Entrepreneurs worth £130,000 a year to UK economy, but more SMEs needed

An influx of small and medium-sized enterprises are needed to bring the UK economy back to pre-recession standards, according to new research.

Findings from commercial insurer RSA reveals that small and medium-sized enterprises (SMEs) are currently contributing 52 per cent of private sector Gross Added Value (GVA) to the British economy.

The survey forecasts that private enterprise will grow faster than the UK economy as a whole over the coming few years, but that 300,000 SMEs are needed to pull the UK back to its pre-recession peak.

By surveying the efforts of SMEs, RSA predicts that individual entrepreneurs contributed an average of £130,000 each to the UK economy in 2012. While the amount of big businesses has declined by 11 per cent over the proceeding ten years, the number of small companies has grown by 35 per cent over the same period.

Tara Kneafsey, SME director at RSA, comments, ‘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.

‘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.’

A breakdown of the SME research compiled by RSA shows that London leads the way for business creation with 1231 companies per 10,000 adults (see table below).

Regional breakdown of SMEs in the UK
Region Businesses per 10,000 adults Public sector employment as a share of total employment (%) Fastest growing sector after administrative & support, utilities and health & social work, exlcuding Other (1-249 employees) Sector growth 2010-2012 (%)
London 1231 17.3 Real estate 18
South East England 1098 15.9 ICT 7
South West England 1096 18.2 Real estate 5.9
East England 1080 16 Real estate 6.1
East Midlands 880 17.6 Real estate 7.9
West Midlands 818 19.5 Real estate 5
Yorkshire & Humberside 806 21.2 Education 7.1
Wales 769 25.2 Arts, entertainment and recreation 5.1
North West England 754 20.3 Accomodation and food services 5.9
Scotland 735 23.5 Real estate 18.7
North East England 625 22.5 Education 6.4

Source: RSA

The regions of the South East and South West of England follow on from London with 1098 and 1096 firms per 10,000 adults. Propping up the base of the table are the North West and North East of England alongside Scotland.

Kneafsey adds, ‘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.’

RSA says that analysing different sectors, there is ‘real disparity in SME growth’. The study finds larger amounts of growth in administrative and support services and ICT sector which posted rises of 23 per cent and 20 per cent respectively over the last two years.

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Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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