SMEs hold the key to UK economy growth

Small businesses have long been recognised as vital to the overall health of the British economy. With around 4 million now operating in the UK, SMEs not only play a part in boosting tax receipts, but also in terms of creating new jobs and innovations.

Powerful SMEs

The London Stock Exchange has recently announced a new “Elite” group of small companies of whom they have great expectations. Known as “the magic 6 per cent”, this small subset are believed to be particularly important for the part they play in economic growth and job creation. The LSE believes that these businesses will create up to 230,000 new jobs and add £38bn to the UK economy. However, the LSE has not made specific predictions of how long it will be until these Elite companies generate these returns.

Another survey conducted by the Clydesdale and Yorkshire Banks last year suggests that UK SMEs are now well into a spending boom, investing £82bn over the course of this financial year. And this is just part of the £1600bn turnover directly attributed to Britain’s small businesses.

Concentration of wealth a potential issue?

To assist with continued growth, insurer AXA has begun lobbying the government with a view to creating an “SME hub” that can help redistribute wealth elsewhere in the country. According to a survey conducted by AXA, 71% of business owners believe the concentration of businesses in London continues to pose a significant risk to the wider economy.

Time will tell whether the LSE is over-confident in the role of their select list of businesses, or whether local business hubs will be needed to ensure healthy economic growth. But whatever the outcomes, the contribution of SMEs to the British economy, and thus the economy generally, seem certain to continue to grow over the next twelve months.