Since 2000 the rate of growth of Small and Mid-sized Enterprises (SME’s) in the UK has been both dramatic and sustained. There were over 5.2 million SME’s at the start of 2014, the first time the business population had exceeded 5 million!
SME’s underpin the UK economy by employing over 15 million people, which equates to 48% (12.1 million) of UK private sector employment. UK SME’s also generate an annual turnover in the UK of £1.6 trillion which is around 33% of private sector turnover.
This post has also appeared on our website (https://korolit.com) and provides a few statistics to highlight the importance of these businesses to the UK economy. The source data for this post has been provided via the Department for Business Innovation and Skills – ‘The Business Population Estimates (BPE) for the UK and Region’. (Licenced as per: http://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/).
In terms of size SME’s are classified as follows:
- Small – 0-49 employees
- Medium – 50-249
- Large – 250+ employees.
Fig 1: Estimated number of businesses in the UK private sector and their associated employment and turnover, by size of business.
Growth in SME numbers has mainly driven by non-employing businesses which increased by 263,000 (up 7.1%) between 2013-14. But there has also been an increase of 66,000 (up 5.5%) in the number of employing businesses – only the second individual year of growth since 2008.
In 2014, 99.3% of the 5.2 million private sector businesses were small and 99.9% were small or medium sized (SMEs). Three main categories of business make up the overall population. In 2014 there were 1.5 million companies (29% of the total), 460,000 self-employed partnerships (9%) and 3.3 million sole proprietorships (62%).
The increasing levels of UK self-employment form a key driver of the SME business population growth since 2000. It is also interesting to note that in recent years the majority of business population growth has been amongst non-employing businesses (of all types) which comprise 91% of total UK SME growth since 2000.
SMEs together account for more than half of the total employment (60%) and almost half of the turnover (47%) in the UK private sector. Small businesses alone account for 48% of private sector employment and around 33% of private sector turnover. Businesses with no employees account for a staggering 76% of all private sector businesses (4.0 million businesses), 17% of private sector employment and 7% of private sector turnover in 2014.
Private sector businesses are generally classified into three main legal forms:
- Sole Proprietorships, owned by one self-employed person
- Ordinary Partnerships, owned by two or more self-employed people
- Companies (including public corporations and nationalised bodies) in which the working directors are not classed as self-employed.
In 2014 around 62% of private sector businesses were sole proprietorships, 29% were companies and 9% were ordinary partnerships. There were an estimated 3.3 million sole proprietorships in the UK at the start of 2014, of which 279,000 (9%) had employees. There were 1.5 million actively trading companies, of which 859,000 (57%) had employees. There were also an estimated 457,000 ordinary partnerships, of which 139,000 (31%) had employees.
While a large increase in the number of self-employed people is a key factor driving business population growth some businesses have more than one owner, and some people have more than one business. The number of sole proprietorships alone is estimated to have increased by 197,000 (up 6.4%) in 2014, and the number of partnerships by 17,000 (up 3.9%).
There has also been an increase of 115,000 (up 8.3%) in the number of companies. This follows high levels of new incorporations at Companies House in recent years, although not all of those incorporations will have resulted in actively trading companies.
Of the estimated 5.2 million private sector businesses in the UK in 2014, 4.6 million (88%) were in England. With 934,000 private sector businesses in 2014, London had more businesses than any other region or country in the UK. The South East had the second largest number of businesses with 837,000. Together these regions account for a third (34%) of all private sector businesses in the UK.
London and the South East have both the highest number of businesses and the highest business density rates (relative to the adult population), whilst the North East had the second lowest number of businesses across all the UK countries and regions, and the lowest business density rate with 701 businesses per 10,000 adults.
Fig 2: Number of businesses and business density rate in the UK private sector, by UK region and country (excluding England).
The biggest percentage increases in the number of businesses since 2013 were in Wales (up 13%) and the North East (12%). In contrast the number of businesses in Yorkshire and the Humber increased by only 1%, whilst the business population in Scotland fell by 1% since the start of 2013.
SMEs dominate business numbers within all industrial sectors, but are not spread evenly across the sectors. In 2014 there were 950,000 SMEs operating in the Construction sector, 18% of all SMEs in the UK private sector. A further 779,000 SMEs (15%) were operating in the Professional, Scientific and Technical Activities and 538,000 (10%) in Wholesale and Retail Trade and Repair. The smallest share of SMEs was in Mining and Quarrying, and Utilities (1%).
Fig 3: Share of SME numbers, SME employment and SME turnover by industrial sector.
Wholesale and Retail Trade and Repair accounted for over a third of all SME turnover (35%). A further third of SME turnover was spread across the Construction (11%), Manufacturing (11%) and Professional, Scientific and Technical sectors (10%). The sector with the lowest share of SME turnover was Education (1%).
The UK has historically been referred to as “A nation of shopkeepers”. The phrase was initially attributed to Napoleon Bonaparte. “L’Angleterre est une nation de boutiquiers,” in respect of les rostbifs’ preparedness for war against France. However, it is believed to have first been used by Adam Smith in his “Wealth of Nations”. He wrote: “To found a great empire for the sole purpose of raising up a people of customers, may at first sight, appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers, but extremely fit for a nation whose government is influenced by shopkeepers. ”
This phrase would seem to provide a very accurate description of the ongoing development of the UK business landscape!