SMEs Dominate UK Private Sector By 99.9%

The composition of the UK business sector is predominated by SMEs, according to statistics from the Department For Business Innovation & Skills – and the number continues to grow.

More than 500,000 new small and medium-sized businesses have been registered each year for the past 2 years, bringing the total up to 5.2 million at the start of 2014.

SMEs

(Image source: www.gov.uk)

Of all UK businesses, 62%(3.3 million) were sole proprietorships, 29% (1.5 million) were companies and 9% (460,000) partnerships.

18% of all SMEs in the UK private sector operate in the construction sector, while 15% operate in the professional, scientific and technical sectors. Wholesale and retail trade accounts for over a third of all SME turnover (35%).

The SME segment accounted for nearly 60% (15.2 million people) of private sector employment, and had a combined turnover of more than £1.6 trillion – almost half (47%) of turnover in the UK private sector.

Share of businesses in the UK private Sector and their associated employment and turnover, by size of business, start of 2014

SMEs

(Image source: www.gov.uk)

This marks an all time record high for the UK private sector business population, continuing the long-term trend that has seen it grow in every year since 2000, accounting for a total increase of 51% or 1.8 million in the past decade and a half.

Estimated number of businesses in the UK private sector, start of 2000 to start of 2014

SMEs

(Image source: www.gov.uk)

Despite this impressive influence that SME owners clearly have in the marketplace, it may seem surprising that there is still a major funding crisis in the sector overall, with many small business owners struggling to find the finance that they need to start and grow their businesses – at least when applying to mainstream banks.

Significantly, the dominating SME sector is becoming less and less enamoured by the prospects of obtaining bank financing. The process is lengthy, intrusive, and many have the (correct) perception that they will simply be refused credit at the end of their efforts in any case, with as many as 50% of first time SME borrowers being rejected, despite a large proportion of these being viable.

The solution to the crisis is to be found in alternative finance. Although there remains a worrying lack in awareness of the AltFi options available to them, increasingly alternative finance is moving into the mainstream. If the number of SMEs is to continue to rise at its current rate, then it will be down to these alternative platforms to support them financially, and ensure that the UK economy continues to recover, grow and prosper in the coming decades.

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