Small Talk: Davos gets a lot of attention but it has little relevance for most businesses

It is the SMEs' views we should be listening to and their problems we should be prioritising for solutions

Last week’s annual vanity project for the leaders of big business and their friends in government – otherwise known as the World Economic Forum in Davos – promised to tell us how “mastering the fourth industrial revolution” would enable us to “transform entire systems of production, management and governance” and “raise global income levels and improve quality of life”.

For which one might feel grateful, were it not for the forum’s usual failure to invite any of the entrepreneurs and small business leaders who, back in the real world, are actually doing most of the work driving the global economy.

Instead, Davos featured the same tired old line-up of chief executives of global businesses and their acolytes, whose companies paid hundreds of thousands of pounds for the chance to attend this annual festival of corporate lobbying.

To see why this matters, consider the statistics. In the UK, small and medium-sized enterprises (SMEs) now represent 99 per cent of all private businesses, account for 60 per cent of private sector employment and produce roughly half of all the turnover generated by private businesses. Even more significantly, studies have suggested these firms are behind three-quarters of new jobs in the UK economy; the OECD’s data, moreover, suggests the UK is pretty typical of developed economies in these regards.

In other words, any country that wants to boost economic growth and increase rates of job creation needs to focus on its SMEs. It is their views we should be listening to and their problems we should be prioritising for solutions.

At the World Economic Forum, however, that’s not what’s happening at all. “Davos is remote and completely out of touch with the economic realities faced by entrepreneurs and the owners of small and medium-sized businesses,” says Stephen Kelly, the chief executive of the software and services firm Sage, which specialises in working with SMEs.

In fact, Kelly is so outraged by Davos’s lack of relevance that he’s commissioned research among SMEs to get their views. “We found just 4 per cent believed that Davos had any relevance to them,” he says. “In fact, 60 per cent didn’t even know it was happening.”

It is, of course, the right of any group of wealthy individuals to gather half way up a mountain to discuss what they feel are the issues of the day. But the problem is that Davos sets the agenda: policymakers and civil servants return from the event with a new perspective on what their priorities should be, and the disproportionate outside interest in the meeting (including from the media) drives this process. Never mind that the agenda in question reflects the wants and needs of only very large businesses.

This year’s meeting is a case in point. Set against a backdrop of concern about slowing growth in China and global stock market volatility, the meeting was dominated by macro-economic debate and power plays between central bankers, politicians and institutions such as the IMF.

Back in the real world, meanwhile, SMEs report reasonable levels of optimism about the year ahead – the latest confidence index from the Federation of Small Businesses is upbeat, for example – and would be even more positive if anyone bothered to listen to them. 

“The real heroes of the economy aren’t even in the room at Davos,” Kelly adds. “The result is that the agenda it drives is completely unrepresentative of the issues they face.”

This doesn’t go unnoticed. Entrepreneurs are battling to deal with challenges such as a higher minimum wage and the cost of the auto-enrolment pensions regime; their growth strategies are frustrated by the failure of customers to pay their bills on time; they’re held up by endless delays over major infrastructure projects such as the Heathrow/Gatwick debate; and they’re at the mercy of their banks. And while they concentrate on creating jobs in the face of so much adversity, they see their political leaders hanging out with the global elite rather than addressing the challenges back home. They must be tempted to think: why bother? 

Pre-referendum nerves add to traders’ currency risk

The debate over the UK’s continuing membership of the European Union is causing problems for small businesses that sell products and services overseas, irrespective of the final outcome, new research shows. Three-quarters of affected SMEs express concern about increased currency volatility in the run-up to the referendum, for which a date has not been set.

The survey, published by the foreign currency company World First, found that small businesses were often dangerously exposed to currency fluctuations. Some 45 per cent said they had previously been caught out by a sudden move in exchange rates, and more than half of those businesses described the impact as severe.

“With the EU referendum hanging like an economic sword of Damocles, there is an enormous degree of uncertainty and concern,” World First chief economist Jeremy Cook said. “One only has to look at the precedent set by the Scottish referendum, which saw sterling lose around 6.5 per cent against the dollar in the two months before the vote.”

Owners turning to drink to cope with growing stress

Britain’s small business owners are so stressed out that more than a third of them are turning to alcohol in order to find some respite from their troubles, new research claims. A survey published by Crunch Accounting says 35 per cent of small business owners admit to relying on alcohol in order to relieve stress.

Respondents said the unpredictability of their work was their biggest worry, with 23 per cent pointing to this as a source of anxiety. Late payments (13 per cent) and tax and red tape (9 per cent) are also significant issues. Jason Kitcat, micro-business ambassador at Crunch, said: “It’s clear that the Government needs to do more to reduce the burden of red tape and to ensure that freelancers and small business owners’ rights are being better protected.”

Small Business Person of the Week: Crispin Lilly, Chief executive, Everyman Media Group

“The awards season tends to be our busiest time of the year, boosting the numbers of people in our cinemas, and this year’s Oscar and Bafta nominations are a particularly interesting mix of very commercial films such as The Martian, and more traditional choices such as Room and The Big Short; the timing of the release of The Revenant is very smart and it’s done far better than many people expected on opening.

“Each venue we go into with Everyman, we try to create something that is new and interesting, rather than growing through identikit roll-outs.

“We do have some shareholders who would like us to be more aggressive, but doing 10 to 15 cookie-cutter new openings each year would be the wrong model for us. Even so, this is a business that is growing rapidly. We now operate 16 cinemas all around the country, compared with only 10 at the beginning of 2015; we have definite plans for six more this year and next, and we’re close to reaching agreement on five other projects.

“This is a story that really started 12 years ago when our chairman got involved with the original Everyman cinema in Hampstead. It doubled in size and then the business acquired the Screen group about seven years ago and brought in new shareholders. By 2013 we were ready to raise money on the Alternative Investment Market – the cinema we opened in Leeds that year was a real game changer for us because it showed we could do openings on a larger scale and – perish the thought – outside London.

“We raised further finance from AIM last year in order to fund the purchase of four wonderful old sites from Odeon, and that transaction has also brought in some really interesting and supportive new institutional investors. We think we’ve got a really bright future.”

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