Ever considered launching your own small business? The British FinTech company Payrow has provided a detailed analysis of UK small enterprise statistics, offering a clear understanding of the current SME environment.
The UK’s Small Enterprise Sector
The outlook remains cautiously optimistic. Inflation continues to be a concern, potentially impacting consumer spending and business costs. However, robust employment figures could be promising for recruitment. Recent government data indicates that 5.58 million SMEs are actively operating in the UK.
According to UK government statistics, 5,547,000 businesses in the UK are classified as small or medium-sized enterprises, making up 99.05% of all companies. Small businesses are defined as those with 0 to 49 employees, while medium-sized businesses have between 50 and 249 employees. Since 2010, the number of SMEs has increased by 1,070,000.
Categories of UK Businesses by Size
– Micro Enterprises (1-9 employees)
Micro enterprises constitute the vast majority of all businesses (95.5%), with a turnover of £592.1 billion. They are the bedrock of the UK’s business ecosystem, highlighting the vitality of small-scale entrepreneurship.
— Small Enterprises (10-49 employees)
These companies account for 3.9% of the total business population, with a turnover of £669.6 billion. They play a crucial role in diversifying the UK’s economic framework and job market.
— Medium-Sized Enterprises (50-249 employees)
Despite representing only 0.6% of businesses, medium-sized enterprises have a significant economic impact, generating a turnover of £762.9 billion. This category illustrates the progression from small ventures to larger operations with substantial market influence.
— Large Enterprises (250+ employees)
Though they make up just 0.1% of businesses, large enterprises boast a remarkable turnover of £2,139.3 billion. They are key players in setting industry standards and driving economic activity.
In total, SMEs in the UK generate a combined turnover of approximately £2 trillion, accounting for 52% of the private sector’s total turnover of £4.47 trillion. This underscores the indispensable role of SMEs in the UK economy, fostering growth, innovation, and employment across various sectors.
Since 2000, there has been a 77% increase in SMEs, growing from 3.5 million over the past 23 years.
New Business Ventures
The year 2023 saw a 19.5% increase in new business launches, marking a 6.5% rise compared to the previous year. This trend suggests a potential continuous increase in business creation into 2024, pending further data from Companies House for the latter half of 2023.
Additional insights include:
Challenges Facing SMEs
Around 316,310 UK enterprises closed in 2023, reflecting nearly an 11% business mortality rate. Although this is a slight decrease from 324,000 in 2022, the figure remains significant. Conversely, 65.3% of small businesses were profitable in 2022, with early 2023 showing signs of recovery in the use of external finance by small enterprises, potentially enhancing profitability.
The Composition of the UK Business Sector
The construction sector led with 914,000 businesses in 2022, according to the Office for National Statistics (ONS). The administrative and support services sector followed closely with 865,000 businesses, with further growth expected.
Key Sectors:
Regional Distribution:
COVID-19 significantly impacted UK small businesses, with some sectors more affected than others. The hospitality, arts, entertainment, and non-essential retail sectors faced substantial difficulties.
Forbes provides a breakdown of businesses qualifying as SMEs by sector:
Emerging Trends and Future Projections
Emerging sectors such as non-alcoholic beer production, corporate travel services, and language learning software have shown notable growth. Additionally, the rise of artificial intelligence and immersive technologies suggests future industry disruptions.
Financial Landscape of Small Businesses
The post-COVID era saw approximately 45% of SMEs experiencing a turnover reduction of at least 20%. External financing became a strategic necessity for many, with 56% of SMEs seeking financial support in the last three years, according to the British Business Bank 2021 survey.
The first half of 2023 saw a significant downturn in capital raised, amounting to £4.6 billion, a sharp decline from £15.3 billion in the previous year, indicating a more cautious investment climate.
Venture Capital and Private Debt
Private debt deals in the UK decreased from 2,706 in 2022 to 1,823 in 2023. The venture capital sector, typically favouring larger enterprises, also experienced changes, with the total funds raised by Venture Capital Trusts (VCTs) showing an upward trend in recent years despite a decrease in the number of VCTs.
Alternative Financing and the Impact of Brexit
Various alternative financing methods, such as crowdfunding, asset finance, and peer-to-peer lending, offer SMEs diverse funding options. However, Brexit introduced uncertainties and challenges, impacting investment and operational costs for many small businesses.
Overcoming Obstacles
Economic instability and challenges in employee retention remain major concerns for UK businesses. Brexit has further complicated the landscape with increased trade barriers and skills shortages, necessitating adaptability and resilience among small enterprises.
Inclusivity in Business Leadership
Despite efforts towards diversity, significant challenges remain, particularly in venture capital funding for female and minority-led enterprises. The gender funding gap and racial bias continue to be substantial barriers, along with new challenges posed by AI automation and evolving investment criteria.
In 2021, 21% of all SMEs in the UK were led by women (UK GOV)
MEG-led businesses as a percentage of the business population by top sector:
Payrow and Technological Innovations
The UK’s SME ecosystem remains robust and dynamic despite economic uncertainties. With technological advancements and a focus on sustainability, the future for UK SMEs looks promising despite challenges in funding, talent acquisition, and regulatory complexities.
Payrow is proud to be a UK FinTech company dedicated to driving the growth of UK businesses. The company specialises in providing services and innovative solutions that enable small and medium-sized enterprises and online firms to integrate up-to-date financial products into their business processes. Payrow aims to increase the adoption of FinTech by introducing the latest technologies that make finance more accessible. Businesses can improve their strategies, reduce costs, and automate routine processes. Payrow’s services are ideal for those looking to free up time and focus on the core of their business.
