What are the challenges currently facing SMEs?
Posted on by Cindy Yip
Estimated read time: 4 mins
In a rapidly changing world and volatile economy, businesses need to be aware of the challenges they are currently faced with. They may not have an entourage of consultants to advise them on how to deflect these challenges but at the same time, they have the advantage of being much more flexible to changes than their larger counterparts. Let’s see what the current challenges facing SMEs are.
The average cyber-attack costs UK businesses between £75,000 and £311,000 according to HM Government’s 2015 information security breaches report (1). Businesses of all sizes face a constant threat from cyber-crime but many small businesses are failing to take the necessary precautions as they either don’t have the knowledge to or don’t think they need to. Only 20 per cent of the organisations from the report believe cyber security to be a top business priority, bearing in mind SMEs are losing a staggering £5.3 billion each year due to cyber-attack (2). SMEs are in fact very attractive to hackers as they often appear at some point in the supply chain and can therefore provide an easier route in larger corporations. Most importantly, they don’t tend to have the same level of security making them not just an attractive target but an easy one too. Read more on educating your staff on cyber security here.
National living wage
In April 2016, the UK living wage increased from £6.70 per hour to £7.20 for over 21s. The Resolution Foundation warned the policy will push up total wage bill by £1.5 billion this year, a figure far higher than what the business community was prepared for(3). It wasn’t just wages that increased but associated costs too such as national insurance, pension contributions and overtime pay. The wage hike has already seen several firms reduce staff perks such as paid breaks, staff lunches, bonuses and overtime pay, a report by Telegraph has shown. With a further pledge by the Chancellor of the Exchequer to increase the amount to £9 per hour by 2020, businesses need to be including this into their budgets.
UK businesses employing 20 or more people found the number one business issue to be recruitment and retention. Three in four companies reveal they do no find it easy to get the right people, a survey from Easyjet and Telegraph has found. This leads to firms having to either absorb increased recruitment costs in pursuit of skilled workers or invest in staff training to develop specialisms in-house. Non-European Economic Area workers now need to earn over £35,000 a year to settle permanently in the UK as opposed to the previous figure of £24,000 (4).
We stand at a current record low interest rate of 0.5%, encouraging traders to sell the currency. This may meant that exporters can sell their goods for cheaper overseas helping to increase demand. On the other hand, it increases the cost of imports (5). SMEs are affected most by the current uncertainty of the economy, especially those who trade internationally. Their balance sheets have less ability to absorb major currency fluctuations which makes them more prone to financial risk than larger companies.