Impact of SMEs on UK Economy

This report examines the impact of SMEs on the UK economy, highlighting their contributions to employment, innovation, and competition. It also explores the importance of start-up businesses and evaluates the contributions of different business scales to economic growth. The report concludes by analyzing the impact of SMEs at various levels of the economy.

UNIT 9

EXECUTIVE SUMMARY
This report highlights impact of the Small business on economy by showing the different
contribution of the SMEs to the economy in the way of employment, innovation and competition
by justifying the answer by the way of Data. Further this report explains the importance of the
Start-up in the economy and the importance of all the scale business in the growth of the
business by the way of explaining each scale importance and in the end report highlights impact
of SMEs on different level of economy.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
P3 Illustrate with the stats and data how SMEs has impacted the UK economy........................4
P4 Explain the importance of Small and start up business in development of the economy......5
M2 Evaluate difference in Large, Medium and small scale contribution toward the economy. 6
D2 Explain the impact of Small scale business at different level...............................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
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INTRODUCTION
SMEs is the small scale enterprise who has less than 250 employees in the organisation and Start
up are the enterprise who has recently established. Report highlights about the impact of the
SMEs in the UK economy. After that report shows the advantage of the SMEs in development of
economy and in the end explains the contribution of all scale organisation in economy and on the
different level of the economy.
MAIN BODY
P3 Illustrate with the stats and data how SMEs has impacted the UK economy
Macro and small business are always known as a back born of the UK economy as they
contribute and impact the economy very vastly as SMEs contribute 99.3% of all private sector
which accounts for 5.7 million business in the UK at the start of the 2018 and which generally
explains that SMEs offers a variety of Job opportunity and opens a new room for the new market
which has contributed very much toward the economy. Out of the total SMEs which are opened
in the UK 44.1 percent of the business used to survive for the first five years. That equates
to almost 415,000 new businesses being born in the UK every year while 328,000 cease trading
on an annual basis.
Some big contribution of the SMEs are as follows:
Employment: In total 16.3 million jobs were created in the last year by SMES and micro
business itself, which has played a very crucial role in decreasing the unemployment in the
economy but at the same time the job created by SMEs are not that long lasting for the economy
as many SMEs out of that die due to some or other reason and the problem of the employment
again arise for the economy. As 30% of start up dies in the first year itself and in the long run
60% of the SMEs dies in the first five year of the establishment (Jamali, Lund-Thomsen and
Jeppesen, 2017).
Competition: SMEs has always forced the big organization to increase the quality of their
service or product in the economy by offering a good competition in the market. Their are 5.7
million businesses which has been opened in the previous year which are 99.9 percent of all the
business. which has helped the economy to see the best result from the organisation but most of
the SMEs are provided fund by the bank and the organization which falls behind in handling the
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competition used to close the business and which result in bankruptcy which eventually create
the burden on the economy.
Creativity and Innovation: These are the two big thing which is contributed by the SMEs to the
economy as SMEs brings the séance of new things and idea in the economy which has helped the
UK government to grow and also helps the SMEs in establishing their business and increasing
the revenue of the business. In year passed, SMEs total turnover was 1.9 trillion pounds which
was almost 52 percent of all private sector in UK.
When it goes on to see the contribution of the SMEs in the UK as a region wise than London and
Manchester are the two region who has seen a good respond from the entrepreneur side to open
their SMEs in that region. SMEs account for 99.8% of total private sector business in the London
and the Manchester is most grown region as region has seen the 36% of rise in the opening of the
SMEs and also 49.8% of employment in the London region is created by the SMEs (Paul,
Parthasarathy and Gupta, 2017). London used to be the region in which there are 1563 business
for every 10,000 business which is more than average of UK as there is 1059 business over evry
10000 business. When seen the impact of the SMEs on the basis of the growth than West
Mid;and used to be at the top with 9 percent growth, followed by Yorkshire & Humber (7%),
Scotland (7%) and Northern Ireland (6%).
The impact of SMEs on the different industry in the UK has also helped the UK economy to
offer variety of path to their entrepreneur to go in and establish their business. Almost 74 percent
of the SMEs in the UK are opened in the Service sector and another 18 percent is attracted by the
Construction industry. However, retail is the standout sector in this list. Retail companies make
up 10% of the entire UK business landscape, employ 19% of private sector workers and generate
33% of the turnover generated by all UK industries. The Industry which has attracted more
entrepreneur is Food industry as it is the one industry in which most of the SMEs are opened in
the last few years and the scope which is offered by the Food industry is the big reason for the
attraction. Retail industry is the second most popular industry which has attracted the
entrepreneur toward the industry as Retail industry has given the option for the entrepreneur to
introduce new and innovative idea in the market to establish their business. The industry which
