By Daniel Hunter
Against a backdrop of downgraded growth forecasts by the Chancellor in the Autumn Statement, and recent ONS figures depicting subdued UK economic expansion, a new study released today (Friday) shows that 300,000 new small to medium sized enterprises (SMEs) are needed to restore the UK economy to its pre-recession peak.
Valuable Assets, published by RSA, the UK’s largest commercial insurer, and conducted by the Centre for Economics and Business Research (Cebr), reveals that SMEs are contributing more than half (52 per cent) of private sector GVA to the UK economy.
In fact, private enterprise will grow faster than the UK economy as a whole over the coming years. This will help the UK to offset the effects of fiscal austerity measures, such as 800,000 job losses over five years3 and Whitehall spending cuts of one per cent next year and two per cent in 2014.
“Our study shows that an ‘enterprise army’ will be the driving force for growth, providing a much-needed shot in the arm for the UK economy," Tara Kneafsey, SME Director at RSA, said.
"Measures announced in the Autumn Statement, such as the one per cent cut in Corporation Tax, extended doubling of small business rate relief, and a new export finance facility will all help to encourage SME growth and are an important step in the right direction.
“With growth, though, come challenges as well as opportunities. We often work with SMEs at the start of their business journey and have seen first-hand the challenges they face and the measures they must take to protect their business. As an essential element of the UK business landscape, it is crucial not only that they are supported from inception through to growth — whether that is at home or abroad — but also that they maximise the opportunities that technology and an increasingly flexible and global workforce can bring.”
The entrepreneurial spirit is certainly alive and well here in the UK, with individual entrepreneurs contributing an average of £130,000 to the UK economy in 2012. While the number of large businesses has declined by 11 per cent over the last ten years, the number of small businesses has risen by a staggering 35 per cent over the same period showing the growing strength of the burgeoning SME population.
However, looking across the sectors, there is real disparity in SME growth — with some clearly more appealing or accessible to entrepreneurs than others. The study reveals significant growth in Administrative & Support Services as well as the Information & Communication Technology sector; with increases of 23 per cent and 20 per cent respectively over the last two years.
In stark contrast, the number of SMEs in Manufacturing grew by just one per cent for the same period. However, the Chancellor’s move to raise the existing cap on the Annual Investment Allowance to £250,000 and the pledged increase in export finance facilities may go some way towards nurturing growth in this area.
Similarly across the regions, the 300,000 new SMEs are likely to come from certain entrepreneurial ‘hot spots’ around the UK. The top three areas are London, the South East and South West with 1,231, 1,098 and 1,096 businesses per 10,000 adults respectively.
Kneafsey concluded: “Britain’s SME entrepreneurs are one of the country’s most valuable assets. The regional picture is surprisingly varied, so as SMEs strive for growth and get set to play a major role in rebuilding the country’s economy, the big question now is what can be done to support them. Local Enterprise Partnerships, the Government and the wider business community all have a part to play — whether in practical, or in financial terms — if we’re to foster an enterprise culture more broadly across the whole of the UK.”
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