Small Firms Plan Grand Designs on Overseas Markets

58 per cent of UK small to medium-sized firms are planning to enter new markets in the next two years.

In a further sign of economic optimism, well over half 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 new study by Albion Ventures, one of the largest independent venture capital investors in the UK.

Evidence of an export-led recovery is provided by the fact that one-in-three (34 per cent) SMEs are looking to break into new markets overseas of which 19 per cent are casting outside the EU and 15 per cent within the single market.  This is higher than the 30 per cent targeting untapped domestic markets.  A further one-in-six (15 per cent) small businesses plan to grow through launching new products and improving their online services. 

New Markets for Manufacturing

The third Albion Growth Report, designed to shed light on the factors that both create and impede growth among over 1,000 SMEs, shows that medium-sized companies are more likely to be looking to expand into new markets (77 per cent) than small businesses (53 per cent).

In sector terms, three-quarters (75 per cent) of manufacturing firms are planning to enter new markets, the highest of any sector and also top for expansion within the EU at 28 per cent. Businesses in media, marketing and advertising (68 per cent) and IT/ telecoms (56 per cent) were second and third respectively.

Entering new markets is not without its challenges; in fact over half (52 per cent) of firms who have taken the plunge reported experiencing problems, the biggest were lack of expertise (13 per cent); too many regulatory obstacles (13 per cent); strong competition (12 per cent); and lack of demand (12 per cent).

Companies in the education sector were the most likely to encounter problems (61 per cent) when trying to enter new markets, followed by those in manufacturing and transportation & distribution (59 per cent and 57 per cent respectively).

Focus Outside the UK

Patrick Reeve, Managing Partner at Albion Ventures, said: “The search for new markets among small businesses is gathering pace with much of the effort focused outside the UK.  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.  This is an area where external equity investors such as Albion can provide valuable hands-on support; for those small firms who get it right, conquering new markets can have a transformational impact.” 

On a regional basis, London-based SMEs are the most likely to enter new markets in the next two years with 66 per cent followed by those in the South West (62 per cent) and Scotland and the North East (59 per cent). Small firms in Wales are the least inclined to break into new markets with only 50 per cent planning to do so.