New breed of “size zero” SMEs emerge
ready to exploit market opportunity
65% of SMEs overhaul working styles to cope with downturn
2.8m turn to outsourced specialist support to improve focus
New lean models fuel optimism as SMEs look to create 400,000 jobs
Two thirds (65%) of SMEs1 in the UK have been forced to overhaul how they
work in reaction to poor economic conditions, according to a new report out
today from CitySprint.
The report, ‘Collaborate UK’, highlights the new strategies being followed in
response to the downturn, revealing a significant cultural shift among the
dynamic SME community and the emergence of a new breed of leaner, more
focused ‘size zero’ businesses.
It found that a quarter (24%) of the 700 SMEs surveyed are now more open to
working with other businesses than they were before the downturn and 14%
now work with more partners as a result. 1 in 8 would even team up with a
competitor if there was a business benefit.
The report identifies the emergence of a new breed of “size zero” businesses
– organisations that are stripping out non-core functions by embracing
outsourcing, exchanging services and sharing expertise, so that they can
focus on their strengths (see map 1 for regional trends):

Smart outsourcing - 2.8 million2 SMEs have embraced outsourcing,
buying in a mean of five non-core business functions. Among this
group, the projected mean spend on outsourcing in 2013 is £143,000
with 18% planning to increase it, while the biggest spenders can be
found in the East of England, where SMEs plan to spend an average
(mean) £203,000

Exchanging services - nearly half a million SMEs are engaging in a
‘bartering’ economy3, by trading their services with other businesses in
lieu of payment. Wales is leading the way, with 16% of SMEs there
saying they have contra deals in place

Sharing expertise - over a quarter (28%) work with other businesses
to obtain sales leads and win new business while 22% share best
practice with other businesses. A huge 28% of businesses in Yorkshire
1 SME
= small and medium sized enterprises (less than 250 employees)
Based on 60% of respondents who say that they outsource in some way. 60% of
the total number of SMEs (which is 4,795,200 according to BIS) in the UK is
2,877,120
3
Based on 10% of respondents who say that they have contra deals in place with
other businesses. 10% of the total number of SMEs in the UK SMEs (which is
4,795,200 according to BIS) is 479,520
2
and Humberside would even consider working with a competitor
(compared to the national average of 12%)
These smarter ways of working have perhaps contributed to a feeling of
cautious optimism among SMEs as they look to create over 400,000 new jobs
this year, with the West Midlands showing the biggest signs of optimism and
the North East the lowest (see Table One).
TABLE ONE: Future employee headcount expectations amongst SMEs
REGION
Expect to hire
more staff
Expect staff levels to
remain the same
Expect to hire
fewer staff
Net increase/decrease
in employee intentions
Number of SMEs
(BIS)**
Net number
of jobs*
East
21%
67%
12%
9%
511,488
46,034
East Midlands
23%
58%
19%
4%
324,675
12,987
London
27%
63%
10%
17%
805,194
136,883
North East
7%
72%
21%
-14%
132,867
-18,601
North West
15%
77%
8%
7%
431,568
30,210
Scotland
11%
79%
11%
0%
318,681
0
South East
19%
67%
14%
5%
767,232
38,362
South West
11%
78%
11%
0%
477,522
0
Wales
19%
73%
8%
11%
192,807
21,209
West Midlands
29%
69%
2%
27%
368,631
99,530
Yorks/Humberside
19%
77%
4%
15%
344,655
51,698
418,312
*Net number of jobs for each region is based on the net percentage of SMEs in each region hiring or reducing one
additional employee
**The number of SMEs in each region is based on data sourced from BIS, ‘Business Population Estimates for the UK
and Regions 2012’, where 99.9% of businesses in each region are SMEs:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/80247/bpe-2012-stats-release-4.pdf
Professor Robert Blackburn, Director, Small Business Research Centre,
Kingston University, comments on the findings: “This more open, collaborative
culture not only strengthens the capabilities, flexibility and efficiency of SMEs
but has a wider economic benefit, stimulating more opportunities for
enterprises as ‘suppliers.’”
Patrick Gallagher, CEO of CitySprint comments on the report, “By sharing
expertise, exchanging services and embracing smart outsourcing, SMEs
across the country are successfully stripping non-core functions out of their
businesses. This is creating a new breed of leaner, “size zero” businesses,
able to focus on their core area of expertise whilst tapping into their networks
for everything else, as and when they need something.”
Gallagher concludes: “Our report shows that far from feeling isolated during
the economic downturn, there are real opportunities for new intra-SME
contracts across the sector and country and a real sense of optimism.
Through the work we do, it has been really fascinating to see businesses
seize this opportunity and, in many cases, play a part in it.”
MAP 1: Region collaboration trends