Professional sector notes growth, but retail and construction slows
Small business entrants into the key UK sectors have increased since 2010, although growth rates have varied wildly, new research shows.
Whereas growth in professional and technical sectors has outstripped all other industries during the past seven years, other sectors including retail and construction have slowed.
The data from Hampshire Trust Bank, done in partnership with the Centre for Economics and Business Research, noted that the number of SMEs in legal services, architecture and vets has risen by nearly 40% since 2010.
Growth of 33% was also noted in information and communication sector, while business services increased by 25%.
All of these sectors are above the wider growth rate average for the UK of 17% and reflect increasing confidence among many SMEs.
The research shows that three in five firms in the accountancy, IT and communication sectors are optimistic when it comes to their long-term prospects.
A lower proportion of SMEs have entered the construction and retail sectors though, although both still noted growth since 2010.
The research suggests that the constructor sector has a number of barriers to overcome, including the costs of planning and meeting other regulations – it is claimed that smaller firms can struggle to meet strict deadlines and turnaround times.
However, it is also noted that opportunities are being noted outside of London and the South East, especially in cities such as Manchester, Birmingham and Bristol, which may provide a boost for the sector.
The finances required to get small projects off the ground can put a strain on construction SMEs, as cash flows can be severely pressurised if not carefully managed.
The latest available figures from the Insolvency Service reveal that the construction sector had the highest level of insolvency by sector (for the 12 months ending Q3 2016) as nearly 2,500 firms were declared insolvent.
Around half of those in the construction sector are optimistic over their long-term forecasts according to Markit data.
HMRC is also consulting on a set of proposals to tackle fraud within the construction sector relating to labour provisions and when it is time to pay taxes and VAT.
By Phil Smith