Recent research by insurance broker LV= (Liverpool Victoria) revealed that 41% of SMEs increased their turnover in 2014.
In total 75% of the 750 SMEs surveyed said that turnover had either increased or remained the same in 2014 (34% of SMEs said turnover remained the same as the previous year). Additionally, a record-breaking 330,000 new businesses were started since the beginning of 2013, the highest figure since the survey began in the year 2000. The number of businesses in the UK has slowly increased each year, even with the onset of the recession in 2009, but we have seen the largest growth in new businesses over the last two years. Although people who have become self-employed account for much of the recent growth, SMEs in the UK employ a large part of the working population: 60% of the private sector, or 15.2 million people in total. It is estimated that an additional 200,000 jobs were created last year, either through SMEs expanding existing teams or sole-trader businesses hiring for the first time.
Many UK businesses fall under the definition of an SME. According to the EU definition, an SME must have less than 250 employees, a turnover not exceeding €50m, and a balance sheet not exceeding €43m. In the UK we now have more SMEs than ever before. Statistics released by the Department for Business Innovation & Skills on November 26th 2014 showed that there were a record 5.2 millions SMEs at the beginning of 2014, which is “the first time the business population has exceeded 5 million”. In 2000 there were just 3.5 million SMEs, meaning the number of these businesses in the UK has increased by a whopping 1.7 million, or almost 50%, over the past 14 years. Together they account for £1.6 trillion in annual turnover, or 47% of the total turnover of businesses in the private sector.
The worrying statistic revealed through LV=’s research showed that one in twenty of the businesses surveyed were not fully insured. Mike Crane, commercial lines director of LV=, said that SMEs were the “lifeblood of the British economy” but warned that they should get the appropriate insurance cover as soon as possible, so that they were no longer “vulnerable to prosecutions and fines by the HSE (Health and Safety Executive) for not having appropriate insurance in place.” As well as the fines of up to £2500 per day, SMEs should be equally concerned about the financial impact of a successful claim against them if they were not fully insured.
What does this all mean for the small business owner?
One of the most important conclusions that we can draw from this is that the outlook for SMEs in 2015 remains very positive. Owners of small businesses should do everything possible to build on the strong foundations set in 2014 to ensure further growth this year. The same month the figures were released by BIS, serial entrepreneur and angel investor Sherry Coutu released a report titled: ‘The Scale-Up Report on UK Economic Growth’, estimating that a 1% increase in ‘scale-ups’ would create 238,000 new jobs and generate an additional £38 billion. According to the report, “A ‘scale-up’ is an enterprise with average annualised growth in employees or turnover greater than 20 per cent per annum over a three year period, and with more than 10 employees at the beginning of the observation period.” Small businesses will be instrumental in creating this growth, and therefore it is essential that both the government and the rest of the business community do everything possible to support these high growth potential businesses.
Comment from John Moore of Kingly Brookes
“We welcome the confirmation of this increase which we suspected due to our observations of increased activity in our clients. The move from employment to self-employment puts a new tranche of people into the complexities of the compliance regimes for small businesses.”
You can find out more about how Kingly Brookes works with Small and Medium Businesses here.