has seen the very less Start up is the Hospitality industry as compare to the other to industry the
big reason for that is that this industry requires the huge amount of finance as compare to the
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other industry and finance always prove to be difficult for the SMEs (Fingleton, Eraydn and
Paci, 2017).
SMEs not only in UK but also in other country have played a good role such as In the Portugal
68.5%, 61.5% in Austria and In Italy 33% is the contribution of SMEs in the Country GDP.
P4 Explain the importance of Small and start up business in development of the economy
Creation of employment: The most important contribution of the SMEs toward the economy is
the Job creation as it always prove difficult for the economy to provide 100% employment to all
the skill full individual in the economy but the SMEs helps the economy in doing that as SMEs
always brings the jobs with them which helps the economy to defend the problem of
unemployment in the country as a data suggest that 16.3 million job has been created by the
SMEs in the UK which is a very big number and has contributed adversely in the development of
the economy.
Meeting social purpose: As almost every SMEs is establishes with the sole motive of earning
the revenue by looking the social objective also it has helped the country in building the social
economy as looking at the social objective helps every organisation to build a good goodwill and
the name in the eye of the customer which has always helped the organisation in the long run of
the business (Faggian, Partridge and Malecki, 2017).
Local improvement: As SMEs has helped the economy in improving the quality of the service
in the organization it eventually helps the business in improving the standard of life in the
country as the quality of product which is consumed by the citizen is improved.
Engage significant number of people including the from disadvantaged groups: SMEs has
helped the economy in optimum utilization of their human resources as the SMEs has helped the
business in reducing the unemployment rate in the country.
Variety of Carrier: SMEs are the one which has helped the economy to offer variety of the
carrier option to the individual as the success of the SMEs has attracted many new and bidding
entrepreneur toward the respective industry which has helped the economy in getting more and
more proficient individual in the market and at the same time the success of SMEs has also
opened room for the student to choose the best sector in which they are interested.
M2 Evaluate difference in Large, Medium and small scale contribution toward the economy
When it comes on the contribution toward the economy it is very difficult to differentiate in the
business on the basis of the Scale as large scale organisation contribute very much in the
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economy but at the same time number of Large scale industry are less than Small or medium
scale industry which means that the contribution of all the industry is equal in growth of the
economy. Larger scale industry used to provide the quality product to the organisation and hence
earn a good revenue from that at the same time small scale and medium scale industry used to
provide good innovative product to the market which also contributed well in the growth of the
economy, Hence it has proved that all the scale organisation is important for the growth of the
economy (Wakkee, Van Der Veen and Eurlings, 2015). SMEs used to provide the employment
to the 60 percent of the employee at the same time 40 percent of employment are provided by the
large scale organization. SMEs used to cover the 99.9 percent of the private area where only 0.1
percent is covered by the large scale organization. 96% of businesses in the UK employ fewer
than 10 people
D2 Explain the impact of Small scale business at different level
Small scale industry has a good impact on the all aspect of the economy as at regional level,
SMEs has the option of offering the good and innovative product to compete with other business
to meet and satisfy the need and demand of the customer effectively at a regional Level. SMEs
generally used to use the heat and trial method in which they generally used to bring the change
on a regular basis to check the validity of their innovation. At the national level organisation
used to expand their business by using more economic resources which eventually increase the
revenue and tax liability which help the country in development as tax are collected by them,
they generally try to give more satisfying product with the help of more researched and
developed product.. At the international level, many SMEs used to export their product to other
country which help the country to have a foreign currency which contributes to growth of
economy (Ceptureanu, 2015).
CONCLUSION
From the above report it has been summarised that there is very good impact of SMEs on the
country economy which has proven very good for the growth of the economy but there are some
demerits also of it but the positive point has so good that it overlooks the demerit.
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REFERENCES
Books and Journals
Ceptureanu, S.I., 2015. Competitiveness of SMES. Business Excellence and Management
Review. 5(2). pp.55-67.
Faggian, A., Partridge, M. and Malecki, E.J., 2017. Creating an environment for economic
growth: creativity, entrepreneurship or human capital?. International Journal of Urban and
Regional Research. 41(6). pp.997-1009.
Fingleton, B., Eraydn, A. and Paci, R. eds., 2017. Regional economic growth, SMEs and the
wider Europe. Routledge.
Jamali, D., Lund-Thomsen, P. and Jeppesen, S., 2017. SMEs and CSR in developing
countries. Business & Society. 56(1). pp.11-22.
Paul, J., Parthasarathy, S. and Gupta, P., 2017. Exporting challenges of SMEs: A review and
future research agenda. Journal of world business. 52(3). pp.327-342.
Wakkee, I., Van Der Veen, M. and Eurlings, W., 2015. Effective growth paths for SMEs. The
Journal of Entrepreneurship. 24(2). pp.169-185.
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