Small and medium-sized enterprises (SMEs) across the top 10 UK cities are forecast to contribute £217 billion to the UK economy in the next four years, according to a new study.
The research by Hampshire Trust Bank and the Centre for Economics and Business Research (CEBR) revealed SME contributions to the economy will grow by 11% from 2015 to 2020. Currently, SMEs contribute £196bn to the UK economy.
London will see the greatest increase in the number of SMEs, with the number of businesses rising from 444,880 in 2015 to more than half a million (534,035) by 2020. The study identified that growth in the capital will be driven by professional and administrative service sector businesses, which currently account for 28% of total SME employment.
London is currently home to the largest number of SMEs and the capital tops the table for total SME contribution to the economy, £149bn in 2015 rising to £164bn by 2020, 76% of the total that SMEs contribute to the UK economy.
Leeds and Manchester are forecast to boost their value add by 15%, closely followed by Bristol, which is predicted to increase by 14% over the same period.
Mark Sismey-Durrant, chief executive at Hampshire Trust Bank, said: “Our report demonstrates the critical importance of SMEs as the engine room of the economy. Their sizeable contribution to the fortunes of the UK economy – growing to 27% of total business contribution by 2020 - cannot be ignored.
“Our research with CEBR should be a source of optimism for the government and for employers as the strong future growth predicted suggests significant opportunity for investors, business owners and their employees.
“As the government prepares for the first Autumn Statement following the decision to leave the EU, I urge them to keep the spotlight on smaller companies by creating conditions which will be support their continued growth.”
Across UK cities as a whole one sector that will be driving SME growth will be professional and administrative services, such as legal and accountancy firms, with ‘wholesale and retail’ and ‘public administration, education, and health’ also playing a crucial role.
Nina Skero, managing economist at CEBR, said: “This study demonstrates there is a positive story to be told about the UK’s SMEs and it is encouraging to see such strong growth being mirrored outside of the capital.
“We expect the importance of SMEs to the country’s economy to increase in the coming years and hope this research will inspire business leaders across the UK to invest in their growth strategies.”