Small and medium-sized enterprise (SMEs) in the United Kingdom

SMEs in the United Kingdom A pocket guide of pertinent facts and figures on SMEs in the United Kingdom from 3E Accounting.

Small and medium enterprises or SMEs are acknowledged as the lifeblood of the UK economy. Surprisingly, however, no set definition explains what SMEs in the United Kingdom are. While a standardised definition appears to be lost in translation, SMEs are no doubt here to stay. It makes up 99% of all UK businesses and will continue to drive a growing economy.


The Backbone of an Economy

In the UK, you will get a different explanation of what an SME is based on which authority you ask. SMEs can include micro, small and medium businesses with thresholds focused on annual turnover and number of employees.

The European Union’s definition, for example, splits SMEs into micro, small and medium enterprises. Microbusinesses have less than ten employees and a turnover of less than GBP2 million. This rises to less than 50 employees and a turnover under GBP10 million for small businesses. Medium businesses are categorised as having less than 250 employees and a turnover of less than GBP50 million.

Companies House splits the definition only into two, between small and medium businesses. Annual turnover criteria are GBP6.5 million and GBP25.9 million, respectively. Employees should be less than 50 people for small businesses and less than 250 people for medium ones. Conversely, the UK’s tax authority, HMRC, has an even leaner and more straightforward approach. It considers any business an SME if its annual turnover is less than GBP100 million and has less than 500 employees.

Whichever definition applies, there is no doubt that SMEs are needed to ensure the economy does not falter. Statistics for the year 2020 indicate that there were six million SMEs in the UK. By comparison, there were only eight thousand large businesses. SMEs generated half of the UK’s total business revenue and employ almost 50% of the workforce.

Acknowledging the importance of SMEs, the UK government offers various forms of aid and support. There are national and local grants available, as well as loans and funding for a variety of business activities. These include innovation, investment, energy and environment-related projects, etc. There is also numerous training, mentoring, and professional consultancy and advisory schemes. These focus on helping to meet the challenges of running a business. Further, extra tax benefits such as annual investment allowance can be used toward reducing tax liabilities.

An added initiative is the Local Enterprise Partnerships (LEPs) and Growth Hubs, supported by the Department for Business, Energy, and Industrial Strategy (BEIS). These are collaborations between businesses and local authorities aimed at facilitating economic growth and development. There are currently 38 LEPs all over the UK and to date have supported over a million businesses.

SMEs in the United Kingdom can include a variety of businesses from online retail to trade and pop-up bars. If this is the business model that appeals to you, then do consider getting in touch with us. At 3E Accounting, we offer innovative, unique, and brilliantly customisable business solutions to fit every budget. Along with our regional and global partners and affiliates, we offer the best solutions, including company formations and setups. Contact 3E Accounting today for a chat with one of our friendly experts on the best business solutions for you.

SMEs in the United Kingdom