Small Business Statistics in the UK: What You Really Need to Know

Small business statistics in the UK have been the most volatile on record over the past few years. We will go through important numbers you need to know this year. So let’s get right into it!

Too much could be said about the worldwide repercussions of recent events, such as the COVID-19 pandemic and the Russian war in Ukraine.

This has resulted in a number of interesting statistics about small businesses in the United Kingdom, including both new company structures and sizes, as well as the number of companies going bankrupt. There is a large proportion of small businesses in the UK’s private sector.

Nonetheless, many of the same overarching statistics can be found in the UK business landscape. Discover the most recent data on small businesses, including their prevalence, distribution, and how they are operating.

Highlights of Business Statistics in the UK

• In 2022, the United Kingdom was home to 5.5 million separate companies.
• Businesses in the UK went 1.5% fewer than in 2021.
• The largest drop in business population happened between 2020 and 2021, with a 6.5% down, which was the largest fall since 2000.
• Most business closures were primarily driven by micro businesses with no employees, presenting the largest category in the UK.
• 74% of UK businesses had no workers in 2022
• More than 99% of companies in the United Kingdom were classified as SMEs, meaning they employed between 50 and 249 people.
• More than 61% of all jobs and 7% of total business revenue in the UK were generated by SMEs.
• Nearly 0.1% (around 8,000) of all businesses in the UK are considered large (defined as having 250 or more employees).
• In the United Kingdom, large corporations accounted for 39% of all jobs and 50% of all business revenue.
• The region most hosted businesses in the UK was London in 2022, with 1 million companies. 

*Source: House of Commons Library

Are you interested in learning more about small business statistics in the UK? Let’s go!

Key Small Business Statistics in the UK You Need to Know

Here, we round up the recent essential small business statistics in the UK, including size, turnover, employment, and regional location.

What Does Small Business Mean in the UK?

The common definition of small and medium-sized enterprises (SMEs) in the UK is any business with fewer than 250 employees, while micro-businesses have 0-9 employees.

What Does the Private Sector Comprise in the UK?

(Source: GOV.UK)

The vast majority of businesses in the UK are sole proprietorships or small enterprises (referred to as “SMEs” in the lingo of business: small and medium-sized enterprises).

Furthermore, businesses can take several legal forms, ranging from large multinationals to self-employed sole traders. They represent 99.9% of all businesses. But in 2022, there were some exciting numbers:

• There were about 5.5 million privately held businesses in the United Kingdom.
•  Only 1.4% of these were run by employees, while over 4% were managed solely by their owners.
•  There were 5.2 million micro-businesses in the UK in 2022, representing 95% of the business population.  
•  Thus, nearly three-quarters (73%) of organisations rely solely on their owners for staff. In some cases, there is only one owner responsible for the entire enterprise! (Read the next point)
•  Five million businesses in the UK employ between one and forty-nine people, making up 99.2% of all businesses there.
•  A microbusiness typically earns a revenue of £176,016 per year.
•  There were 35,900 medium-sized businesses with 50-249 employees, or 0.7% of all businesses.
•  With only 7.700 companies having 250 or more employees, large businesses make up less than 0.1% of the total in the UK.

The bottom line: fewer-than-49-employees businesses make up the largest part of the UK business population, accounting for 99.21%. That makes micro businesses by far the most common type in the country. 

How Good is the Business Environment in the UK?

(Source: NimbleFins)

In 20 years, the number of small businesses in the country has grown by 55% (from nearly 3,550,000 million in 2002 to almost 5,500,000 in 2022), but there was a significant drop of 8% from 2020 to 2022 (£390,000) due to COVID-19 (-6.5% in 2021 and -1.5% in 2022). Non-employer small businesses have driven this fall in the business population.

Over the past two decades, small business expansion has averaged 2.2% per year. On the other hand, 2014 was the year with the greatest growth, when the number of small businesses increased by 6.8%.

How Many Businesses in the UK Face Troubles?

Source: The Bank of England (BoE)

The number of SME businesses in the UK increased by 25% from 2019 to 2021. This was probably because of the worldwide and especially UK economic impact of the coronavirus paramedic.

How Many Black-Owned Businesses Exist in the UK?

(Source: The House of Commons)

4.5% of the total number of registered businesses in the UK are owned and operated by members of ethnic minorities. It’s worth noting that this percentage includes all non-white ethnic groups that make up around 14% of overall UK businesses, given that ethnic minorities will continue to increase in the country during the upcoming years. This means that people from minorities operate 6% of businesses with zero workers.

