Small Business Britain Report

The 10th annual State of Small Business Britain recently published, shows that despite small businesses making up more than 99% of the business population and accounting for more than 50% of jobs, the level of support available is currently insufficient and too fragmented.

Over the last decade, small business growth has slowed. This has been caused by combinations of the Banking Crisis, Brexit, Covid-19 and Geopolitical tensions and this has led to the proportion of small firms that are expanding their workforce, to drop by 40% between 2012 and 2022.

Within this report, a number of trends and issues are drawn together to give a snapshot of the current small business landscape in the UK.

Key findings from this report include:

• Business crises are common, with a third of small businesses experiencing a threat to their survival within the last five years. Despite this, fewer than half of firms sought external advice or support during the last year, to help them plan how to cope with a crisis.
• The COVID-19 pandemic took a heavy toll on SMEs, as nearly half suffered a hit to their turnover and three in 10 were forced to cut jobs. The pandemic also saw an increase in the number of company dissolutions, with young firms the most vulnerable and prompted one in five small firms to pivot to a completely new business model.
• The cost of doing business has risen. The ERC’s Small Business Price Index (SBPI) showed that costs rose faster during the first half of 2022 than they had since 2008
• International trade has become increasingly challenging following Brexit and the COVID-19 pandemic, with nearly one quarter of small firms viewing Brexit as a major business obstacle between 2018 and 2021, as the UK struggled to bounce back as quickly as other countries.
• Innovation among small businesses declined between 2017 and 2021. Those firms that did innovate continued to experience significant disruption in 2022.
• Small businesses have been hit by an increase in ‘presenteeism’ with 37 percent of firms in 2023 reporting that employees continued to work while unwell or beyond their contracted hours. This was accompanied by an increase in the rate of mental health-related sickness.

What help do small businesses need to grow?

Overall the report demonstrates that SME’s do show remarkable resilience in the face of these many challenges. Some, a small number, have achieved impressive growth as they were able to take advantage of opportunities in the midst of uncertainty.

It does warn that the Government tends to celebrate the small proportion of very high-growth firms and make a big thing of the number of new businesses entering the market, using this as evidence of how their policies are working. Instead, their focus should be on helping more small businesses to achieve sustainable growth and building in greater resilience and adaptability, to national and international challenges

The UK Government spends a not insignificant amount of money reacting to issues and putting together interventions to help small businesses each year. It is vital for the future that these funding decisions are based on solid evidence, such as shown in this report, to ensure that policymakers provide small businesses with the support they actually need.

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