The Impact of SMEs on the UK and EU Economies: A Comparative Analysis

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What makes an entrepreneur?
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Table of Contents
Task 2...............................................................................................................................................3
Task 3.............................................................................................................................................10
Reference list.................................................................................................................................17
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Task 2
Executive summary
Financial contribution of organisations coming under SME was given and their growth was
evaluated. Factors halting and helping to grow SMEs in UK was found. Impact generated by
SMEs in London, South West region, Italy, France, retail and construction industry was found. It
pointed positive impact on economy of these regions, sectors and countries.
Brief background
There was a decline in SME during World War 2 in UK. After this, the number of SMEs started
to grow. In recent financial crisis, 73000 SMEs were rejected from starting business (Cowling et
al., 2016). This section will study growth and economical contribution of SMEs in UK. Some
factors will be found, which are either contributing or halting business growth of SMEs situated
in UK. Contribution of SMES in two UK regions, two industries, and EU countries will be
found.
Section 1
a. Define the concept of an SME, and evaluate the growth and financial contribution of
micro, small and medium private organisations to the UK Economy.
SMEs are organisations, which employs less than 250 people and their turnover is limited to 50
million Euros. These businesses consist of small, micro and medium organisations.
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Figure 1: Share of businesses in the UK by size
(Source: fsb.org.uk, 2019)
Micro
Micro private organisation in UK in recent five years has contributed to UK economy. In 2017,
micro organisations have grown to 5416 number of businesses. This signifies growth of micro
organisations in UK. These organisations are employing about 8800 number of people. About 96
percent business in UK is held by micro organisations. This is the reason behind 33 percent rate
of employment in UK. Micro companies had 808 billion pounds in 2017. Therefore, financial
contribution of these organisations is quite evident (Burns, 2016).
Small
According to Parliament of UK, there are about 210 small businesses present at UK. This
increment is the sign of growth in small business. More than 4080 people are working for them.
About 4 percent of UK business consists of them. Turnover has reached to 590 billion pounds.
They are causing 15 percent of total turnover of UK. This statistic is proof for their financial
contribution (fsb.org.uk, 2019).
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Medium
There are about 34 businesses, which are medium in size. They employ about 3400 staffs from
UK. Therefore, medium sized enterprises have not seen huge amount of growth. Their financial
contribution consists of generating 600 billion pounds, which is 15 percent of total turnover of
UK (statista.com, 2019).
Conclusion
UK SME’s are contributing to economy of UK. They have increased employment and
contributed to increase UK’s turnover. These organisations have seen major growth in recent
years and have become a backbone for UK’s economy.
Section 2
Your analysis needs to be based on the last 5 years and must include potential political and
economic factors that might have either stimulated or halted the development of SME’s in
the country.
Political factors
UK government has seized trading opportunities for SMEs. Export finance department of UK
has collaborated with five banks, which is allowing SMEs to get access to huge number of funds.
UKEF will support financially these SMEs to sustain in market. The amount of financial support
will be provided is 2 million pounds. This will become a major reason for stimulating growth of
SMEs (gov.uk, 2019).
Impact of Brexit will bring negative consequences for SMEs. Capital investment on these SMEs
will be reduced. This will weaken them and will undermine ability for growth as well as halting
it. There will be institutional instability due to this. There is an uncertainty regarding
ramifications of Brexit (bbc.com, 2019).
Economic factors
Due to lack of capital investment, about 57 percent SMEs are unable to upgrade their
technology, which is vital for business. Due to internal resource constraint, 31 percent SMEs are
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finding it difficult to sustain. Therefore, these limitations are halting SME organisation’s growth
(telegraph.co.uk, 2019).
A record equity investment of amount 6.7 billion pounds went to SME business. There has been
5 percent increase when it comes to equity investment. There has been huge amount of crowd
funding, public sector funding and angel investments. This is major stimulating factor for the
huge growth of SME companies (ft.com, 2019).
Conclusion
Economical support from government will help in growing of SMEs. They will be able to take
their business in international level due to access of bigger funds. Brexit can halt growth for
SMEs, as investment may be stopped. Huge equity investment is channelizing growth, due to
contribution made by people and angel investors.
Section 3
b. Examine the role of SME’s and analyse how they contribute to the national economy.
Your analysis must contrast the following:
A) Compare the impact of SME’s for two UK regions
There are many regions in UK. Two UK regions, which are London and South West, are chosen
for this comparison. SME’s inside these regions will be considered for this analysis and their
impact will be assessed.
London South West
 In London, about 99.8 percent private
business consists of SMEs. Therefore,
it hold maximum amount of
organisation, which is important for
business. A huge number of SMEs are
in London. This amounts up to 1061
organisations (statista.com, 2019).
 In London, 3 percent growth for SMEs
 In South West region, more than 70
percent private organisations come
under SME business (Lyee et al.,
2015).
