Entrepreneurship became one of the buzz words of 2014 in the second half of the year, with more people than ever before launching their own firms due to a combination of an improving economic climate and an increase in the number of incubators launched to help those with good business ideas get off the ground. This saw small businesses perform incredibly well in 2014 as a whole, with data from Barclays showing SMEs recording the biggest boost to income since the turn of the 21st century.
According to the commercial bank’s Small Business Income Index, Barclays business customers with a turnover of under £5 million saw income levels rise by 8 per cent when compared to results in 2013. This means that, in the years since 2000, revenue levels in the bank’s small business division have risen by 20 per cent – a very string result considering the period encapsulates several years of the steepest recession seen in recent times.
Deloitte chief economist Ian Stewart believes the recent data demonstrates the fact that the benefits of the improving economic conditions are beginning to filter down the chain from bigger businesses to SMEs.
He says; “It was always going to be the case that a recovery in credit conditions would manifest itself first in big firms and what you are seeing now is it moving down the spectrum to smaller businesses that are more risky.”
Thanks to the housing boom and renewed interest in the commercial property market seen throughout the year, firms in both the management and construction areas of the property sector saw the largest proportion of revenue growth generated in 2014. Their share accounted for more than one third of Barclays’ overall small business customers income despite the fact that small business lending for the construction industry was notoriously difficult to come by due to contractions.
Unfortunately, this success was not mirrored in the retail and technology sectors and, somewhat surprisingly, nor did it manifest as expected in manufacturing. This was put down to high competition within the manufacturing sector, along with high internal investment by businesses into growth inhibiting their ability to “keep money in the bank” for long periods of time.
Retail remains the worst performing category in the small business stakes, largely due to the high vacancy rates in town centres nationwide putting potential new business owners off taking up leases. However, it is hoped that the upcoming review of the business rates system will encourage entrepreneurship in the retail industry to flourish once more and cause a corresponding boom in the number of independent retailers appearing on the country’s High Streets.
Barclays also found that the rate of growth varied hugely on a regional basis, with small businesses in London accounting for more than a quarter of the overall rise – in fact, growth seen in the capital city alone was double the rate of growth posted by Welsh small businesses. However, as all regions posted positive growth, it is hoped that 2015 will bring with it a more balanced economic recovery.
Do you think 2015 will allow small businesses to capitalise on the strong foundations built in 2014?
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