Two-thirds of UK’S small businesses expect revenue growth in next year

● Three million are operating as ‘balloon businesses’ to meet demand fluctuations

Britain’s small businesses are optimistic about their growth prospects despite operating in a “challenging” environment, according to new research published today.

Close to two-thirds of small and medium-sized enterprises (SMES) in the UK plan to expand in the next 12 months, as 64 per cent anticipate their revenue will grow by an average of 10.6 per cent in that time.

One third of SMES intend to employ new full-time staff, while slightly fewer (28 per cent) plan to recruit part-time employees and 21 per cent will look to hire temporary workers to deal with seasonal demand.

The research, from insurer Direct Line for Business, identified around three million SMES operating as so-called “balloon businesses”, that expand or contract through- out the year to meet business demand.

The trend is defined by companies that recruit and release employees in response to relevant business needs, or open pop-up or temporary locations as demand fluctuates, rather than following a continual growth trajectory.

Almost three quarters (74 per cent) of SME owners have set up their business to be scaled up or down in this way without affecting its viability.

SMES also highlighted a lack of consistent revenue throughout the year, with significant peaks and troughs. Decision makers identified June as their most profitable month, while January has traditionally been the month they record their lowest revenues.

Robert Blackburn, director atthesmallbusinessresearch Centre, Kingston University, said: “Today’s small firms operate in challenging environments but it is their agility and their ability to respond quickly to market opportunities and threats, that enables them to survive and thrive.

“Hence, it is important that small firms are able to adjust their costs according to their requirements, rather than be burdened with a fixed outlay.

“Driving down the so-called fixed costs of the business is one way of achieving this. Indeed, the ability to manage their cost base flexibly can be the difference between success and failure of a small firm as market opportunities come and go and the performance of the business fluctuates.”

Jazz Gakhal, managing director at Direct Line for Business, said: “Traditionally business growth has been viewed as a linear process, but small companies are now incredibly agile.

“By adopting flexible working practices, they can quickly scale up or down their operations without putting the company’s survival at risk.”