 About 49 percent employment in South
West is coming from SMEs. There are
about 22384000 employees, who are
working under these SMEs. For micro,
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is seen. Employment in SMEs has been
representing 49.8 percent. This amount
reaches to 2.3 million jobs. This huge
amount of job creation has been
beneficial for London. Many people are
employed due to this. Therefore,
economic impact through creation of
jobs is positive (Cusmano et al., 2018).
 SMEs make up for 47.7 percent of
business turnover in London. This
amounts up to 430 billion pounds.
Therefore, these businesses in London
are contributing to economy in major
context (london.gov.uk, 2019). There
are more SMEs in London that South
West region.
this rate is 18.56 percent, 18.2 percent
for small and 15.2 percent for medium
organisation (gradsouthwest.com,
2019).
 Sectors such as retail, manufacturing
and construction SMEs are giving
highest amount of turnover in this
region. Micro businesses have given
36135 million pounds in turnover.
Small and medium companies have
given 34000 and 37587 million pounds
consecutively. In South West, 3 percent
growth was seen in SMEs. This shows
that there has been a positive change in
context to SMEs. About 546
organisations can be classified into
SMEs (gradsouthwest.com, 2019).
Table 1: Comparison of impact of SMES in London and South West region
Therefore, SMEs in both these regions has contributed to development of these regions. Their
economic contribution by increasing turnover of these regions is quite magnificent. Therefore,
they generate a positive impact on economy of London and South West region. However,
London is far more ahead when it comes to developing SMEs than South West region.
B) Compare the impact of SME’s for the UK utilising two different industries (for example,
retail and construction)
Retail Construction
 In retail industry, about 16 percent
organisations comes under SME
(statista.com, 2019). There are more
than 560 SMEs kin retail business. This
 About 1000 SMEs are there in
construction industry. This consists of 5
percent of total business. In
construction industry, 8 percent people
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holds about 10 percent of total
business. Therefore, their high amount
of contribution to this industry in
undeniable.
 Employment rate in these SMEs have
reached to more than 19 percent.
Therefore, employment has become
higher in this industry due to SMEs.
This is strengthening those (Muller et
al., 2015).
 About 34 percent of total UK’s
turnover in retail industry comes from
SMEs. Turnover generated by SMEs in
retail sector is higher than construction
industry. In UK, 69 percent of SMEs
have made profit in 2018 (statista.com,
2019). About 8 percent companies
coming under this category has made
loss. The high amount of profit will
become a positive impact on retail
industry. However, many SMEs have
lost money in this business and this
could be a negative impact.
are employed by SMEs. This shows
that many people working at
construction industry is being
benefitted by SMEs. Therefore, it is a
positive impact
(ukconstructionmedia.co.uk, 2019).
 If total turnover of UK in construction
business is taken into consideration,
then it is seen that 8 percent of total
turnover is generated by these
businesses (Rhodes, 2015).
 In UK construction business, 74
percent SMEs have seen profit in 2018.
Only 3 percent companies faced loss
(statista.com, 2019). Therefore, these
SMEs have been able to bring in more
profit for this industry than
organisations in retail sector could.
Table 2: Comparison between SME's impact on retail and construction in UK
C) Compare the impact of SME’s for two EU countries
France Italy
 In France, 99.9 percent business
organisations are SMEs. France is
presently dominated by SMEs. They
hold every sector in France and
 In Italy, 99.9 percent firms come under
SMEs. This adds up to 3746109
companies. This major amount of
growth and domination is acting as a
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contributing to overall growth (Muller
et al., 2015).
 SMEs in France have given job to
9182432 people. This amount is 61.6
percent of total employment. This has
helped many people in France and
reduced unemployment. It is a very
important contribution and impact of it
in per capita income of France is
positive (Adair and Adaskou, 2015).
 These SMEs have contributed about
529 billion Euros in 2017. This kind of
economic contribution towards France
from end of SMEs is having a positive
impact on economic health of France
(Mtar, 2017).
positive impact on industries of Italy
These SMEs are employing about
11391179 people, which is 78.5 percent
of total employment. Income of people
in Italy has increased and Impact of
these organisations is better in Italy
compared to France (Ghisetti and
Stano, 2016).
 They have contributed to 471.5 billion
Euros in present time. It can be seen
that SMEs contribution has been less if
it is compared with France. However, it
is quite enough to indicate a positive
impact. This is about 52 percent of total
turnover (statista.com, 2019).
Figure 2: Comparison of SMEs impact in France and Italy
Conclusion
Two UK regions are compared in case of impact made by SMEs. London seems to be most
beneficial while compared to South West region. SMEs in construction business have been most
profitable if it is compared to SMEs in retail industry. There has been huge economic
contribution given by SMEs in both France and Italy. France has been slightly more beneficial.
Recommendations
SMEs should seek help from government, as they are helping by giving funds. They should
reach out to public and Angel investors to find help. They will have to reduce operational cost, as
they have to tackle negative consequences of Brexit. This is a high time to start a small or
medium business in UK.
