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Trade, skills and green growth: how SMEs can gain an edge

Author: ICAEW Insights

Published: 25 Jan 2022

Lynn Oxborrow of Nottingham Business School discusses the challenges and opportunities for SMEs as we emerge from the pandemic.

As Associate Professor in Small Business and Supply Chain Management at Nottingham Business School, Lynn Oxborrow knows all too well the challenges that UK businesses have faced over the two years. As we slowly emerge from the pandemic, it’s a focus on good management and sustainability that will help the UK’s SMEs to weather the storm and grasp future opportunities, she says.

Oxborrow admits she’s been amazed at the resilience demonstrated by many of the UK’s SMEs over the past two years. But the hunger to take advantage of new opportunities for growth is being thwarted by knowledge gaps at a senior management level. Supply chain issues have dominated the headlines but questions about sustainability, and the management implication of new ways of working, are important issues for ambitious SMEs to address if they are to thrive.

Since lockdown, Nottingham Business School, part of Nottingham Trent University, has been working with the Chartered Association of Business Schools to deliver government-funded training programmes aimed at SMEs including the 12-week Help To Grow: Management course. Oxborrow was also personally involved in developing modules and supporting materials for the management programme.

Oxborrow says the focus of many of the delegates – all in SME leadership roles – is now less about solving problems to stay afloat and more about taking advantage of new trade opportunities, whether that’s devising new products and services or branching out into new markets.

“SME leaders have been surprisingly adept at being able to hold their heads above water or even grow under very difficult circumstances,” Oxborrow says. Supply chain issues have continued to plague product manufacturers and show no immediate signs of abating. The knock-on effect of cost increases for transporting components and shipping to customers has been a bitter pill to swallow.

But changes to working practices have proved the trickiest management curveballs for SMEs. Homeworking initially presented big challenges to employee engagement and well-being, Oxborrow says. More recently, the big issue is recruitment and finding the skills needed to be able to carry on and meet their orders, she says. “It’s a double whammy because they’re having to wait for parts or services provided from elsewhere and then don’t have the staff to process them when they arrive – due to staff shortages. Some are having to limit the orders they take on or schedule longer lead times.”

Oxborrow says low availability of skilled staff has been compounded by changes to immigration rules and overseas workers leaving the UK. “Tightening the borders has had a knock-on effect in terms of the supply of labour; it has become a sellers’ market when it comes to people looking for skilled jobs.” It often means SMEs are losing out to larger corporates, which can offer better packages and even golden handshakes to lure people in. Against a backdrop of rising inflation and interest rates, money talks.

Finding ways to engage staff – whether it’s through company culture, inclusivity, social activities or having charity causes that teams can pursue – will help, Oxborrow says. “It’s also about letting people have a voice, not necessarily in what they do, but how and where they do it.”

Small businesses want to make a difference. With COP26 still fresh in people’s minds, the concept of green growth is gaining traction. “Environmentally sustainable working practices can often save organisations money. But it also gives them the opportunity to potentially win new business because their customers – often larger businesses – are interested in demonstrating that their supply chains are sustainable. Consumers are also more interested in purchasing responsibly and this might give SMEs new opportunities in terms of products and processes. Because of the sheer number of SMEs, collectively they can have a big impact.”

From a workforce perspective, an environmental focus offers the opportunity to engage and retain workers, an important consideration given the current frenzy of hiring activity. “Getting your whole workforce engaged in programmes that support doing something responsible is the kind of thing that makes younger workers in particular feel as if they have something to contribute,” Oxborrow says.

The trick is to prioritise, starting with initiatives that have a measurable and quick impact. “It’s not necessarily about trying to do everything at once. You need to be pragmatic – tackle the low-hanging fruit. But there also needs to be a plan to identify things you can work towards and make progress.”

SMEs may not have the clout to dictate to their suppliers how to work in a more sustainable way, but they can make choices about alternatives, Oxborrow says. “You can look at your suppliers and materials, or consider how your product could be recycled or repaired. Even digital businesses can think about where they store their servers or data. They’re all matters of choice.”

The Help to Grow: Management course introduces sustainability as a leadership concept, from having the right vision and values in the company to managing innovation and digital adoption so you can change and monitor what you’re doing. There are also operational considerations; organisations should work leaner and smarter in terms of resources, reduce their waste and support circularity.

Oxborrow is confident that SMEs can rise to the green growth challenge. After all, if the pandemic has taught us anything, it’s that we don’t have to do things the way we’ve always done them. The benefit of small businesses is that they are much more able to be responsive than their larger counterparts, Oxborrow says. “All of those things are in the gift of SMEs, but they have to be positively led in an inclusive way, so everyone is involved.”

Trade: clean growth and tech

Clean growth and the application of major emerging technologies to existing sectors are two key characteristics of trade in 2022. Add to these levelling up supported by foreign direct investment, and there are exciting future prospects for business and the prosperity of communities globally.

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