Nearly six out of 10 of UK small to medium-sized firms (SMEs) plan to enter new markets in the next two years with the manufacturing sector leading the way, according to a study by independent venture capital investor Albion Ventures.
It reports that evidence of an export-led recovery is provided by the fact that 34% of the SMEs polled are looking to break into new markets overseas of which 19% are casting outside the European Union (EU) and 15% within the single market. This is higher than the 30% targeting untapped domestic markets, while a further 15% of small businesses plan to grow through launching new products and improving their online services.
The third Albion Growth Report focuses on the factors that both create and impede growth among over 1,000 SMEs, and shows that medium-sized companies are more likely to be looking to expand into new markets (77%) than small businesses (53%).
In sector terms, 75% of manufacturing firms plan to enter new markets; the highest of any sector and also top for expansion within the EU at 28%. Businesses in media, marketing and advertising (68%) and IT/ telecoms (56%) were second and third respectively.
However, the survey also finds that entering new markets is not without its challenges; with 52% of firms that have entered overseas markets experiencing problems. The biggest were lack of expertise (13%); too many regulatory obstacles (13%); strong competition (12%); and lack of demand (12%).
Companies in the education sector were the most likely to encounter problems (61%) when trying to enter new markets, followed by those in manufacturing and transportation/distribution (59% and 57% respectively).
“The search for new markets among small businesses is gathering pace with much of the effort focused outside the UK,” said Patrick Reeve, managing partner at Albion Ventures. “Given the EU’s continuing economic travails, it’s of little surprise that other overseas markets are proving more popular. Breaking into new markets is easier said than done and all too often small firms lack the necessary expertise to overcome established competitors.”
On a regional basis, London-based SMEs are the most likely to enter new markets in the next two years with 66% followed by those in the South West (62%) and Scotland and the North East (59%). Small firms in Wales are the least inclined to break into new markets with only 50% planning to do so.
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