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Task 3
Introduction
This section will compare between managers and entrepreneurs. Some skills of entrepreneurs
and characteristics, which should be present in them, will be discussed. Croft-Simon’s
personality will be understood. Next correlation between an entrepreneurs’s characterises and
success as an entrepreneur will be found. Some factors for Croft-Simon, which can either foster,
provide positive impact, hinder and give negative impact will be found.
Discussion
1. Explain the difference between an entrepreneur and a manager.
Entrepreneurs focus more on starting a business, as they are passionate. Business for them in not
merely a profit making entity, rather it gives them internal satisfaction. Whereas, Managers give
their focus on ongoing operations, as they are more oriented towards organisation. Entrepreneurs
can have unique approach towards tasks, as they consider many possibilities. Manager’s style is
more formal and they like to follow strict rules, when it comes to designing tasks and execution.
Entrepreneurs prefer to reach milestones and their primary motivation is generated from
achievement. Managers can get motivated from achieving power. They prefer to exercise power.
Entrepreneurs are driven by creativity (Lee, 2015). They prefer to innovate and try to bring
creativeness in their organisations. Managers are driven to preserve their status. They work only
to preserve their position and are not much creative.
Entrepreneurs are owners of companies. They treat their company as their brainchild. They do
not think of themselves as mere employees. A manager is only an employee in an organisation.
They do not have any ownership. Entrepreneur’s main reward for performing hard is profit.
There are other rewards like recognition, fame and self-satisfaction. Salary is an only reward for
managers. Other additional rewards like pay hikes, promotions are there. Entrepreneurs are
highly intuitive. They believe in intuition and trusts in their instincts (Koudstaal et al., 2018).
They do not rely on conscious reasoning to take every decision. Managers are more calculative
when it comes to decision making. They calculate every step and take help of past record to
make future decisions. Entrepreneurs can take risks regarding any business decision. They try to
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delve into work without being afraid to face challenges. Managers try to avert risks at every
situation. They prefer to take safer paths to reach organisational goals.
2. Explain what are the entrepreneurial characteristics and skills an entrepreneur needs to
have in order to achieve success.
An entrepreneur should have creativity. That person should be able to give birth to new ideas.
They need to have knack for generating ideas and ability to act on them. Professionalism should
be present inside entrepreneurs, as that person should have excellent behaviour and mannerism.
They should reliable to themselves and have discipline. Therefore, creativity and
professionalism are important characteristics, which are important for being successful. There
should be characteristics of risk taking inside an entrepreneur (Allen and Truman, 2016). They
should be able to explore unknown territories of business without being afraid. They need to use
unorthodox ways to achieve success even if no one else agrees to those. This is critical for
making an entrepreneur successful. In order to achieve success, an entrepreneur should be
passionate. This is a vital characteristic, which an entrepreneur should have. It will become a
major driving force to strive for betterment in business.
An entrepreneur will have to manage time, which is a vital skill to achieve success. Time
management is crucial because it helps an entrepreneur to plan activity. This helps in define
milestones and set targets. It becomes easier to manager projects and helps in allocating time. It
is compulsory for an entrepreneur to have communication skill. This includes every section of
communication such as verbal, non-verbal and written. This is a paramount, which makes
interaction with employees, partners and clients easier (Bird, 2019). These things are necessary
to achieve success. Ability to perform finance management is another skill. This factor either
makes a business successful or obliterates it. Therefore, en entrepreneur will need to critically
asses situations and manage finance properly. They have to assess investments and see
discrepancies in budgets. Success can only come if it is managed properly. An entrepreneur
needs to have technological skills. By using knowledge of technology, an entrepreneur can
upgrade organisation. This will help to achieve success by using proper technology in business.
3. Utilise the Big-5 Model and analyse Croft-Simon’s entrepreneurial personality.
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Figure 3: Big five model of personality
(Source: Saucier and Srivastava, 2015)
The “big five model of personality” have five categories. This will be determined for Croft-
Simon. She is extremely creative and is always open to try new things. This is because she
believed that there was an opportunity to invent new organic popcorn, which is free of artificial
flavours. She thought that there are no options in market and allergies can develop from artificial
elements in popcorns, as she herself suffered once. Therefore, openness trait is high inside her
(Oleynick et al., 2017). Conscientiousness is very high inside Croft-Simon. She likes to give
time for preparing her work. She pays attention to detail and that is why, packaging of Nom
Foods is very attractive. She likes to finish important tasks first without any delay. Croft-Simon
likes to prepare schedule and work by following it. She has high level of extraversion quality
inside her. She likes to start conversation with people and socialise with them. She likes to meet
new people and have met many interesting people due to her work. This has inspired her in many
ways. She thinks that support network around her helps in striving Nom Foods. She likes to hang
out with food lovers to learn about food.
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