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Read more…Small businesses are an essential part of the business landscape, but the recent economic turmoil has threatened their survival. So, what is the current outlook? We explore the latest small business statistics in the UK, including the number of SMEs and how this varies between industries and regions.
We also look at how many new businesses survive the first 5 years, and ways you might improve your chances of success with the best business banking options, among other things.
The latest figures show there are 5.5 million small and medium-sized businesses (SMEs) operating in the UK. SMEs make up more than 99% of the total private sector business population, and the number of SMEs has increased over the last decade.
Over the last decade, the number of SMEs peaked at the start of 2020 and has declined slightly since then. This is likely due to increased challenges for UK businesses during the coronavirus pandemic and the cost of living crisis.
However, SMEs have consistently made up the majority of private sector businesses in terms of numbers over the past decade, making up more than 99% of the total every year since 2013.
Year | Number of SMEs |
---|---|
2013 | 4,889,060 |
2014 | 5,236,390 |
2015 | 5,382,485 |
2016 | 5,490,470 |
2017 | 5,687,230 |
2018 | 5,660,000 |
2019 | 5,860,085 |
2020 | 5,972,685 |
2021 | 5,583,245 |
2022 | 5,501,260 |
The term SME refers to any business that is small or medium-sized. This includes the sub-categories of micro-business, small business and medium-sized businesses.
Micro-businesses with 0-9 employees make up the majority of the SME population in the UK, with a total of 95.4%. Interestingly, 74% of SMEs are micro-businesses with no employees. This category includes sole traders and partnerships without any other employees.
Business type | Percentage |
---|---|
Micro (No employees) | 73.82% |
Micro (1-9 employees) | 21.58% |
Small (10-49 employees) | 3.94% |
Medium (50-249 employees) | 0.65% |
SMEs contribute approximately half (51%) of turnover and account for three-fifths (61%) of employment in the private sector. The most recent figures show that UK SME turnover was £2.1 trillion, and they employ over 16 million people a year.
In the last decade, the turnover contributed by SMEs has increased every year except between 2021 and 2022. The number of SMEs also decreased in these years, likely due to the coronavirus pandemic, so it makes sense that the turnover would reduce along with this.
Year | SME turnover (billions) | Large business turnover (billions) |
---|---|---|
2013 | 1,578 | 1,702 |
2014 | 1,647 | 1,874 |
2015 | 1,754 | 1,956 |
2016 | 1,825 | 2,036 |
2017 | 1,905 | 1,834 |
2018 | 1,994 | 1,868 |
2019 | 2,168 | 1,981 |
2020 | 2,270 | 2,076 |
2021 | 2,310 | 2,139 |
2022 | 2,124 | 2,032 |
The average turnover for each SME is estimated to be £385,551, considering there are 5.5 million SMEs in the UK, and they contribute a total of £2.1 trillion in turnover.
This is different from the average turnover for small businesses, which contribute £609 million in turnover but make up just 217,000 businesses in the UK. Therefore, the average yearly turnover for a small business with 10-49 employees is £2.8 million.
On the other hand, micro-businesses (0-9 employees) contribute £808 billion to the economy but make up the majority of the SME population at 5.2 million businesses. They make a much smaller average yearly turnover of £153,963.
As you would expect, the more employees a business has, the higher turnover it can generate!
More than three-fifths (62%) of new small businesses fail within the first 5 years, as the survival rate for UK businesses over this period is 38%. While most new businesses can survive the first year, it becomes increasingly harder for small businesses to continue trading.
These are the following survival rates for new UK businesses formed in 2016:
Year | Survival rate |
---|---|
Year 0 | 100% |
Year 1 | 95.20% |
Year 2 | 77.10% |
Year 3 | 54.10% |
Year 4 | 44.90% |
Year 5 | 38.40% |
The most popular sector for SMEs is construction, with almost 1 million businesses operating in this area. This is closely followed by professional, scientific and technical activities, with just over 760,000.
The sector with the lowest number of UK SMEs is production activities. The UK is not currently known to be a hub for production and is known to have a service-based economy, so it makes sense that a relatively low number of SMEs are operating in this area.
Sector | Number of businesses |
---|---|
Construction | 914,175 |
Professional, Scientific and Technical | 761,735 |
Wholesale and Retail Trade | 547,190 |
Administrative and Support Service | 471,710 |
Other Service activities | 354,770 |
Human Health and Social Work | 340,505 |
Transportation and Storage | 338,345 |
Information and Communication | 334,245 |
Education | 307,840 |
Arts, Entertainment and Recreation | 274,430 |
Manufacturing | 242,915 |
Accommodation and Food | 220,340 |
Agriculture, Forestry and Fishing | 148,250 |
Real estate | 129,695 |
Financial and Insurance | 83,155 |
Production | 31,955 |
Unsurprisingly, the majority of small businesses are based in London and the South East, and these 2 regions combined account for a third (34%) of all SMEs in the UK. Northern Ireland has the lowest number of SMEs at just 128,000, closely followed by Wales with 218,000.
Name | Number of SMEs |
---|---|
North East | 155,000 |
North West | 512,000 |
Yorkshire and The Humber | 385,000 |
East Midlands | 368,000 |
West Midlands | 437,000 |
East of England | 542,000 |
London | 1,036,000 |
South East | 843,000 |
South West | 537,000 |
Northern Ireland | 128,000 |
Scotland | 340,000 |
Wales | 218,000 |
In 2021, 19% of SMEs with employees were led by a woman or a majority-female management team, which is just over 1 million businesses. This is a much lower percentage than FTSE100 companies, where women occupied 39% of directorships as of February 2022.
The number of women-led SMEs also varies significantly depending on the sector in question. For example, in the construction sector, which has the largest number of SMEs in the UK, only 9% are led by women. The education sector has the highest percentage of women leaders of all the sectors at 44%.
In 2021, just 6% of SMEs with employees were led by someone from a minority ethnic group (MEG), which equals around 335,000 businesses. The sector with the highest number of MEG leaders was health, while London is the region with the highest number of SME leaders from minority ethnic groups.
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