Catch up on the big issues with our Small Business Bites. We cut through the noise to dig out stories that really matter to UK small business owners, from the last two weeks. Here’s our roundup of things you need to know:

Top cities for growth prospects 

Smallbusiness.co.uk reported on the latest Business SME Growth Forecast Index by npower Business and Capital Economics this week. The report identified the City of London, Bristol, Leeds, Birmingham, Brighton and Hove, and Manchester as the cities with the best potential for SMEs over the next five years.

It also estimated that some £16 billion will be generated annually by these British cities, with more than 200,000 jobs created by 2020 in the UK economy.

Philip Scholes, head of npower Business, was quoted in the article saying: “SMEs are critical for future economic growth in the UK. These businesses have been the backbone of the country in recent years and, as this research shows, there is significant opportunity for them to grow further over the next few years.”

Small businesses meet Living Wage challenge

New research from the Federation of Small Businesses (FSB) found small firms are meeting the challenge posed by the new National Living Wage (NLW) with the majority (59%) absorbing the costs by taking lower profits.

However, some companies are struggling to meet the Living Wage, and in the FSB’s 2016 Q2 Small Business Index, 47% of small businesses said wages are now the main contributor to the rising cost of doing business.

Research also shows that the sectors most affected by the wage increase were those with tight margins and where low wages are most common. In particular, retail, wholesale and hospitality, and accommodation businesses say they have been negatively impacted by the NLW.

Around a third of firms surveyed (32%) said the new wage has led to some increase of their wage costs.

Growth of UK economy over summer

Private sector activity rose modestly again in the three months to August, according to research by the CBI (Confederation of British Industry).

It found that output growth across the manufacturing, distribution and service sectors rose steadily at (+8%), at a broadly similar pace to the previous month (+5%).

Meanwhile, sales stabilised in the retail sector after four months of decline.

Rain Newton-Smith, CBI Chief Economist, said: “While it’s still early days following the EU vote, the economy is continuing to grow at a steady pace, despite mixed performances across different sectors.”

The survey of 833 respondents showed that over the next three months firms expect private sector growth to see a similarly steady rise (+7%) – an improvement on July’s expectations.

Firms miss out on international sales 

Two thirds of UK small businesses are not exporting abroad, potentially missing out on millions of pounds in lost revenue, according to new research by the Royal Mail. The reasons for this include the perceived cost and complexity of getting through customs (26%), a lack of knowledge of the market (21%) and language barriers (21%).

Among the 40% of business who sell internationally, just over a quarter of their sales this Christmas (26%) are expected to come from international orders.

The study of 300 senior decision makers and small business owners was conducted by Royal Mail to assess small business owners’ attitudes to international growth.

Lack of digital skills among micro-businesses 

70% of micro-businesses (0-9 employees with a turnover or balance sheet of less than £1.7 million) think digital knowledge is critical to their future success – yet over 85% lack the skills, according to a survey by domain name website 123-reg.co.uk.

Tom Thackray, director of innovation at CBI, who is quoted in the executive summary of the report, said: “This research emphasises the importance of closing the digital divide in the UK. Breaking down the barriers for micro firms to adopt digital technologies is essential for unlocking productivity and growth in the economy. The know-how exists in the business community and for micro businesses getting started on their digital journey, building these connections and access to tangible resources is crucial.”

In other news

• Company Check’s annual Business Census will launch this autumn, asking thousands of businesses for their views and predictions for 2017 – sign up to our newsletter below to keep informed about when it launches.