Impact of SMEs on the UK Economy: A Case Study of Thirdway

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REPORT ON THE IMPACT OF SMEs ON
THE UK
A CASE STUDY OF THIRDWAY

EXECUTIVE SUMMARY
In this report, the concept and definition of SMEs are described and the impact of SMEs on the economy
of the UK is analyzed with the help of recent data and charts. The growth of SMEs and the political and
economic factors that affected the growth of SMEs in the UK are also discussed. The comparison
between the impacts of the SMEs on two different regions of the UK is mentioned and also the
comparison between the impacts of two different sectors of the small and medium-sized businesses is
discussed. Finally, the impact of the SMEs on two different countries of the EU is also mentioned. Finally,
the recommendations and conclusion of the report are provided.

Table of Contents
EXECUTIVE SUMMARY.................................................................................................................................2
Table of figures............................................................................................................................................4
INTRODUCTION...........................................................................................................................................5
CONCEPTS OF SMEs.....................................................................................................................................6
EVALUATION OF THE GROWTH AND FINANCIAL CONTRIBUTION OF MICRO, SMALL AND MEDIUM SIZED
BUSINESSES ON THE ECONOMY OF THE UK................................................................................................7
CONCLUSION...........................................................................................................................................9
ROLE OF THE SMEs AND CONTRIBUTION TO THE NATIONAL ECONOMY..................................................10
4.1 COMPARISON OF GROWTH OF SMEs IN TWO DIFFERENT REGIONS OF THE UK.............................11
4.2 COMPARISON OF THE IMPACT OF TWO DIFFERENT SECTORS OF SMEs IN THE UK’s ECONOMY....12
4.3 COMPARISON OF IMPACTS OF SMEs ON TWO EU COUNTRIES.......................................................13
CONCLUSION.........................................................................................................................................14
CONCLUSION AND RECOMMENDATIONS FOR REPORT.............................................................................15
REFERENCES..............................................................................................................................................16

Table of figures
Figure 1: IMPACT OF UK BUSINESSES ON ECONOMY..................................................................................7
Figure 2: EMPLOYMENT GENERATION BY THE UK ENTERPRISES...............................................................10
Figure 3: UK BUSINESSES BY NUMBER OF EMPLOYEES (2000-2018).........................................................11
Figure 4: % of Total UK Employment & Turnover By Different Sector (Start 2018)...................................12

INTRODUCTION
SMEs comprise of small, micro and medium-sized businesses that employ members ranging from 0-249
and their revenue do not exceed 50 million euro. These businesses account for 99.9% of the private
sector businesses in the UK and are majorly responsible for the development of the economy of the UK.
In this report the impact of SMEs on the economy of the UK is discussed and how these organizations
contribute to the development of the economy. The various political and economic factors that affect
the SMEs are also discussed. The objective of this report is to know the role of SMEs and their
contribution to the economy of the UK. By taking the case study of Thirdway, the impacts of SMEs are
discussed (Memili et al., 2015).
Thirdway is the service sector small business. Thirdway provides interior designs for the offices and
workplaces and makes them comfortable and professional suited to the needs and budget of the
customer. Thirdway was established in 2009 and provide services in design and build, Architecture and
commercial real estate. The working environment and culture of the organization are very friendly and
the organization deals in providing innovative services. The founder of the organization is Ben Gillam
(Thirdway, 2019).

CONCEPTS OF SMEs
SMEs are small and medium-sized businesses. The concept of SMEs differs in every nation. In the
European countries, SMEs are small and medium-sized businesses with the employment of not more
than 250 employees and the turnover not exceeding £50 million.
Small businesses are business organizations that are privately owned. These organizations can be sole
proprietorships, partnerships or in the form of limited companies. Small businesses do not have more
than 50 employees whereas micro businesses are a part of small businesses that employ members
ranging from 0-9.
Around 99% of the organizations in the UK are small and medium-sized businesses and contribute
majorly to the growth and development of the economy. SMEs help in the reduction of poverty by
creating job opportunities and increasing the cash flow in the economy.

