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

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Entrepreneurship and Small Business
Management
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Table of Contents
Task 2 – Report................................................................................................................................3
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........................................3
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...........................................................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.........................................................7
References........................................................................................................................................8
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Task 2 – Report
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.
There are various types of companies that are taking over the market of the UK. Small scale or
medium-sized enterprises are one of them. These enterprises have a maximum of 250 employees
and provide maximum opportunities to the entrepreneurs of the nations. In this era, every
individual is trying to open their start-ups in the form of SME. Therefore it can also be said that
with the help of these types of companies the level of unemployment is reducing in the UK
(Market-inspector.co.uk. 2019).
SME plays a crucial role in the economy of the United Kingdom. With the growth of SME, the
economy of the UK is also growing and the people residing in the respective country can
experience an innovative environment. With the opening of a new organization the level of
creativity and innovations in increasing in the country which is giving it an economical push
(Planning, BIM & Construction Today. 2019).
With the opening of SME, employment opportunities are created in the country that helps in
reducing the level of unemployment from the organization. By evaluating the real facts it is
analysed that the individuals residing in the UK are trying to open new organizations every year.
By 2016 the respective country was able to open about 5.5 million SME organizations in the UK.
The reason behind this progress is that the government is supporting the start-ups and is
providing attractive loans to the parties. With the help of the respective process, the government
is able to enhance the growth and GDP rate of the nation (Market-inspector.co.uk. 2019).
In the UK the majority of companies are operated on a small level. These organizations are
funded either by the government or by the stakeholders who are interested in the products or
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services of the organization. The companies can either take loans from the banking institution. In
the UK taking a loan for start-ups is very easy as the banks are very cooperative with the
individuals who are up with new and creative ideas. The banks of the respective nation find it
profitable to invest in a new idea and this likewise helps in boosting the morale of the new
entrepreneurs. The business of SME is affected by a number of political, economic and social
factors, some of these factors are provided underneath:
Impact of Political factors on SME of UK
In the UK the political parties have a significant impact on the growth of small scale or micro-
enterprises. The authorities of the respective nation are in full support of such organizations and
try to promote the concerning trend in various ways. Generally, the entrepreneurs have to invest
their funds in the business, but with the support of the government in the UK, the entrepreneurs
are able to collect the funds from the government in the form of investment or loans. This has
helped in enhancing the scope of SME in the boundaries of the UK (Gov.wales, 2019).
Impact of social factors on SME in the UK
Along with the political factors, the economic factors likewise play a vital role in the growth of
small and medium scale enterprises in a nation. The economic condition of UK is sound. The
individuals are ready to spend on the products that seem interesting and hold good value for
them. These factors have helped in boosting the morale of the individuals that are up with a new
and creative start-up idea. The individuals are eager to open their new start-up in the market as
they feel that with a new organization they will be able to grow themselves in a professional
world.
The UK is a nation that is currently a major part of international trading. Pound holds the
significant value in the market in comparison to the other currency such as Dollar, Euro and
Rupee etc. Hence the entrepreneurs also have a facility of expanding its chain of business to the
international market which can additionally help in enhancing their profit reserves. By getting
involved in the activity of exporting the respective organization will be able to grow their areas
of development. The exchange rate of the company is more than all the other major international
traders. This helps the country in attracting more and more entrepreneurs (Planning, BIM &
Construction Today. 2019.).
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Impact of social condition on SME in the UK
Social conditions likewise play an advancing role in the development or growth of the small and
medium-class industries. The social culture of the UK is very sound and productive. The
individuals of the respective country welcome every new thing with full interest. They try to
invest in a product that is available in good quality and holds good value for society. The new
and educated youth currently prefers the companies that are serving the society effectively and
are attentive towards the environment. The start-ups that try to contribute to the environment in
one or their manner are highly popular among the youth of the UK (Gov.wales, 2019).
