SME's contribution to the UK Economy: A 5-Year Analysis

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Unit 9: Entrepreneurship and Small
Business Management
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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................4
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. 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.........4
b. Examine the role of SME’s and analyse how they contribute to the national economy.
Your analysis must contrast the following:............................................................................6
A) Compare the impact of SME’s for two UK regions; 200.................................................6
B) Compare the impact of SME’s for the UK utilising two different industries (for
example, retail and construction)...........................................................................................7
C) Compare the impact of SME’s for two EU countries;......................................................8
Conclusion..................................................................................................................................9
Reference List..........................................................................................................................10
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Introduction
SME is the abbreviation of small and medium-sized enterprises that are the organisations that
have under the scale of 250 employees as defined by European Commission. In case the
country the United Kingdom is considered it can be stated that the country has several
numbers of small and medium-sized organisations. As per the European Commission, the
small and medium-sized organisations have rate of turnover that is fewer than 50 million
pounds.
In this report, the concept of SME has been defined along with the evaluation of the
development as well as economic contribution that the micro, small and medium
organisations that are private make. The political factors along with the economic factors that
stimulate or obstruct the development or growth of SME’s in the United Kingdom has been
illustrated along with the analysis of the contribution that the SME’s make to the economy of
the United Kingdom.
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Discussion
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. 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.
As per the European law, small and medium-sized enterprises or SME can be defined as the
organisations that have less than 250 employees and less than 50 million pounds. In the
United Kingdom, the small and medium-sized organisations are very important as
approximately 99 percent of the organisations in the United Kingdom are SMEs. It has been
found that millions of the citizens are employed in the small and medium-sized organisations
in the country the United Kingdom (Smallbusiness.co.uk, 2015). The SMEs are responsible
for driving the growth of the United Kingdom. If segregated the micro business, small
business and medium-sized business can be defined as follows:
 The medium-sized organisations have less than 250 staffs and a turnover of
approximately 50 million pounds. The medium-sized organisations have a balance sheet
of approximately 43 million pounds (Simplybusiness.co.uk, 2019).
 The small businesses have under the scale of 50 staffs and a income of 100 million
pounds approximately. These organisations have a balance sheet of approximately 10
million pounds.
 The micro organisations have less than 10 staffs and the turnover rate of approximately 2
million pounds. These organisations have a balance sheet of approximately 2 million
pounds.
As the small and medium-sized organisations make up approximately 99 percent of the
organisations in the United Kingdom therefore the contributions that the organisations make
is immense. In the last 5 years, the micro organisations have made a major contribution in the
growth and development of the United Kingdom economy as it has created a huge number of
jobs even at times of recession (Thoughteconomics.com, 2012). The medium-sized
organisations have been observed to cut-down a huge number of jobs thus it can be stated that
the micro and the small organisations are the major factors of growth of the United Kingdom
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economy. The small and the micro organisations have made a vital contribution in the
enhancement of wealth and productivity of the United Kingdom economy.
Figure 1: The contribution of the SMEs to the GDP of the countries that have varying
levels of income
(Source: Businessenvironment.org, 2019)
The small-scale organisations have made a major contribution in driving the productivity of
the organisations especially in case of sales that are made in international markets. The small
organisations are important in terms of driving creativity or innovation that has further
stimulated the growth of the financial system of the United Kingdom.
Figure 2: The contribution of the SMEs to generate employment in the countries that have
varying levels of income
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(Source: Edinburgh-group.org, 2019)
The political as well as economic factors of the United Kingdom has affected the
development and growth of the small and medium-sized organisations in the United Kingdom
as Brexit has resulted in sluggish growth of the United Kingdom economy as it has increased
the financial crisis and has increased the rate of inflation in the country. The exit of the
United Kingdom from the European Law has lead to the emergence of instability in the
country since 2018 that in turn has affected the small and medium-sized organisations in the
country. Brexit has increased uncertainty in the United Kingdom economy (Ft.com, 2019).
The exit of the organisation from the European Union Law has further affected the GDP of
the nation adversely as it has affected the rate of growth of the SMEs in the country.
Figure 3: The contribution of the SMEs to shares of employment based on regions
(Source: Edinburgh-group.org, 2019)
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; 200
The small and medium-sized organisations play an important role in determining the growth
and development of particular regions of the United Kingdom as shown in the cart below:
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Figure 4: SMEs in various regions of the United Kingdom
(Source: Rhodes, 2019)
London: It was observed at the beginning of 2012, London had about 805,085 SMEs. The
SMEs account for approximately 99.8% of the private sector organisations in London
(London.gov.uk, 2019). The employment generated by the small and medium-sized
organisations in London is approximately 2.3 million that is about 49.8% of the number of
people employed in London. The turnover of the small and medium-sized organisations in
London is 47.7 percent that is approximately 430 billion pounds.