EVALUATION OF THE GROWTH AND FINANCIAL CONTRIBUTION OF
MICRO, SMALL AND MEDIUM SIZED BUSINESSES ON THE ECONOMY OF
THE UK
SMEs contribute quite a lot to the growth and development of the economy by generating employment
opportunities and creating a maximum number of jobs for the people. SMEs provide a major
contribution to the innovation dynamics and in the recent years SMEs are advancing because of the
market factors and due to availability of resources and technological advancements, the SMEs have
strengthened their advantages and benefits (Loader, 2018).
The employment generated by SMEs in 2016 was 15.7 million, 60% of the total employment generated
by the private sector in the UK. The growth of SMEs can give rise to the economy of the UK as around
99% of the enterprises in the private sector of the UK are comprised of SMEs. It is predicted that the
contribution of SMEs is around £217 billion till 2020 in some of the cities of the UK. SMEs merged
turnover results in about half of the total turnover of the private sector i.e. 47%, the total resulted in
around £1.8 trillion (Loader, 2018).
Figure 1: IMPACT OF UK BUSINESSES ON ECONOMY
Source: (Rhodes, 2018)

THE POLITICAL AND ECONOMIC FACTORS AFFECTING THE DEVELOPMENT OF THE UK's SMEs:
The political factors have both positive and negative impacts on SMEs. The policies set by the local and
national government of the UK and the initiative plans like UK trade and investments and Government
Business Growth Services have a positive impact on the SMEs and help in the funding and growth of the
organizations. Instability of the government and increase in taxation and other duties hinder the growth
of SMEs (Harrison and Baldock, 2015).
Economic factors like inflation rate and recession hinder the growth of SMEs whereas financial
investments and availability of funding and investments by the government and other angel investors
benefit the SMEs and help in the development of the organizations (Harrison and Baldock, 2015).

CONCLUSION
Through the above descriptions in the report, it can be concluded that SMEs are the small and medium-
sized business that brings in innovation and competition in the market and help in the growth and
development of the economy of the UK and from the above observations, SMEs are the major factor for
job creation and for the growth of GDP and revenue generation of the economy.

ROLE OF THE SMEs AND CONTRIBUTION TO THE NATIONAL ECONOMY
SMEs have a huge impact on the growth and development of the national economy of the UK. There is
the great importance of the SMEs on the economy as these contribute to the growth and create
employment opportunities for the people that in terms of help in the productivity of the economy. The
growth and expansion of SMEs are lagging behind that of the US and the government of the UK need to
take initiatives in order to expand their SMEs (Fingleton et al., 2017).
SMEs play an important role in the growth, employment and turnover of the economy:
Growth: SMEs are the backbone of the UK economy as these are the major contributors to the growth
of the economy. The manufacturing and service sectors in the small and medium-sized businesses have
much confidence and are continuously growing and contributing to the economy in term of the GDP
rate and gross value-added products. Thirdway is the service sector organization and is rapidly growing
since its establishment in 2009 and contributing to innovation and development of the economy
(Fingleton et al., 2017).
Employment: small and medium-sized businesses create more than half of the employment
opportunities in the UK and 60% of the employment is generated from small and medium-sized
businesses. Although micro business owners are sole proprietors but still SMEs create maximum jobs in
the UK. Thirdway employs a team of people for the work and provides rewards and incentives for their
efficiency in work (Fingleton et al., 2017).
Figure 2: EMPLOYMENT GENERATION BY UK ENTERPRISES

Source: (Fingleton et al., 2017)

4.1 COMPARISON OF GROWTH OF SMEs IN TWO DIFFERENT REGIONS OF THE
UK
London is one of the largest and most populated regions of the UK. At the beginning of 2012, the total
number of SMEs in London amount to 805,085. The figures obviously exceeded over time. SMEs
constitute of 99.8% of the private sector of London creating a large amount of revenue, employment
and business turnover. SMEs generate 49.8% of the total employment in London amounting to around
2.3 million. It makes up to 47.7% of turnover in London that amount to around £430 billion. The growth
rate of SMEs in London is above the national growth rate whereas the areas such as Wales have very
low growth in the SMEs amounting in negatives (-6%). This means some of the areas like London, South
East, South West produce maximum growth rate to the UK’s economy.
Figure 3: UK BUSINESSES BY NUMBER OF EMPLOYEES (2000-2018)
Source: (Rhodes, 2018)