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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
Small and medium enterprises are a major attraction of individuals in the UK. All the individuals
are trying to open their own start-ups in the country as the company holds a great social and
economic value. The Impact of SME is different in different regions of the country. A
comparative study that can help in stating the same is discussed below:
Impact of SME in Scotland
The scale of SME is found decreasing in Scotland in 2018. The decrease was reported due to the
decreasing number of registration of the companies. Though a number of companies are
established in the specific region they are not registered by the government. Due to this, the
business of respective firms is impacted as the companies are not provided with the financial
assistance of the government. Along with this, the government is likewise imposing heavy taxes
on the SME as to lower the impact of unethical and illegal processes (Gov.wales, 2019).
Impact of SME in Wales
On the contrary side, the business of SME in Wales is flourishing at a rapid pace. The companies
related to tourism, jewellery and electrical essential are quite popular in this region. The business
of such companies is experiencing tremendous growth in Wales. The government of the
respective region is in complete support of the establishment of SME. But currently the Welsh
government is dealing with a number of financial hazards, so the government is not able to fulfil
the requirements of all the SME in Wales. Due to this factor, the business of small scale
industries is impacted insignificantly (Eurofound. 2019).
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B) Compare the impact of SME’s for the UK utilising two different industries (for
example, retail and construction)
Retail industry
 The retail industry is experiencing a hike in both online and offline sources
 The purchasing power of the consumers is effective in concern to the retail market
 In 2018 the UK was incorporated with about 319,000 retail businesses.
 The retail sector of the UK is contributing positively to the GDP and GVA
(Gov.wales, 2019)
Construction industry
 In the UK about 20% of the total SME and micro organization are related to
construction.
 In London, there are about 53,645 small and medium enterprises
 The respective industry is very productive for the economy and GDP of the UK
C) Compare the impact of SME’s for two EU countries
The trend of small and medium enterprise is very popular in European countries as well. The
authorities of this country are also very supportive of the new start-up's project. The main
attraction of the start-ups in the United Kingdom and Spain. Both of the countries are very must
popular among the entrepreneurs and are filled with start-ups. But the policies adopted by both
the companies for SME is a little different from each other (Espon.eu. 2019). In Spain, the legal
policies on the Small and medium-sized industries are comparatively more. The government is
very attentive regarding its business. The international trade of Spain is affected by a number of
legal boundations which are not really observed in the territories of the United Kingdom
(Espon.eu. 2019).
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References
 Espon.eu. 2019. Small and Medium-Sized Enterprises in European Regions and Cities.
[online] Available at: https://www.espon.eu/sme [Accessed 17 Jul. 2019].
 Eurofound. 2019. SME Initiative Spain. [online] Available at:
https://www.eurofound.europa.eu/observatories/emcc/erm/support-instrument/sme-
initiative-spain [Accessed 17 Jul. 2019].
 Gov.wales. 2019. Adran yr Economy a Thrafnidiaeth Department for Economy and
Transport. [online] Available at: https://gov.wales/sites/default/files/publications/2019-
02/atisn12909.pdf [Accessed 17 Jul. 2019].
 Market-inspector.co.uk. 2019. Facts About the Role of SMEs in the UK. [online]
Available at: https://www.market-inspector.co.uk/blog/2017/05/facts-about-small-
medium-businesses-in-the-uk [Accessed 17 Jul. 2019].
 Merchant Savvy. 2019. UK SME Data, Statistics & Brilliant Charts (2019 Update).
[online] Available at: https://www.merchantsavvy.co.uk/uk-sme-data-stats-charts/
[Accessed 17 Jul. 2019].
 Planning, BIM & Construction Today. 2019. SMEs working in the construction sector
within the UK. [online] Available at: https://www.pbctoday.co.uk/news/planning-
construction-news/smes-construction-sector/52120/ [Accessed 17 Jul. 2019].
 Www2.gov.scot. 2019. Businesses in Scotland - Key Facts. [online] Available at:
https://www2.gov.scot/Topics/Statistics/Browse/Business/Corporate/KeyFacts [Accessed
17 Jul. 2019].
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