East of England: In case of East of England, it can be observed that the number of SMEs is
572,420 that is less as compared to London. The turnover rate of East of England is about
366,346 million pounds (Merchantsavvy.co.uk, 2018).
Based on the data or statistics of London and East of England it can be stated that London
provides a better environment of growth to the small and medium-sized organisations.
London has been the major centre for the development and growth of the small and medium-
sized organisations as compared to east of England thereby making a better contribution to
the development and growth of the United Kingdom.
B) Compare the impact of SME’s for the UK utilising two different industries (for
example, retail and construction)
Figure 5: SMEs in various industries of the United Kingdom
(Source: Muller et al., 2019)
As per the reports in 2016 it can be seen in the graph above that number of small and
medium-sized organisations in the manufacturing industry is nine percent of the total number
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of organisations in the manufacturing industry in the United Kingdom. The employment
generated by the small and medium-sized organisations in the manufacturing industry in the
United Kingdom is 19% of the total employment generated in the industry. In case of the
construction industry in the United Kingdom, it can be observed that the number of
enterprises is 14% of the total number of organisations in the in the construction sector in the
United Kingdom. The employment generated by the small and medium-sized organisations in
the construction industry is 12% of the total number of employment generated by the
construction industry in the United Kingdom overall. Thus, it can be stated that if the SMEs
are compared in the manufacturing and the construction industry then the employment
generated in the manufacturing industry is more as compared to the construction industry as
the number of businesses in the manufacturing industry is more.
C) Compare the impact of SME’s for two EU countries;
In case the countries France and the United Kingdom is considered the impact of the small
and medium-sized industries is different. In case of the United Kingdom, in 2018 the small
businesses account for not more than 99.9% of the organisations in the country. The total
number of small and medium-sized industries in France is 3700. The SMEs in France employ
approximately 50% of the employees in the country (BpiFrance, 2019). Thus, it can be sated
those in terms of small and medium-sized industries the United Kingdom supports the small
and medium-sized industries more as compared to France. The impact of the small and
medium-sized industries in the United Kingdom is more as compared to that of France. Since
the number of SMEs is more in the United Kingdom and makes a larger contribution to the
GDP of the countries respectively and generation of employment opportunities.
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Conclusion
The small and medium-sized industries play a crucial role in determining the growth and
development in the United Kingdom as affects the GDP of the country and generates
opportunities of employment. The small and medium-sized industries in the United Kingdom
have been affected by Brexit that is the exit of the United Kingdom from the European
Union. The small and medium-sized industries have different impacts on different regions of
the United Kingdom and the impact of the small and medium-sized industries in different
industries also varies.
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Reference List
Edinburgh-group.org. (2019). [online] Available at:
http://www.edinburgh-group.org/media/2776/edinburgh_group_research_-
_growing_the_global_economy_through_smes.pdf [Accessed 14 Jun. 2019].
Ft.com. (2019). Economists predict the UK economy’s trajectory in 2019 | Financial Times.
[online] Available at: https://www.ft.com/content/4b566c36-0521-11e9-9d01-cd4d49afbbe3
[Accessed 14 Jun. 2019].
Businessenvironment.org. (2019). [online] Available at:
http://www.businessenvironment.org/dyn/be/docs/272/The%20Impact%20of%20Business
%20Environment%20on%20Small%20and%20.pdf [Accessed 14 Jun. 2019].
Thoughteconomics.com (2012). The Role of SME’s in the UK Economy. [online] Available
at: https://thoughteconomics.com/the-role-of-smes-in-the-uk-economy/ [Accessed 14 Jun.
2019].
Simplybusiness.co.uk (2019). What is an SME? A simple guide. [online]
Simplybusiness.co.uk. Available at:
https://www.simplybusiness.co.uk/knowledge/articles/2018/12/what-is-an-sme/ [Accessed 14
Jun. 2019].
Smallbusiness.co.uk (2015). The importance of small businesses in the UK economy. [online]
Available at: https://smallbusiness.co.uk/the-importance-of-small-businesses-in-the-uk-
economy-2492626/ [Accessed 14 Jun. 2019].
Merchantsavvy.co.uk (2018). UK SME Data, Statistics & Brilliant Charts (2019 Update).
[online] Available at: https://www.merchantsavvy.co.uk/uk-sme-data-stats-charts/ [Accessed
14 Jun. 2019].
London.gov.uk. (2019). [online] Available at:
https://www.london.gov.uk/moderngov/documents/s22201/SMEs%20in%20Londons
%20Economy.pdf [Accessed 14 Jun. 2019].
Rhodes, C., 2019. Business statistics. House of Commons Library, 06152.
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Muller, P., Julius, J., Herr, D., Koch, L., Peycheva, V. and McKiernan, S., 2019. Focus on
self-employment. ANNUAL REPORT ON EUROPEAN SMEs 2016/2017, (2017)5729448).
BpiFrance, 2019. FRENCH SME REPORT 2016.
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