMEs export their goods and services to other countries. The EU-wide figure stands at 25% and it is estimated the UK's small businesses could raise the value of their exports by as much as £40 million if the EU figure was matched.

Expert Opinion

It is widely regarded that improvements in the economy mean small businesses are in a position to take advantage of opportunities which may arise in the coming months. However, only those which are innovative and well-equipped are likely to be a success. <br/> <br/>"A key part of a successful small business’s toolkit is advertising and this research highlights that many may wrongly consider marketing as the reserve of larger organisations. Companies of all sizes should consider how they could benefit from promoting their services and should not ignore the impact such activity can have. <br/> <br/>"However, it is important for SMEs considering such activity to consider legal advice – whether it relates to branding and intellectual property or the wide issue of ensuring they meet the necessary regulations when promoting their interests." Steven Beahan - Partner