According to a study done by Parker Review, boardroom diversity is on the rise. In 2021, 89 out of 100 FTSE 100 businesses were led by a member of an ethnic minority group, a 74% increase from the previous year.

How Many People in the UK are Employed by Small Businesses?

(Source: NerdWallet)

Small business statistics in the UK estimate that over 13 million UK people are now employed by one of these establishments. Nearly half (48%) of all jobs in the private sector are held by those earning less than £1.4 trillion per year (34%).

Since 2000, a whopping 27% increase in small enterprises with employee counts has been recorded across the country.

Although small companies make up the great bulk of the UK economy, micro-businesses are responsible for only 32% of employment and 19% of sales.

Now, let’s talk more about these large companies.

SMEs vs Large Businesses: How Size of Both in Terms of Employment and Turnover?

(Source: GOV.UK)

As we’ve already said, big enterprises have a significant impact on the economy and the labour market in the UK. Still, SMEs account for around half of all private sector revenue and roughly three-fifths of all private sector jobs.

Medium-sized businesses employed about 3.5 million people; their expected revenue was £0.7 trillion (17% of total revenue). On the other hand, there were 10.6 million people employed by major enterprises, with a total revenue of £2.0 trillion (49%).

Let’s talk more about revenues and money.

Can We Guess How Much Small Businesses Earn Annually?

(Source: NimbleFins)

While the typical small business in the UK made 259,254 in 2012, this number varied widely depending on the company’s size. Non-employer businesses reported an average turnover of £68,357 yearly. This number shows revenues (aka sales). However, it does not reflect the business cost such as employment costs, material costs, marketing, insurance, rent, and other expenses required to operate a company.

In 2022, small businesses with less than ten workers had an average annual revenue of £446,872, while small enterprises with ten or more workers had an average yearly turnover of £2 million.

What are the Main Industries in the UK?

(Source: House of Commons Library)

When sole proprietorships are considered, it is clear that educational enterprises prevail. These businesses include partnerships, sole traders, and limited companies. Music instructors, private tutors, and others fall under this umbrella. The hospitality and food service industries are the most common among small enterprises hiring people. Such businesses include restaurants, cafés, hotels, B&Bs, other lodging establishments, and those that rent out homes for vacations.

While the construction industry accounted for 16% of all SEMs, it accounted for just 8% of turnover and 8% of employment, while the mining, utilities, and quarrying industries accounted for less than 1%. Many construction businesses are self-employed, making the number of enterprises double but not the number of employment in the sector.

4.2 million businesses in the services industries, regarding the number of businesses, were the scientific and professional sections estimated at 762,000 businesses (14% of all businesses).
In addition, 15% of SMEs were engaged in professional, technical, or scientific activities, whereas just 10% were involved in wholesale, retail, or repair services. Manufacturing firms accounted for 9% of employment, 4% of the private-sector business, and 14% of turnover.

In Which Areas of the UK Can You Find Most Businesses?

(Source: House of Commons Library)

There were 1,014 companies per 10,000 resident adults in the UK.

London has the highest concentration of small businesses in the United Kingdom, with 1,029,700 expected by 2022, a 26% increase from 2012. In London only, there were nearly 1,452 businesses per 10,000 residents, whilst, in the North East, there were around 704 businesses per 10,000 residents

Following London with 837,800 small businesses, the South East accounts for 34% of the UK’s business population, a 9% increase from 2012. That means over a third of UK businesses exist in London and the South East. After London, the North East, North West, and West Midlands regions saw the highest rate of small company growth at 17% from 2012 to 2022. On the other hand, Northern Ireland hosts 0.1 million businesses, the fewest of any region or country in the UK. 

Of all the regions of the United Kingdom, the North East has the fewest privately-owned companies, with around 154,000. Three hundred thirty-six thousand private sector enterprises closed their doors in England between 2020 and 2021, compared to just 28,000 in Scotland, a drop of 8%. Northern Ireland has also witnessed a 17% drop, representing 25,000, while Wales suffered a 1% drop, representing 1,000.

Most importantly, London had the largest decline (90,000) of any English region, followed by the South East (57,000) and Yorkshire and the Humber (2%).

In the UK, How Many Different Types of Stores Are There?

