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Antony Antoniou – Luxury Property Expert

Why SMEs are the Foundations of British Business

Why SMEs are the Foundations of British Business

**Understanding the Dynamics of the UK Private Sector Business Landscape in 2022**

In the ever-evolving world of business, staying informed about trends and statistics is essential for making informed decisions. In the United Kingdom, the private sector business landscape has seen some interesting shifts at the start of 2022. Let’s delve into the key numbers and insights that shape the business ecosystem in the UK.

**Snapshot of the Private Sector Business Population**

At the dawn of 2022, the UK hosted a total of 5.5 million private sector businesses, showcasing the vibrancy and diversity of its entrepreneurial culture. Breaking down this number further, we find that:

– 5.47 million businesses fell into the small category, with 0 to 49 employees.
– 35,900 businesses were categorized as medium-sized, employing 50 to 249 individuals.
– 7,700 businesses stood tall as large entities, boasting 250 or more employees.

A notable trend emerged when comparing these figures with those from the previous year. The private sector business population exhibited a slight decline of 1.5%, representing a decrease of 82,000 businesses from the prior year.

**The Source of These Insights**

These insights are brought to you by the Department for Business, Energy and Industrial Strategy (BEIS) – the authoritative source of information on the UK private sector business landscape. Unlike other sources that focus solely on value-added tax (VAT) traders and pay-as-you-earn (PAYE) employers, BEIS provides a comprehensive overview of the business landscape. This report takes into account a wide range of businesses to offer a holistic perspective.

**A Closer Look at the Business Composition**

The majority of the UK’s private sector businesses fall into the category of small and medium-sized enterprises (SMEs), making up a staggering 99.9% of the business population. As of the start of 2022:

– 1.4 million businesses had employees, while 4.1 million operated without employees.
– 74% of businesses had no employees other than their owner(s).
– 5.47 million businesses belonged to the small category (0 to 49 employees).
– 35,900 businesses were medium-sized (50 to 249 employees).
– 7,700 businesses were large (250 or more employees).

**The Impact of Different Legal Forms**

In terms of legal forms, the private sector is composed of three main categories: sole proprietorships, ordinary partnerships, and companies. At the beginning of 2022:

– Sole proprietorships accounted for 56% of the total private sector business population.
– Actively trading companies made up 37% of the population.
– Ordinary partnerships comprised 6% of the total.

The landscape further revealed that 1.1 million companies were employers, along with 220,000 sole proprietorships and 95,000 ordinary partnerships. Meanwhile, a significant portion – 2.9 million sole proprietorships, 932,000 companies, and 257,000 ordinary partnerships – operated without employees.

**VAT and PAYE Registration Insights**

Interestingly, over three-quarters of UK private sector businesses are non-employers, and many of them remain unregistered for both VAT (value-added tax) and PAYE (pay as you earn). Specifically, in 2022:

– 2.7 million private sector businesses were registered for VAT or PAYE, representing 49% of the estimated total population.
– 2.8 million businesses (51%) traded without being registered for VAT or PAYE, earning them the ‘unregistered’ classification.
– 14% of sole proprietorships and 52% of ordinary partnerships were registered for VAT or PAYE.

**Trends in Business Population Over Time**

Zooming out to observe the trends from 2000 to 2022, we can observe several intriguing patterns:

– The business population increased by an impressive 2.0 million businesses (59% growth) over these two decades.
– The years 2013-2014 witnessed the highest rate of increase at 6.8%, followed closely by 6.7% between 2003 and 2004.
– However, there have been notable decreases as well, with a 1.5% drop between 2021 and 2022 being the third decrease in this series. The most significant decrease was 6.5% between 2020 and 2021.

In the recent year, the business population saw a decrease of 82,000 (1.5%). While employing businesses increased by 32,000 (2.3%), there were 114,000 fewer non-employing businesses (2.7%).

**Regional and Industry Dynamics**

The distribution of businesses across the UK is far from uniform. At the beginning of 2022:

– England housed 4.8 million private sector businesses, while Scotland had 341,000, Wales had 219,000, and Northern Ireland had 128,000.
– London and the South East of England boasted the lion’s share of businesses, constituting 34% of the entire UK business population.
– The North East region, on the other hand, had the fewest private sector businesses amongst English regions (155,000).

The dynamics within industries also reveal interesting patterns:

– The Construction sector housed the largest number of SMEs (914,000 or 17%).
– Wholesale and Retail Trade and Repair, along with the Professional, Scientific, and Technical Activities sectors, also held substantial numbers of SMEs (14% and 11% respectively).
– In terms of large businesses, Manufacturing took the lead, followed by Wholesale and Retail, and Administrative and Support Service Activities.

**Uncertainty in the Numbers**

It’s important to note that the numbers reported come with a certain degree of uncertainty. Estimates of unregistered business numbers are derived from survey data, leading to variability in the total business count. Additionally, administrative data from the Inter-Departmental Business Register (IDBR) introduces some level of error. Confidence intervals (CIs) indicate the potential range within which the true value of an estimate is likely to fall with 95% probability. Coefficients of variation (CVs) give insight into the estimate’s precision.

**In Conclusion**

As we conclude our exploration of the UK’s private sector business landscape in 2022, we’re left with a nuanced picture of entrepreneurial dynamics. With 5.5 million businesses shaping the economy, the UK demonstrates a diverse array of enterprises across industries and regions. The prevalence of SMEs, accounting for almost 99.9% of businesses, underscores their pivotal role.

While the overall trend reflects growth over the years, the recent decrease of 1.5% signals the fluctuating nature of business ecosystems. These changes are driven by a myriad of factors, including shifts in unregistered businesses, reflecting the agility required to navigate a constantly changing economic environment.

The insights from this report, meticulously compiled by the Department for Business, Energy and Industrial Strategy, underscore the need for adaptability in today’s business world. The prevalence of uncertainty in estimates reminds us that the business landscape is a living, breathing entity, subject to various forces.

In conclusion, the UK’s private sector business landscape is a dynamic arena where growth, change, and uncertainty interplay. These statistics empower business leaders, policymakers, and analysts to make informed decisions, offering a valuable lens into the intricate tapestry of the UK’s entrepreneurial spirit. As we move forward, staying vigilant, embracing innovation, and making sense of shifting trends will remain essential for navigating the intriguing journey of business in the UK.

The vast majority of businesses in the UK are SMEs, yet this government has chosen to hit them hardest by raising corporation tax from 18% to 25% an increase of over 38%, there will be a high price to pay for this, especially when raising of the base rate by over 2000% since last year filters through to the wider economy.

These are not the actions of a government that wishes to support business and we know for a fact, that raising taxes does not increase revenue, it only serves to erode it and more significantly, it destroys the thriving businesses that contribute to the economy, time and time again.


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