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The Crucial Role of SMEs in the UK Economy
With more than six million small businesses in the UK, they have a significant impact on the nation’s economy.
New government statistics show small and medium enterprises have a combined annual turnover of £2.18 trillion - amounting to 52% of the private sector's total turnover.
The crucial role of SMEs in the UK economy is as a foundation for economic growth. As well as contributing to the economy at national level, they also play a vital role in local communities.
The contribution of each SME UK-wide is substantial, ranging from providing employment and keeping town centres alive to contributing to the nation’s gross domestic product.
The employment rate is a key indicator of the economy’s health, so when SMEs create jobs, it benefits both the people who are employed and the economy as a whole.
In turn, as employment increases, it has a ripple effect, boosting consumer spending and general economic activity. This also leads to increased production and more job opportunities in related industries.
Boosting the GDP
SMEs have a considerable impact on the UK’s gross domestic product, generating 25% of the nation’s total GDP.
This statistic alone makes it clear why people should support small businesses, as this will help ensure long-term economic growth in Britain.
Keeping town centres alive
The local economies and communities are dependent on consumers shopping with small businesses.
When customers spend their money at a local independent shop, rather than at a national chain store, it means more money is recirculated in the local economy.
SME owners are more likely to spend their income with fellow small businesses, including at pubs, restaurants and other stores, creating a knock-on effect. This will benefit the entire community.
The products sold by SMEs usually require less transportation to reach the market. This means they have a lower carbon footprint compared with products sold by national chain stores.
For example, vegetables grown in the local area and sold at the greengrocer’s will have a significantly lower carbon footprint than those flown in from overseas and sold at large supermarkets.
Buying produce from local stores helps support farmers and manufacturers in the community too. Small businesses also tend to use more sustainable packing materials.
Shopping with independent retailers helps to promote diversity, as SMEs are more likely to showcase the unique cultural characteristics of their community.
This provides a wide range of products and services for diverse tastes. Small and medium enterprises are often run by generally under-represented groups, helping entrepreneurs to grow a more equitable business community.
Small businesses are also able to build a personal connection with customers. This promotes a greater sense of belonging and inclusivity.
Surviving the economic downturn
This can help them to survive economic downturns, especially if they take advantage of professional accounting for SMES to ensure the books are being kept accurately.
A skilled SME accountant will help you to keep track of income and expenditure, offering advice on tax relief, business growth and reducing spending where possible.
SMEs are the backbone of the British economy - and while some will be simply fighting for survival during these challenging times, canny business owners will be keen to innovate and grow, putting together ideas for the future when the current financial crisis abates.