(Source: GOV.UK)

Across the United Kingdom, more than 300,000 companies have been officially recognised as operating in the retail sector. More than 18% of all jobs, 35% of all revenue, and 10% of all enterprises in the UK are provided by these businesses. The total amount spent in UK stores in 2021 was £421.2 billion.

The administrative and support services sector is estimated to be 9% of all businesses. Services industries accounted for around 80% of employment and 72% of turnover.   

In the private sector, what kinds of organisations may you legally establish in the UK?

In the private sector of the United Kingdom’s economy, you can choose between operating as a sole proprietorship, a limited liability company, or a general partnership.

Sole proprietorships dominate the UK small company landscape, according to the small business statistics in the UK.

• In the United Kingdom’s private sector, 56%, or 3.1 million businesses, were sole proprietorships, 37% were publicly listed firms, and 6% were ordinary partnerships (353,000).
• There were 1.1 million enterprises that hired people, including 220,000 solo operations and 95,000 regular partnerships.
• Not only that, but 2.9 million sole proprietorships, 932,000 corporations, and 257,000 conventional partnerships never hired anyone but the owner.

Oh, we forgot to define sole proprietorships, right?

Any business owned and operated by a single individual without the benefit of incorporation is considered a sole proprietorship. This includes small shops selling clothes and groceries, independent IT consultants, freelance graphic designers, musicians, etc.

How Many E-Commerce Businesses are in the UK?

(Source: CREME)

It is estimated that there are 120,375 eCommerce enterprises in the UK, making up around 2.2% of all businesses in the country. The percentage of UK businesses engaging in eCommerce has increased over the past few years because of the growing demand for online shopping, partially made possible by the pandemic.

The same report referred that online shopping as a part of all retail sales grew by nearly 38% in 2021, reaching 8% at the start of 2011 and 19% in 2020.

Undoubtedly, eCommerce websites have changed through the pandemic, falling back but still making progress, accounting for 28% of businesses in the UK. 

Which Annual Proportion of UK Enterprises Fail?

(Source: Office for National Statistics) 

Here are a bunch of shocking facts you need to know.

With a birth rate of nearly 13% (up from 11.5% in 2020) and a mortality rate of 11% (companies that quit operation), nearly 1 in 5 new enterprises in the UK each year fail.

In 2021, there were around 364,000 business births in the UK, showing a 31,000 increase from the previous year. At the same time, the business deaths were calculated at 327,000, approximately 28,000 more than in 2020.   

In general, the volume of business births and deaths is slightly proportionate to the whole number of businesses. Meanwhile, business statistics in the UK showed more business births and deaths found in a larger business population. 

However, due to the financial crisis in 2008, the UK witnessed a business death rate higher than the birth. Despite the negative impact of the pandemic and global instability, the birth rate in the UK remained above the death rate between 2020 and 2021.   

So which sectors shared the highest business birth rate?

The transport and storage industry, including postal services, accounts for 25.9%. At the end of 2021, the number of business births was higher than the number of business deaths in all countries and regions of the UK, except for Scotland and South East England. In addition, London saw the highest rates of business start-ups and closures (85,305 and 69,860, respectively).

That evokes a crucial question: WHY!

Firstly, this makes sense for global business, not only in the UK, because the first few years are tough and unfavourable credit terms can lead to crippling cashflow issues.

According to small business statistics in the UK, people rush into creating a business without having a business or marketing plan. That often leads to a lack of focus and direction, which stifles growth.

Also, some companies become over-reliant on too few income sources, which can lead to a disaster if one of these sources is lost. Some experts also suggest that business failure comes from owners’ intent to launch their projects. People often run their businesses based on their hobbies and fail to adopt the appropriate business mindset required for success. 

Finally, they find trouble standing out because of weak marketing activities. Let’s be honest; without a good marketing strategy, even the best business ideas are unlikely to thrive or survive. 

What Are the Main Issues Affecting SMEs in the UK?

(Source: GOV.UK)

71% of UK SMEs cited the pandemic as a major threat to their operations and growth in 2020, according to a government poll. Also, there are other challenges that UK SMEs reported, including: 

• Competition (37%)
• Regulation (35%)
• Taxation (27%)
• Late payments (25%)
• Brexit (23%)

Covid-19: What Effect Has It Had on UK Small and Medium-Sized Enterprises?

(Source: GOV.UK)

The pandemic established hideous trading conditions for these companies in the country. That was reflected in reducing operations, supply shortages, and short-term shutdowns.

