SMEs in the property and construction sector are concerned about corporate competition

About two-thirds (62%) of SME owners in the property and construction sector that took part in the survey are concerned that multinationals and other large corporates ‘have too much say’ over the future viability of their business, according to research compiled by accountancy firm, Menzies LLP.

In order to address this, about a quarter (27%) of SME owners in the property and construction sector are intending to boost their own competitiveness by cutting costs and raising finance to re-invest in their businesses and a similar percentage are looking for ways to spread risk. However, 41% said they are not intending to take any action at all, with the majority of this group explaining that they ‘feel unable to do anything about it’.

Just over half (52%) of respondents in the property and construction sector believe the prolonged period of Brexit uncertainty has favoured multinationals and other large corporates, allowing them to gain ground over SMEs.

Lucy Mangan, partner at accountancy firm, Menzies LLP, said:

“Small and medium-sized businesses in the property and construction sector have been suffering in the current climate of uncertainty and many believe large corporates and multinationals have been better able to prepare for Brexit and manage cash flow to give them a competitive advantage.

“Whilst they realise that being smaller and more agile is a bonus, SMEs are concerned that corporates will be more cash-ready to take advantage of any upturn that might come once the Brexit stalemate is resolved one way or the other.”

Harder to make a profit 

The cross-sector survey also reveals that 46% of SME owners believe it has become harder to make a profit in the past year, despite most reporting static or improving sales. Whilst Brexit uncertainty was the main reason given for this, one in three (33%) SME owners also blamed ‘more competition from multinationals and other large corporates’.

“SMEs are feeling the heat of competition, and some believe that large customers are holding too many of the cards, which is putting pressure on their cash flow and operating margins. Some also think large corporates have scale, geographic reach and market dominance on their side,” added Lucy Mangan.

Challenges facing SMEs in the property and construction sector

Commenting on the challenges that lie ahead, SME owners across all sectors identified predicting future demand, cash-flow forecasting and uncertainty surrounding Brexit as their top three factors. In the property and construction sector, these challenges ranked as follows:

  1. Cash-flow forecasting
  2. Predicting future demand
  3. Uncertainty surrounding Brexit

Lucy Mangan said:

“Areas such as property development can be hugely capital intensive, and rely strongly on businesses taking careful steps to monitor their cash position. As such, it is little surprise that property and construction SMEs have identified cash-flow as their top challenge for the year ahead. Uncertainty, both in terms of predicting future market demand and the UK’s post-Brexit trading position, are also key concerns for the sector.”

SME advantages and disadvantages 

SME owners identified five key advantages that corporates have over them in the current climate as follows: ‘bigger budgets to invest in technology’; ‘better access to credit and finance options’; ‘bigger budgets to attract talented people’ and ‘they can afford to take a long-term view’ and ‘better access to strategic advice’.

Two thirds (63%) of SME owners also know they have some advantages compared to large corporates. The top five were identified as follows: ‘lower operational overheads and fixed costs’; ‘quicker decision-making ability due to a lack of shareholders’; ‘better equipped to react to market changes’; ‘less red tape and compliance risk’ and ‘fewer legacy issues’.

About the research

The research was conducted by Menzies LLP in Q1 2019 with a sample of 1,000 UK SME business owners, including 58 owners of property and construction businesses. View the SME Benchmarking Report here.