BUSINESS

Issues and challenges facing SME's in UK today

Issues and challenges facing SME's in UK today

Introduction

The presences of small and medium sized enterprises are an important part of UK economy. They have an important impact on the economy, its social and environmental factors as well. This paper will demonstrate the key issues in UK economy and how is the government helping them to achieve their objectives. In the current economic structure, growth of the economy will most likely come from these SMEs. Therefore, the year 2011-2012 saw an increasing number of companies started their business venture. Unfortunately, many are unable to survive and only few go on to the next year in their business cycle. Here, we look at the challenges faced by SMEs and the factors that can help develop them for the best practice in the business.

Discussion

It is recognized by many UK SMEs that they have gone through their life cycle of ups and downs with financial constraints which was mainly maintaining cash flow in the business. For SMEs the success is not about growing too fast as that quickly evaporates a lot of business cash. The success of the business greatly depends on recurring revenues for development, increasing shareholders value and sustaining cash, while some would feel the success also comes from non-financial factors. These include fulfillment of tasks, building business and creating a sustainable business venture. In 2010 the bounce back of the UK GDP was seen as a sign of growth that was asserted to a number of companies replacing themselves due to the increase in recession in 2009. It was further anticipated that the volumes would start increasing and the base rates would rise. However, the SMEs were bound to get disappointed due to Euro uncertainties and falling back of UK into recession. This resulted in many companies saving their cash rather than investing or growing or taking financial assistance from the bank (Michael, 2012). The decrease in bank lending statistics has further decelerated the growth in UK. There are 4.5 million SMEs in UK which provide a vast employment pool.

Issues of the SMEs in UK

Many now look at their profits than on the long term strategies of growing or investing in their business. The SMEs do not hoard inventories; buy from their foreign suppliers due to market uncertainty. The other issue faced by SMEs is from the banks as they do not provide them with the required funds or capital and also are less concerned with what these small businesses need. This leads them to acquire finance through use of credit cards, discounting their invoice for immediate payments, obtaining third party equity finance or reinvesting the funds from the successful business. However, these means provide limited funds and they take revenue away from the core activities of the business (Michael, 2012). Therefore, we can successfully conclude that the key issues for any SME are to maintain cash flow and liquidity of the business.

SME Sectors

The presence of small firms is usually in the service sector ...