The United Kingdom has the fifth largest economy in the world. In 2015 our total GDP was 2.849 trillion dollars. We are the ninth largest exporter in the world and the fifth largest importer. For four consecutive years the UK has been the fastest growing economy in the G7.
How do startups contribute to this success? Here are 5 ways that startups and SMEs are important to the UK economy.
Employment and Job Creation
The greatest impact that SMEs have on the UK economy is the size and scale of the jobs they provide.
According to the Department of Business, Innovation and Skills (DBIS), in 2015 SMEs provided 15.6 million jobs, 60% of all total private sector employment.
In the next three years, it has been predicted that SMEs provide extra 250,000 new jobs.
Mark Heart, a professor at Aston University and expert in the areas of entrepreneurship, enterprise and small business asserts the employment of SMEs when saying, ‘Small businesses, particularly micro-enterprises, have been responsible for the majority of the gross job creation in the last five years… particularly through the recession.’
Income and profits
Along with creating jobs, UK SMEs generate a significant proportion of the UKs annual turnover. According to the DBIS, UK SMEs provide a combined annual turnover of £1.8 trillion, that’s 47% of all private sector turnovers in the UK.
Share of business
SME’s also comprise the vast majority of the compositional make-up of UK business in the economy.
In 2015 there were a record 5.4 million private sector businesses, an increase of 146,000 since 2000. Of these, 99.9% are small to medium-sized enterprises, and 99.3% are small businesses.
Adding to this, 45% of SMEs plan to grow in the next 12 months and all SMEs, excluding those with 0 employees, improved growth prospects in 2013 and 2014.
Appetite for growth is strong and increasing among SMEs.
The balance of payments
The balance of payments (BOPs) is a crucial feature to the UK economy. In its simplest form, the BOPs tell us how much is being spent by consumers and firms on imported goods and services, and how successful firms have been in exporting to other countries.
An independent study, commissioned by Exact, revealed that 54% of SMEs sell products or services abroad, with the manufacturing sector very much leading that charge with 68% of them exporting.
Adding to this we may see a further rise in SME exports. Chancellor George Osborne has placed a target to get 100,000 more British businesses exporting by 2020.
Playing a leading role in women’s representation
At the end of 2015, less than 10% of executive directors at FTSE 100 companies were women. However, at the end of 2014 around 18% of all UK SMEs were female-led.
There are now almost 1.5 million women self-employed which represents an increase of around 300,000 since before the economic downturn. This is due to the fact women are increasingly starting up businesses. Between 2008 and 2011 women accounted for an unprecedented 80% of the newly self-employed.
These female led SMEs contributed are invaluable to the UK economy and generate around £50 billion to the UK economy between 2006-2010.