UK small businesses see challenges in financing, opportunities in AI
While the UK economy has shown surprising resilience this year, our economists point out that businesses will contend with a number of headwinds in 2024, including relatively sticky inflation and growth that’s expected to lag behind the US and the rest of Europe.
To better understand how small enterprises are expanding amid these challenges, we spoke with alumni of 10,000 Small Businesses UK gathered at the Goldman Sachs Generation Growth event in November. Since it was started more than a decade ago, the program has given a boost to more than 2,200 small businesses that generate £5.8 billion ($6.6 billion) in revenue and employ over 53,000 people.
10,000 Small Businesses UK graduates have an edge when it comes to financing: More than 70% of our alumni have been able to take on external financing, which is twice the rate of UK small businesses generally. But even so, business leaders at Generation Growth say access to finance can remain opaque.
At the same time, they’re looking ahead to implement new technologies like artificial intelligence, scouting real estate to hire more workers, and putting in place unique cultures for their organizations.
Tina Warner-Keogh, co-founder and co-CEO of Warner’s Distillery, a farm-born independent craft distillery in the UK, says financing is one of the biggest challenges facing small- and medium-size businesses.
“Access to finance is absolutely essential for growth and driving your business, but there is a fog that surrounds it — nothing is in one place when it comes to access to finance. It feels like there are a lot of things that need to change both in terms of awareness, education, and availability of information.”
When it comes to technology like AI, Warner-Keogh says there are there are capacity issues to overcome before firms like hers can implement newer systems:
“We are hoping to integrate and maximize the use of digitalization and AI, but we also face the challenge of balancing time and resources to learn more. We’re sporadically using AI, but we are looking to make a more concerted effort for our plans for next year. We have already seen the potential benefits of digitalization with our business growing significantly through social media, but we’re moving away from the perception that it can only help our marketing efforts. In terms of customer service, [AI] has the potentially to really increase efficiency and effectiveness.”
Victor Buchanan, founding director of Dallol Energy, says his team used an internal review to find areas that rely too heavily on manual processing with limited data outputs:
“We’re working on a program to automate specific processes after discovering areas with a high level of manual processing and limited data, which would benefit hugely from digital automation.”
And even as labor markets show signs of cooling from ultra-overheated levels, businesses still have critical decisions to make when it comes to facilities and culture.
Alice Rivers Coopers, CEO and co-founder of Posh Totty, is based in Brighton and manufactures her hand-made jewellery pieces at a workshop in central Brighton:
“Our team is young and fun and want to work in central Brighton. Although we have a workshop which works well for us now, it is the only available manufacturing space in central Brighton. If we move out of the city center to grow or for a better working set up, the concern is I may lose members of my team who wouldn’t want to relocate or commute to a more rural location.”
Buchanan of Dallol Energy says developing a natural culture is important for his enterprise:
“Lots of companies put a lot of focus into developing a culture which is right for them, but for us that culture has developed naturally. We focus on hard work and flexibility, with our working relationships built on a strong foundation of trust.”