The biggest challenges facing small businesses in 2018 – part one

10 July 2018

Is business getting harder?

Running a business has always been challenging. Making the activity worthwhile for both the owner and the employees even more so. As accountants we are in a privileged position – we get to hear of the grumbles, genuine grievances, and hardships of our business clients earlier and in more detail than other advisers. What has become clear is that challenges fall into two main categories: internal ones which have existed since people began to trade, such as staff problems, awkward customers, lack of finance, poor leadership, creaking supply chains and external ones, that seem to have worsened lately, such as regulations, tax, technology, foreign competition, and social attitudes to work.

Technology and Globalisation

Of all the new challenges that SMEs now have to face, surely the twin issues of technology and globalisation are the most far-reaching. In a survey carried out last year by SME Insider, 64% of small businesses said that their greatest problem was competition from ‘digital players’ in their sector. One only has to glance at the state of the typical British high street to see the effect that online trading is having on our retailers, even on the larger ones who have the resources to fight back, and this challenge is by no means confined to the retail sector. Worryingly, only 6% of the respondents of the same survey said that they were investing in the technology needed to compete. Innovation is certainly part of the answer, but most small businesses lack the required in-house expertise. See our recent blog on innovation for further thoughts on this.

Artificial Intelligence and the use of data

On the same theme, the challenge from “big data” and artificial intelligence is getting serious. Very large organisations have now become extremely effective at gathering data on customers. AI allows them to analyse and use the data in unprecedented volumes. There is a danger that even in sectors previously dominated by small businesses, large multinational organisations will begin to corner the market by focussed marketing campaigns and slick, efficient, web-based customer service. If you would like to know more read our blog of 1 May.


Much as we fear the effects of globalisation on our businesses, ironically it is the populist anti-globalisation backlash that is poised to create further challenges. The 2016 referendum has given rise to a great deal of uncertainty. The Government has pledged to deliver frictionless trade between the UK and the EU, but no-one knows yet if and how this can be delivered. It has also stated its intention to set up new trade deals across the world, in particular with Commonwealth countries. If you are a manufacturer that, for example, buys component parts from a supplier in Germany, you cannot rely on the assumption that this time next year you will still be able to order a consignment today and have it delivered tomorrow, or that no duty will be payable on the goods at the port of entry. You may therefore be looking for a supplier in a Commonwealth country, but that presents obvious transport and quality control problems. Then, just when we thought that we could perhaps cope with the unpredictability, politics intervened again, in the shape of Donald Trump’s trade war, starting with tariffs on steel and aluminium but possibly ending in a world-wide reduction of international trade. Even if you are not directly involved in export or import it’s a fair assumption that some of your main customers are. Will this affect you, and will you be able to do something about it? Read more in our blog of 21 May.

Employment trends

There is no doubt that the millennial generation has a different attitude to work from their parents’. They are much more tech-savvy but also keener to balance life with work. They are also more mobile, and likely to change jobs, not necessarily for the prospect of higher remuneration but rather for the opportunity to work flexible hours or enjoy such benefits-in-kind as gym membership or health insurance. At the moment, when unemployment is low and there is a shortage of skilled employees, employers need to improve their offering to get the people they need. Those businesses that successfully rise to this challenge will benefit enormously from the knowledge of technology that this generation holds at its finger-tips. To find out more on employing millennials click here.


And then there are the factors that take up time and energy that we could better use on business development. Examples include the new General Data Protection Regulation, workplace pensions, ‘Making Tax Digital’, and ever-increasing employment legislation.

In our next blog we will be looking at the challenges to your business that come from within and how to use them to achieve success.

For further information about any of these topics, please speak to one of our accountants in Newcastle, Jarrow or Sunderland.

As one of the leading firms of accountants in the North East, with offices in Newcastle, Sunderland and Jarrow, we have the expertise to advise you on a wide range of tax related issues. If you would like to speak to one of our local experts, please contact us.