Role of SMEs in the UK Economy

Entrepreneurship
Title: Entrepreneurship
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Entrepreneurship
Table of Contents
Task 2 - Report...............................................................................................................................2
Introduction......................................................................................................................................2
Concept of an SME..........................................................................................................................2
Contribution of Micro, Small and Medium-sized Organizations to the UK Economy...................3
Impact of Political and Economic Factors on the Development of SME’s In the Country.............5
Role of SMEs and Analysis of their Contribution to the National Economy..................................6
Comparison of the Impact of SME’s For Two UK Regions.......................................................6
Comparison of the impact of SMEs for the UK utilizing two different industries......................7
Comparison of the impact of SMEs in two EU countries...........................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10
Task 3 - Essay...............................................................................................................................12
Introduction....................................................................................................................................12
Analysis of Entrepreneurial Characteristics and Factors that Impact on the Entrepreneurial
Success...........................................................................................................................................12
Conclusion.....................................................................................................................................19
References......................................................................................................................................20
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Entrepreneurship
Task 2 - Report
Introduction
Small and medium-sized enterprises (SMEs) are the major contributor to the economy of
many nations including the United Kingdom. These organizations are potential in making
improvements, especially in the developing countries by reducing the unemployment rate,
paying tax to the government and participating in CSR practices. The report explains the
concept of SMEs and analyses its impact on the UK economy.
Concept of an SME
Small and medium-sized enterprises (SMEs) are business organizations that independent
and non-subsidiary and usually employ less than a particular number of workers (Herliana,
2015). This number of workers differ across nations. In most of the cases, the upper limit of the
workers in SME is 250, For example, the European Union. Nonetheless, a few nations set the
breaking point at 200 workers, while the United States defines SMEs to incorporate
organizations with less than 500 workers.
According to the new definition of SME given in 2005, the revenue of medium-sized
ventures ought not to surpass £50 million and it must employ 50-249 employees; whereas the
revenue of small should be below £10 million and the number of employees must be between 10-
49. In the case of micro businesses in the UK, the number of employees should be below 10 and
revenue not greater than £2 million. On the other hand, balance sheets for small, medium and
micro businesses must not surpass £10 million, £43 million, and £2 million (Flynn, 2018).
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Entrepreneurship
Fig 1:- Classification of SMEs
(Source: researchgate.net)
Contribution of Micro, Small and Medium-sized Organizations to the UK
Economy
UK business statistics reveal that in 2018, a total number of 5.4 million microenterprises
were operating in the market of UK that contributes to 96% of total businesses in the country.
The number of large enterprises was announced to be 8,000 that estimate to 0.1% of total
businesses in the country. It is also observed from the business statistics that in 2018, in terms of
the revenue, the contribution of the micro businesses to the UK economy is £808 billion, which
is 21% of the total turnover of all the businesses. The medium and small enterprises contribute to
the economy, which is 15% of the total revenue of all businesses. Thus, it is clear that the
financial contribution of the SMEs in the economy of the UK is much greater than that of the
large businesses, which have contributed to the economy with 48% of the total revenue
(Rittenhofer, 2015).
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Entrepreneurship
Fig 2:- Share of businesses in the UK according to size
(Source: beta.parliament.uk)
SMEs play a pivotal role in the growth and development of the social economy in every
nation all over the world. Such sort of companies administers inventive and innovative thoughts
of goods, services, business operations and processes, technological advancements that
encourage individuals to satisfy their desires and requests. It has been additionally revealed that
start-ups of small ventures are effective in catching the market rapidly and can secure and gain
an enhanced amount of revenue in an exceptionally lesser period of time (Zoghi, 2017). The
governing body of the UK gets a greater amount of tax from SMEs that adds value to the growth
and development of the nation. SMEs offer a greater amount of work opportunity to the public
that diminishes the rate of unemployment of the nation. The measurements demonstrate that in
2018, employment was provided to 0.8 million people by the UK through micro-businesses
whereas medium and small enterprises had employed and medium organizations have employed
more than 7.3 million people in the UK (Mattevi and Jones, 2016).
According to Yapa Abeywardhana (2015), SMEs in the UK are more concerned about
their corporate social responsibility. Especially the start-up businesses are more involved with
this approach by raising and donating funds to the charitable organizations for the welfare of the
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community and wellbeing of the vulnerable and homeless people. They are also involved in the
betterment of the environment and the economy through a range of policies. An investment like
this greatly contributes to the economy and promotes its growth.
Impact of Political and Economic Factors on the Development of SME’s In
the Country
The assessment of the rate of business births and deaths can give an estimate of the
growth of SMEs in the UK. The term business birth rate signifies the number of active
companies that are active and have begun its operation in that particular year and the term
business death rate signifies the number of companies that have stopped operating in that specific
year. Statistics show that in 2017, the UK has experienced the maximum fall in the rate of
business births, as the number of business births was 382,000, which was recorded to be 414,000
in 2016. Additionally, the rate of business deaths was also greater than in 2016. A number of
political and economic factors are behind this major fall in the birth rate and enhancement in the
death rate. However, globalization is one of the factors that also hinder the performance of new
SMEs.
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