During the lockdown, annual turnover was claimed to have decreased by 56% of small and medium-sized businesses. In spite of this, 41% of small and medium-sized business owners anticipated a rise in sales in the following years.

What Percentage of Companies are Led by Women in the UK?

(Source: the House of Commons)

In 2020, 19% of all SMEs in the United Kingdom were owned and operated by women (21% of these SMEs had no staff), with either a single female owner or a management team consisting of a majority of women. Meanwhile, 24% of SME employers had an equal number of women and men at the managerial level.

In 2021, women managed 37.7% of the FTSE100 and 34.9% of the FTSE250. The £85 billion generated by women-led firms is equivalent to around 16% of the Gross Value Added established by SMEs across the country.

Based on different small business statistics in the UK, there is a significant variation in the proportion of women-led enterprises by industry. For example, in the construction sector, only 9% of companies were women-led in 2021.  

The education sector showed not equally-led SME employers, as 44% were primarily women-led. The House of Commons Library’s report also found that women in the health and social care sector hold 37% of managerial jobs. In comparison, women dominate 31% in entertainment and arts, 30% in other services, and only 29% in the accommodation and food services sectors. 

Moreover, a report conducted by the Global Entrepreneurship Monitor found that the male entrepreneurial activity rate was 13.2% in 2021 compared to 9.7% for females— both significantly higher than the prior year. This gives a male-to-female entrepreneur ratio of nearly 4 to 3.

However, the same report highlighted that the ratio of entrepreneurship varies across the UK regions, from 92% in Wales to 65% in Northern Ireland in 2021.

Meanwhile, the government developed a long-term plan to increase the number of female entrepreneurs, equivalent to 600,000 additional female entrepreneurs, by 2030.

How Much Do Small Businesses in the UK Pay for VAT and Taxes?

(Source: GOV.UK)

Over 75% of UK private-sector enterprises do not have employees. Hence the vast majority are not PAYE (pay as you earn) or VAT registered (value-added tax). There were only 14% of sole proprietorships and 52% of all other types of partnerships that were registered for PAYE or VAT. Without being registered for PAYE or VAT, 2.8 million firms (51% of all businesses) would have to be considered unregistered.

During the fiscal year ending in 2021, overall VAT receipts fell by 22% from the previous year. Net Home VAT obligations continued to be borne mostly by the retail and wholesale industries. In addition, merchants, who accounted for more than £10 million in yearly revenue, paid 68% of the total net home VAT reported. Of the 2.77 million VAT and/or PAYE enterprises, only 59,000 were multi-locational.

How Many UK Businesses Keep Trading with the EU?

(Source: House of Commons Library)

Concerns have been raised about the effects of Britain’s withdrawal from the European Union (EU) on businesses that transact with EU member states.
However, the EU, taken as a whole, is the largest contributor to the UK economy and the most influential trading partner.

In 2021, UK exports to the EU were calculated at £267 billion (42% of all UK exports), compared to £292 billion as the UK imports from the EU (45% of all UK imports).

Disruptions to international trade driven by the COVID-19 paramedic added to disruptions resulting from the end of the Brexit translation period disclosed the value of UK trade with the EU contract dramatically between 2019 and 2020 before slightly recovering between 2020 and 2021.

How come? Let’s see.

• Between 2006 and 2021, the percentage of British exports destined for the EU decreased from 54% to 42%.
• Between 2002 and 2021, the proportion of British imports going to the EU decreased from 58% to 45%.
• In 2021, the UK trade accounted for by the EU had an overall deficit of -£25 billion.
• A surplus of £42 billion on trade was found in services industries, but it was outweighed by a -£67 billion deficit in goods.
• Northern Ireland, followed by the North East of England and Wales, had the highest percentage of goods exports shipping to the EU of all the regions and countries in the UK during 2021. 
• At the same time, Northern Ireland, followed by the South East of England, had the highest proportion of goods imported from the EU. 
• Regarding the terms of the UK-EU Trade and Cooperation Agreement (TCA), the United Kingdom is no longer a member of the EU single market and customs union. However, the provision of the TCA doesn’t apply to trade in commodities between the EU and Northern Ireland.  

The UK-EU Agreement treaty generally covers all aspects of UK trade with the EU.

How Many UK Businesses Export to the EU?

