The state of small business:

Putting UK entrepreneurs on the map

Small & medium businesses (SMEs) are vital for the economic wellbeing of our nation.

They are a core part of our social fabric, and the State of Small Business report from Sage and Nesta shows that entrepreneurial culture in the UK is booming.

It is SMEs’ resilience that has put them at the heart of the UK’s impressive job creation and helped pull the nation out of recession.

But even though the economy is growing, real wages are falling and living standards are not rising. And striking differences in SME growth and productivity at a local level across the UK are reinforcing the inequalities of modern Britain.

The State of Small Business report unveils the unique SME landscape in each local area, and shows how tailored support will help business to thrive.

Find your local area _ Download the report _ Read our key findings _
  • _
    29% more SMEs are trading than before the financial crisis.
  • _
    SMEs have created 73% of net new jobs since the recession.
  • _
    Firms in the most productive part of the UK are 26 times more productive than those in the least.

Where are the SME hotspots?

Measures like growth and productivity vary hugely across the UK, and change over time. The map here shows how areas have changed since before the recession, whilst shorter-term changes can be seen on the individual local authority pages. Click on the toggles below to see an overall picture of the UK’s hotspots, and zoom in on the map to identify local areas.

How’s my local area doing?

Not a valid postcode or Local Authority

Key Findings

/ / Finding 01

1. SMEs have disproportionately driven job creation

Since 2010, SMEs have created 73% of new private sector jobs, despite accounting for just 60% of private sector employment.

Of these 2.8 million new jobs, 34% came from non-employers, and 40% from SME employers. 27% came from large businesses.

Job creation by business size since 2010

  • SME Non-employers
  • Large businesses
  • Small businesses
  • Medium businesses
  • Micro businesses
/ / Finding 02

2. UK business population is booming, but this is not felt across the whole UK

UK businesses are booming in general but there remain very strong regional differences. For example, numbers of SMEs in London have increased at more than ten times the rate of those in Northern Ireland.

Change in SME count 2010-2016

/ / Finding 03

3. The local variation in productivity is huge

While the regional gap in productivity has been widely reported, at a local authority level the difference is even more stark. The most productive local authority in the UK produces 26 times more turnover per worker than the least productive.

Within regions, the most productive local authorities are typically 5 times greater than the least.

Productivity variation by region

  • Local authority with highest productivity
  • Local authority with lowest productivity
/ / Finding 04

4. Failure can be good

The belief that long business survival rates are a sign of a thriving SME landscape is misplaced. In fact, there is a significant negative relationship between productivity and survival rates, with some of the most productive areas of the UK having the lowest survival rates and vice versa. This shows that the dynamism of ‘creative destruction’ is good for the economy.

High productivity doesn’t accompany high survival rates

  • Productivity
  • Five year survival rate
/ / Finding 05

5. Digital infrastructure without digital skills and tools will not boost productivity

While broadband coverage is lower in rural areas and the devolved regions, there is little evidence for connection speeds impacting on SME activity, growth, or productivity.

However, the productivity impact of the SME deficit in digital skills is clear and is estimated by others to cost the UK around £19 billion annually. Equipping SMEs with basic digital capabilities would result in a significant productivity gain.

Hear from the businesses

We spoke to a range of small & medium businesses from up and down the UK. Here are some of their thoughts on the opportunities – as well as the challenges – presented by the business environment in the UK. Read more about them and other businesses in the report.

Peter Ashall, Zone V, Startup

“A significant problem is cashflow. Big distribution companies have payment terms which are usually 60-90 days. As a startup, that means you’ve got to wait that long before any cash comes in.”

Jo Lennon, Mellie Green, Micro-sized

“There seems to be a lot of focus on high tech businesses and high growth industries, but I think that is a misunderstanding because that’s only a small fraction of what the UK has to offer in terms of new enterprise.”

Jeremy Corner, Blue Eyed Sun, Small-sized

“Small businesses like ours can be really successful. I think the government could be more proactive in showing our youngsters that setting up a business is a viable thing to do.”

Grant Santos, Educ8, Medium-sized

“We would like to see more clarity from government about how businesses like ourselves can support them in achieving their aims.”

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