Impact of small businesses on the UK economy

Introduction

Small businesses include micro enterprises and small-sized businesses. This article presents the impact of small businesses to the UK economy. In fact, SME (micro, small, medium-sized organisations) have significant influences on the UK economy because small businesses are the main source of income and employment generation for majority of the population in a country. The instance of the UK is no exception.

Analysis of the impact of small businesses on the UK economy

Micro business is the business which has been executed with a very small scale and has ten employees or less than that. Owner of the business executes the business alone. The process of starting Micro businesses is easy and have less legal issues. Entrepreneurs can start micro business individually with small capital because the business does not need many employees and is easy to execute.

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In last 10 years, micro businesses have been contributing in UK’s economy greatly. 94% of the business in the UK are executed by one owner and Britain is in the fourth highest ranked for micro business in the whole world (Forbes, 2017). Though it needs small capital, less employees and easy to execute, micro businesses are increasing rapidly and making people self-employed in the UK. In UK’s economy, entrepreneurial activity is prosperous because the start-up cost is low. It helps the entrepreneurs of micro business to start-up and grow.

The figure presented above shows that 99.30% of the business organisations in the UK in 2021 belong to the category of micro and small business. On the other hand, only 0.70% of the businesses belong to medium and large sized businesses (McKinsey & Company, 2021). This clearly means that the importance of small and micro business in the UK is significant because most of the businesses belong to the small business category. This shows that small businesses have significant impact on the UK economy because business organisations are closely related with economic development. This potentially shows that the impact of small businesses to the UK economy is huge.

Employment generation is potentially related with the economic contribution in any economy because if a sector can generate more jobs, the sector is more important for the economy. Above figure shows that around 52% of the employments are generated by the micro and small businesses in the UK in 2021 (McKinsey & Company, 2021). On the other hand, around 48% of the jobs are generated by the medium and large-sized business organisations. This statistics show that small and micro businesses play potential role to the UK economy by generating employment opportunities and this is closely related to contributing to the economy of the UK.

Now, the aspect of employment generation is closely associated with economic development of an economy. Since small businesses generate majority of employment opportunity of the UK, these businesses potentially contribute to generate taxes for the government to run the social security and development initiatives.

Revenue generation is an important aspect of economic contribution because revenue is related with economic production and contribution. Above figure shows that small businesses in the UK generate as much as £1.6 billion in 2021 whilst medium and large businesses generate revenue of around £2.75 in 2021 (Office for National Statistics, 2021). This means the contribution of the small business in contributing to the DGP is significant.