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POLITICS Leading from the front


With the uncertainty that Brexit, turbulence in the global economy and issues closer to home have caused, strong business leadership is more vital than ever, especially in smaller firms. Professor David Rae, Director of the Centre for Enterprise and Innovation at Leicester Castle Business School, explains why.


THE BIG PICTURE Growing economic and political uncertainty is affecting businesses directly and indirectly. Against a backdrop of rapidly changing


conditions, business leadership, resilience and competitiveness are increasingly important, particularly for smaller businesses which can lack the scale, voice and influence of larger counterparts. The prosperity and prospects for small and micro-firms in the regional and national economy are an issue of continuing interest and concern. The development of local industrial strategies


by the region’s LEPs demonstrate how central small firms are to economic activity and employment across the region. However, evidence from the Enterprise


Research Centre shows East Midlands micro- firms are less likely than the national average to export, use external finance, innovate or develop new-to-market products, and improve productivity. Many are lower value-adding businesses, competing on price rather than service and innovation. Small firms in the East Midlands share national concerns regarding skill shortages and recruitment difficulties, as well as falling profitability. Smaller firms generally have lower rates of innovation and R&D investment, and are less likely to have formal management practices. Their growth rates are relatively low, especially in the manufacturing sector, when compared with services. The prolonged lead-up to Brexit highlighted a


lack of strategic planning and risk management within East Midlands SMEs, with business owners busy running day to day operations with limited time for contingency planning. Globally, economic conditions are becoming


more complex, uncertain and concerning in their implications for business activity and smaller firms and there are growing predictions of a global economic slowdown in 2020, with recessions considered likely in a number of countries, including high-performing economies such as Germany and Singapore. A host of other factors, notably the effects of


climate change and policy and market responses to environmental factors, to the potential impact


54 business network November 2019


of technologies such as artificial intelligence and blockchain on business activities and employment, continue to emerge. Collectively, these create a complex, rapidly changing and unpredictable business environment; illustrating why business leadership, resilience and competitiveness are increasingly important. The challenges facing small firms in the East Midlands include:


• An uncertain economic outlook at global, national and regional levels, which is affecting business confidence on spending and investment


• The potential effects of Brexit are a continuing concern


• Increasing competition, including the potential removal of tariff barriers to imports


• Firms experiencing the effects of new digital technologies which they may not have adopted


• Low investment in innovation limits the value firms can add through new processes and products


The East Midlands risks being at an increasing


competitive disadvantage, in which our small and micro-firms could lose out in a critical period of change for the economy. Adverse conditions are a test of effective leadership. Agile, well-informed and determined leadership will be essential in the next few years.


THE UPSIDE Despite global uncertainties, the East Midlands economy continues to be remarkably resilient. With its diverse business base, broad range of


sectors and access to local, national and international marketplaces, the wider economy spreads both its success and exposure to risks. The large proportion of micro and SME


businesses are part of its strength, limiting dependence on a small number of important large firms, whose investment and location decisions may be governed by factors at global level. Many smaller firms operate within complex supply chains driven by significant OEM manufacturers based in the region, with their prospects closely intertwined.


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