The size and importance of small business in the UK cannot be overstated; it is vital to the economy. The number of businesses starting up each year is also staggering. In 2021, the number was 364,000 although in the same year 327,000 closed.
Here we look at the size of the market, the failure and success rates, and the type of business owners who seek external help.
- At the start of 2021 there were 5.5 million small businesses in the UK private sector (with 0 to 49 employees)
- 1.4 million of these had employees, and 4.2 million had no employees
- SMEs account for 99.9% of the business population (5.5 million businesses).
- SMEs account for three fifths of the employment and around half of turnover in the UK private sector.
- Total employment in SMEs was 16.3 million (61% of the total), whilst turnover was estimated at £2.3 trillion (52%).
- Employment in small businesses (with 0 to 49 employees) was 12.9 million (48% of the total), with a turnover of £1.6 trillion (36%)
- The UK private sector business population is made up of 3.2 million sole proprietorships (56% of the total), 2 million actively trading companies (37%) and 384,000 ordinary partnerships (7%) in 2021.
- 2.7 million private sector businesses were registered for VAT or PAYE, 48% of the estimated total population.
UK Business Survival / Death rate
- The five year survival rate for UK businesses born in 2016 is 38.4% so just under 62% or three out of five will have ceased trading by the end of their fifth year.
- In 2021, transport and storage had the highest birth rate at 25.9% but also the highest death rate at 21.8%
- Information and communication had the highest net negative birth/death rate fall of -6.2%
- Retail had the highest net growth rate of +5.7% net followed by Accommodation at +5.3%
Top reasons for business failure
- Lack of cash and not managing cash flow
- No plan, no clear objectives
- Lack of clear value proposition – no differentiation from competition
- Heavy reliance on one or two big customers
- No marketing platform/plan
- No performance data or analytics – not racking financials or KPIs
- Not acting on market information
- Poor management – and widely seen as the most common factor
Read our blog on: Why Businesses Fail - 6 Top Reasons
What kind of business owners typically seek external help?
- Micro businesses were significantly less likely to use formal business assistance than small and medium-sized businesses (39% of micro businesses used external assistance, compared to 48% of small businesses and 57% of medium businesses).
- SME employers where more than half of the business was owned by women were more likely to use formal business assistance than their male run counterparts (46% compared to 39%)
- Those women-led businesses using business assistance were significantly more likely to have used public sources than male-led businesses (28% of them compared to 18%)
- Businesses where managers had a degree level qualification or postgraduate qualification were more likely to use formal business assistance (47% and 54% respectively) than those where managers had lower level qualifications (36% of them) or no formal qualifications at all (26% of them).
- A similar proportion of Minority Ethnic Group (MEG)-led SME employers used formal business assistance during the past three years to that of their counterparts (39% of MEG led compared to 40% of their non MEG counterparts). Similar proportions also used the various sources of assistance.
- A higher proportion of SME employers using formal business assistance increased their sales turnover during the past 12 months (43% of users compared to 39% of non users)
- The main reasons for not seeking information or advice were that:
- it would be too expensive (38%)
- the right type of assistance did not exist (29%)
- they did not have time (28%) or
- that they had doubts about the benefits/value of obtaining assistance (27%)
Don’t risk your business becoming a negative statistic
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