Small business growth slowed over the last decade: report

Small business growth in the UK has slowed over the last decade hindered by Brexit, Covid-19, and geo-political tensions, a new report has found.

The proportion of small firms that were expanding their workforce fell 40 per cent between 2012 and 2022, the 10th annual State of Small Business Britain report by the Enterprise Research Centre (ERC) has found.

The report also warns the support available to small and medium-sized enterprises (SMEs) is also currently insufficient and too fragmented. It called for more investment and support on exports, innovation, achieving net zero and supporting employees with their mental health.

The report shows that SMEs have shown remarkable resilience throughout the many challenges they have faced and a small number have achieved impressive growth and increased productivity as they identified opportunities in the midst of uncertainty.

However, it warns that the government should not concentrate on a small proportion of exceptional high growth firms or celebrating the number of new businesses entering the market. Instead it should focus on creating a framework that helps more small businesses to achieve growth, sustainability, and resilience.

“It is often stated that small businesses are the backbone of the UK economy, and rightly so. Small businesses make up more than 99 per cent of the business population and account for around 50 per cent of jobs,” Stephen Roper, director of the ERC and professor of enterprise at Warwick Business School, said.

“Our research underlines the enormous changes these small businesses have had to deal with over the last decade. We have seen rapid advances in technology and growing pressure for action on net zero alongside the substantial challenges posed by Brexit, the Covid-19 pandemic, and cost of living rises.

“All of this has placed tremendous pressure on small businesses. As we move into a General Election year, we need a coordinated effort from government and business organisations to help small businesses face the future with confidence.”

Mark Hart, deputy director of the ERC and professor of small business and entrepreneurship at Aston University, added:  “Amid all the challenges, we have seen plenty of evidence that small businesses can be adaptable in a crisis.

“The UK government spends a significant amount of money on interventions to help small businesses each year. It is vital that these funding decisions are based on solid evidence, such as those outlined in our report, to ensure policymakers provide small businesses with the tailored support they need.”

The ERC’s core leadership and research team is based at Warwick and Aston business schools and work in partnership with experts in the field of small and medium-sized enterprises (SMEs) and enterprise research based in a range of other institutions.

Meanwhile, the government has on Thursday announced the creation of a new Small Business Council, due to launch next month, and a refreshed Help to Grow campaign to support SMEs.