UK SMEs expect a bumper 2024, looking ahead to next year with renewed ambition and optimism

UK Small and Medium Enterprises (SMEs) are looking forward to a bumper 2024, as they expect to hit an average of 15% year-on-year revenue growth, bringing overall SME turnover from £2trillion (tn) in 2023 to £2.3tn next year[1].

New research outlined in the Ambition Index from Three Business – the B2B arm of the Mobile network Three – has revealed SMEs are still looking ahead to a bumper 2024 with a renewed sense of optimism and ambition, following the post-pandemic years.

Contrary to the International Monetary Fund’s (IMF) gloomy outlook, that Britain’s economy will be the slowest growing among G7 nations next year, UK SMEs are collectively planning to invest £252 billion in growth in 2024, a 27% increase compared with 2022. This means that UK SMEs are planning to invest a sum that is approximately equal to the value of the economy of Finland during 2024. Seven in ten feel optimistic about the prospects for their business in 2024 and the same amount say growth is the priority for next year.

Nearly a quarter (24%) of SME leaders say they are planning to prioritise investment in recruitment, with an estimated collective spend of £20.4bn, equivalent to an extra 630,000 jobs paying the UK average annual salary of £32,000 per year[2].

Other areas of investment focus in 2024 include:

• Marketing – £35.1bn
• Staff training and development – £27.2bn
• Customer service – £24.7bn
• Improving facilities or tools – £22.3bn
• Digital technologies, including AI – £19.7bn

Weathering the storm and showing resilience

This comes as SME leaders have shown agility in times of crisis, as nine in ten (90%) said they introduced changes to their business in response to the pandemic and almost three quarters (73%) saying they had to adapt to survive.

They have also come out of the pandemic and subsequent economic uncertainty with a new sense of resilience:

• Three quarters (73%) now feel more confident in their business
• Over two thirds (68%) said the past three years have made their business more able to withstand shocks
• Two thirds (66%) feel more capable of dealing with the pressures of running a small business

Challenging times remain

While the future is looking brighter than it did last year, there remain a number of challenges for businesses of all sizes, which are often felt more acutely by SMEs.

Over half (57%) of those surveyed said that the challenges they face as a small business are different to those faced by medium or large businesses, and nearly three quarters (73%) say the uncertain environment has intensified the risks and pressures of running a small business. SME leaders are particularly worried about the cost-of-living implications on customers (30%) and their business (25%), high interest rates (25%) and potential rises in business rates (19%).

The optimism that SME leaders have about their own business prospects does not appear to extend to the broader political environment, with 29% saying they feel apprehensive and 24% feeling pessimistic ahead of the Autumn Statement, and 18% believing it will have no impact.

Of the issues the Chancellor is expected to address, SMEs most want to see an increase in the threshold for Small Business Rate Relief (36%), clarity on government policy (27%), measures to support the labour market, for example, childcare support and pension changes (24%), as well as rate relief to be extended past next April (24%).

Mike Tomlinson, Managing Director at Three Business commented: “Small and medium businesses are the lifeblood of the UK economy. That’s why it’s so encouraging to see the strong sense of optimism and learned resilience that’s coming through among SME leaders, showing they’re ready to invest in their future, grow and take on the challenges of the next 12 months. At Three Business, we work in partnership with SMEs in all sectors and regions to make sure connectivity is an enabler for growth.”

John Chesterman, Director and Owner of Bush Hotel in Surrey says: “We had very little time as new owners before Covid struck, which certainly wasn’t in our five-year business plan!

“We spent the time fixing the basics, building a team, and establishing ourselves as a locally-run, independent business. It’s been an encouraging start as we are already booked out for almost a year. So, the priority over the next 12 months is to build on the foundations we have laid.

“As we build our team out further, we would welcome any Government support to make it more attractive for hospitality professionals to work in the UK. Hiring good, committed people remains one of the biggest challenges facing the hospitality sector.”

Lee Steele, Director of Rabbit Hole Cakes in Perth says: “We are excited for the next 12 months, with lots of opportunities for growth. As our business has grown, launching our e-commerce platform has been essential to our expansion. Without this connection to customers, we would not have been able to reach as many people as we have. We now serve people across the whole UK and are looking to step up our work with corporate orders to maximise our revenue through the current challenging environment.”

[1] Calculated using baseline 2023 revenues from ONS data, October 2023

2 ONS: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2022