SME in the UK| SME & UK Economy| Importance of Small-Medium Enterprise


About SME

SME stands for Small-Medium Enterprise. SMEs plays a crucial part in the global manufacturing networks of the country and are at the heart of developing a country’s financial development. Formal SMEs contribute 50% of total jobs and around 33% of generating economy’s domestic revenue. And the percentage will increase if informal SMEs contributions are added up.

Small-medium Enterprise (SME) refers to the small and medium-sized businesses. The headcount ranges in-between 50 to 250 as per the European Union (EU) standards, but this ratio may vary in other parts of the world. In addition to small, medium-sized enterprise, there are micro industries whose employee headcount is around 10.

The government frequently give incentives like favorable tax returns, better accessibility to loans to SMEs that help them to maintain in shape. SMEs plays a significant role in the stability of the political economy, strengthening of social and economic reforms and promoting innovations, generating job opportunities, export contributions, and promoting a fair distribution of revenue.


There’s no specific definition of SME in UK, but EU derived the definition that is widely used in Europe. Although the UK’s government has focused heavily on startups they have also started to concentrate more on SMEs lately. Personal savings are the most significant source of financing for UK startups, while around one-third of startups borrow money from banks.

In the UK, 5.7 million private sector business was reported in the year 2018, which makes it 99% of all businesses operating in the UK. This makes it an important and highest contributor to the UK’s economy. Around 12 million individuals are directly involved in SME in UK.

Micro Industries
  • A very small level of enterprise
  • Employee ranges between 1-9
  • Turnover of not more than £2 million
  • 95% of SMEs are micro industrial

Small-sized Industry
  • Small-sized business whose employee ratio is not more than 50
  • Turnover of not more than £10 million
  • Balance sheet total of more than 3.26 million pounds

Medium-sized Industry
  • Medium-sized business have less than 250 employees
  • Turnover of under £50 million

Importance of SME In The UK Economy

  • The overall sum of SMEs annual turnover of 2.0 trillion pounds.
  • SMEs are considered as the employment engines by the governments as they engage the maximum number of the UK’s population.
  • It is reported that 76% of small businesses are owned by a single person in the UKv
  • This sector has involved an increased number of people who are now self-employed in the last ten years or so.
  • SME contributes 47% of income to the UK’s economy.
  • These enterprises play a central role in boosting productivity, but still, they need assistance for expanding the business.
  • SMEs can react rapidly and adapt to the changing financial conditions
  • Small enterprises also affect local economic development by collecting sales tax
  • Small enterprises not always remain small they grow more and more to become corporations thus contributing more the country’s economy
  • As far as the company’s development is concerned, SMEs are doing very well in the UK. As 50% of the businesses are said to expand more in the coming years.
  • SMEs are producing an enormous contribution to job opportunity market in the UK. Small enterprises employ more than 16.3 million individuals, representing 60% of all private-sector jobs.
  • When it comes to economic revenue, SME has been contributing the turnover of £2.0 trillion in 2018, which is expected to grow in coming years.

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