(Source: Nerdwallet) 

About 82% of all SMEs who reported exporting previously also reported continuing to export to the EU. To extrapolate, this suggests that somewhere about 8% of all UK SMEs sell their wares abroad in Europe.

Small Businesses Statistics in the UK: What Are the Trends?

Here, we will review the most common trends from 2000 to 2022

• The business population grew by 2.0 million (59%).
•  The growth rate between 2013 and 2014 was the greatest on record, followed by the years 2003 and 2004.
•  While this is the fourth consecutive decline in the series that began in 2017, the one between 2021 and 2022 is the third consecutive decline.
•  Businesses that employ people (32,000) and those that don’t (114,000) both decreased by 82,000, a total decline of -28.2%.
•  There was a fall in both unregistered businesses (98,000) and registered businesses (16,000), both of which contributed to the reduction in the number of businesses that do not employ anybody.
•  Changes in the business population may be thought of as the net result of outflows (companies that merged, shut down, or were acquired by another) and inflows (businesses that started up).

Before you go, here are the most trends you should focus on this year, according to small business statistics in the UK.

Key Small Business Trends 

It’s been another era of improvisation and experimentation by small businesses battling many circumstances, from inflation to a colling economy. So we don’t need to end up this piece with only bland figures about businesses— how they have been and how far they have come.

You also need to uncover what will happen. So, with tips from industry experts, we have gathered the top three trends based on small business statics in the UK, the USA, Australia, and much more.

Sustainable and Affordable 

Over half of the SMEs have promptly invested in sustainability and plan for more. What drove them to do so was changing consumer behaviour. 

The Deloitte report found that consumers increasingly choose to change their lifestyles and live more sustainably. 

How?

Consumers like to buy just what they need. One of the biggest incentives is concern about the climate crisis. Others said the rising cost of living made them think twice about what they should buy and what should be left behind. 

Also, they tend to choose brands that share environmental and ethical values and ditch those who don’t care— especially the products bought most often, such as clothing, food, drinks, beauty, and household products. 

Embracing a circular economy is a key part towards sustainability and reducing waste. Not just because of production costs but also because consumers choose durable products that can be reused or repaired rather than just recycled (or, even worse, thrown in the trash).

However, affordability is one of the primary barriers to consumers adopting sustainability. People don’t want to spend more on their necessities. Instead, they are looking for more affordable products and services based on small business statistics in the UK as the price-increasing crisis continues to bite.    

Expert tip:

Small businesses should be well-placed to offer more sustainable options— from locally sourced to seasonal produce, and trusted advice and information.  

Business owners should focus on the deeper trends around sustainability, such as durability, affordability, and circularity. The digital advertising message should convey the central concept likewise.

That will help you identify gaps and new opportunities to develop and connect with your customers. 

Sustainability involves ethical and environmental factors simply because consumers value brands that appreciate their human and workers’ rights!

Dealing with the Price Hike of Many Raw Materials 

Businesses have experienced a budget-shredding surpass; however, that’s strangely not all bad!

 During 2021, expenses lept 18% when inflation was starting, so why are prices climbing so steeply?

It’s due to sales rebounding, which means companies have to spend more on labour and supplies, and inflation has begun to push costs up. 

That put many businesses on edge and made budgeting so tricky. So after two years of the global crisis, only a few businesses have an extra 14-18% sitting around to absorb surging costs. 

According to small business statistics, lots of businesses have just enough cash for monthly expenses, so no one carries an alternative war chest to call on. 

That said, higher interest rates lead to financing expenses, so many businesses need more options. 

 Expert tip:

It’s time to focus more on the activities that still generate money and to be bold enough to make hard decisions— things you might not want, but as we said, you would have to if you’re out of options. 

Most importantly, you must prioritise profitability and shift your focus to the highest-performing products and services.

“Show not Tell” Business Concept 

Actions, not words. That’s what brands need to show to their audience. They need to prove their ethical credentials, not just make statements about them.  

Many business statistics in the UK showed that ethical consumer spending is growing, including new trends like eco-travel and transport.

Meanwhile, building trust is crucial when discussing environmental and social responsibility, which a transparent and robust business strategy should back.  

It’s not just about ethics; Moore Global research found that businesses committed to this concept have seen profits increase by around 9% over the last three years.  

Expert tip:

Your environmental, social, and Governance (ESG) strategy will help you reduce risks and embrace new growth opportunities. For example, you might be ready with a plan to meet potential future environmental legislation.  

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