SMEs keep stiff upper lip in testing economy

Intellect report reveals UK SMEs are staying positive despite tough economic conditions

SMEs are keeping the credit crunch at bay as a survey by UK trade technology body Intellect reveals smaller companies are challenging the gloomy economic climate.

The Intellect Survey, now in its second year, revealed 83 per cent of respondents were SMEs that were bullish about the year ahead. The survey questioned UK software and IT services companies, about their businesses current and future performance.

A total of 53 per cent of respondents forecasted double digit growth for 2008 compared to 49 per cent last year.

The survey found that businesses expecting 15 per cent or greater organic growth were mostly in the smaller end of a £0-£20m turnover range, and that there were no companies larger than this expecting such a growth rate.

Sectors most likely to generate growth, according to the respondents of the survey are services, telecoms, public sector and banking.

The survey stressed, however, that these predictions are tempered by the amount of activity companies are reporting in the public sector and the financial services sector.

According to the survey growth estimations have not matched up with the reality of market activity.

From 2006-2007 the percentage of respondents servicing the public and financial services sectors dropped from 28 per cent to 27 per cent, and 35 per cent to 27 per cent.

The report suggested that SME software companies are adding value through specialising in certain sectors and providing quality of service and flexibility that larger companies may find difficult to perform.

Nigel Hartnell, chairman of Intellect’s Software Group and executive director of software as a service company FastFill Plc said: “The results from this survey show that in today’s current economic climate, some SME software companies are finding their size an advantage, not a hindrance.

“Agile SMEs have the ability to respond to market changes and customer needs more quickly than large companies. Through innovation and intensive customer focus, many respondents believe they will generate impressive levels of organic growth.”

The survey also revealed that outsourcing and offshoring is on the rise, as Asia becomes less popular. The percentage of respondents outsourcing to Asia dropped to 44 per cent from 55 per cent in 2007. Both Western and Eastern Europe saw an increase in R&D outsourcing.