SME Value and Contribution to the UK Economy

Small and medium sized enterprises (SMEs) are the foundation of the UK Economy, generating value and making a significant and critical contribution to the UK Economy, its productivity and performance. How best can the UK improve productivity, to levels that match its global partners i.e the US, Far East, Germany and the rest of Europe?

Small and medium sized enterprises (SMEs) are the backbone of Britain. Napoleon is said to have once remarked that the British are ‘a nation of shopkeepers’. He was right in as much as Britain is a nation of small and medium sized enterprises.

According to the Department for Business, Enterprise & Regulatory Reform (BERR)’s Enterprise Directorate Analytical Unit, in 2007, the UK economy is 99% SMEs. So out of a total of 4.8m UK businesses, less than 1% were large corporations (i.e. over 250 employees).

Let's ignore one-man-bands who represent a huge 73% of all UK businesses yet only account for 7.4% of Gross Domestic Product (GDP). UK SMEs, employing one person or more, employ 14.23m people, out of a working population of approximately 30 million.

In terms of UK turnover and Gross Domestic Product (GDP) UK SMEs account for 1.48trillion sterling (British Pounds). Despite being only half the story and half the picture, large UK Corporations dominate the skyline, the news and the economy. Business news daily is full of stories about BP, Barclays, M&S, British Gas, BT, and the UK Government. There is a strong political focus on the UK Public sector, which is responsible for up to 1/3rd of UK’s economy.

As a result the UK SMEs sector is largely overlooked considered fragmented and often ignored. Yet it is precisely this sector - UK SMEs - which provides the vital and fertile seed-bed from where tomorrows large corporations will emerge.

Even among SMEs themselves, it is commonly believed that a thin slither of the sector is the one that outperforms all other sectors of the economy, including the large UK corporations, i.e. SMEs in the 100 employees - 200 category. According to BERR statistics for 2007 this sector employs 4.4% yet contributes 5.6% of total UK GDP, showing impressive productivity. However this is also true for the ALL SME sectors, with the preceding SME sector – companies with 50-99 employees employing 4.4% of the UK workforce yet delivering 5.7% of performance in UK turnover.

Better still are SMEs from 20-49 employees who have employ a greater workforce 6.3% - and therefore a greater benefit to the UK economy, and still manage to produce an impressive 8% of UK GDP. In fact ALL SMEs (with at least 1 employee) outperform the large UK Corporations in terms of productivity despite having minimal resources, little support and being largely ignored. Large UK Corporations of 250 employees and over account for 52% of employment but less only 50.8% of UK turnover. It is fair to say that Central and Local Government accounts for 5.13m employees and may well distort the figures. This article is not about undervaluing the role of large UK corporations but an attempt to highlight the magnificent contribution of SMEs to the UK economy without the resources of a large corporation.

In conclusion, there is substantial evidence that the UK economy is supported by SME performance, and that improving performance will have a substantially positive effect on entire UK economy. I call on the UK Government to work closely with the sector, and most importantly with the independent business advisors and practitioners who work at the coal face in the daily struggle to deliver critical business support to SMEs.

To SME owners and senior business managers, in order to improve performance in the ever changing marketplace you need ‘people in your corner’, inspiring you, guiding you, empowering you, and supporting you to build a more consistent, stable and viable tomorrow.

Your local Regional Development Agency (RDA)’s will have a register of business advisers, or you can try a new service like a business service finder to put you in touch with experienced practitioners who have seen it, done it, been there.