SME definition

SME definition

What is an SME?

SME stands for small or medium-sized enterprise. According to the EU, for a business to qualify as a small or medium-sized enterprise it has to have fewer than 250 employees. Therefore, it’s a broad category that encompasses small, family-run businesses to larger corporations that employ hundreds of people.

SME Business Definition

However, staff numbers are not the only criteria by which SMEs are judged. Turnover is also a significant factor that is taken into consideration, and gross assets are too. All of these categories are judged differently depending on what country a business is based in. For instance, in the US the maximum number of employees an SME can have is generally seen to be 500. By contrast, in Australia the limit is only 200.

The majority of businesses worldwide fall into the SME category. 99 percent of businesses in the EU have SME status, and in Australia SMEs are responsible for one third of GDP.

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SME Definition UK

The UK has its own specification for how it defines SMEs. They are judged by three different categories: number of employees (250), annual turnover (under £25 million) and gross assets (under £12.5 million). If a company meets the criteria in at least two of these categories it is recognised as an SME.

Some SMEs are much bigger than others. It’s a term that covers everything from your local neighbourhood greengrocer to big brands like restaurant brand Turtle Bay. To make sense of the differences in scale, businesses within the category are grouped into different sub-categories depending on their size:

  • Medium-sized. Those businesses that employ between 50 and 249 employees. Among other industries, in this category can be found a large number of financial, construction and tech firms.
  • Small-sized. Those businesses that employ between 10-49 employees. There are roughly 210,000 of them in the UK and they include smaller retail chains, tech start-ups and local tourist attractions.
  • Micro-sized. Those businesses that employ under nine employees. This is what the vast majority of the businesses in the UK are – such as local butchers, antiques dealers or tradesmen.

As of 2018, there were 5.7 million SMEs based in the UK. 96 percent of all businesses in the country have fewer than ten employees. There is no doubt that SMEs are the beating heart of the British economy; they are responsible for 60 percent of all employment. Despite larger companies being responsible for the majority of GDP, SMEs are arguably just as important in driving business.

How SMEs Contribute to the Economy

The UK is a country of corner shops, bakers, butchers and hairdressers. SMEs make up more than 99 percent of all private businesses. This is more than countries like Dubai, where SMEs are only responsible for 95 percent of businesses. With this in mind, the UK government has taken measures in recent years to improve the business environment for such companies. In 2018, it launched a new ‘Business Basics Fund’ to support small business growth and, by 2022, it aspires to be spending one third of its expenditure on SMEs.

Initiatives such as Small Business Saturday – which is sponsored by the government – have also encouraged consumers to be more mindful of where they are spending their money. Small Business Saturday takes place every year in the UK across the whole country. In 2018, the event saw over £800 million being spent on a Saturday in late November. There was also high engagement with Small Business Saturday on social media, with more than 100 million tweets about the event on Twitter.

However, right now, SMEs in the UK are operating in a tough business environment. Academic studies suggest that SMEs are set to be damaged by Brexit. It could result in less investment, reduced overseas trading and hampered growth. Those SMEs that heavily export are set to be most affected.

How many SMEs in the UK?

As of 2018, there are 5.7 million SMEs in the UK. The majority of these – 5.4 billion – are recognised as micro-businesses, meaning that they have under nine employees. This means that SMEs vastly outnumber the amount of large businesses in the UK. There are only 8,000 of them in the UK and they only account for 0.1 percent of businesses in the UK.

Unsurprisingly, the highest number of SMEs by region are located in the London area. There are over a million recognised SMEs in the nation’s capital. Outside of London, the South East is a hotbed for small enterprises. London excluded, the South East is responsible for 850,000+ SMEs.

In the north of England, SMEs are less prolific. Only 163,000 such businesses call the North-East home. However, there are some areas in the north which boast a more impressive number of SMEs. Yorkshire and Humber, which includes cities like Leeds, York, Sheffield and Bradford, have over 400,000 SMEs flying the flag for the region.

Where to Find SME Jobs

SMEs are the UK’s biggest employer. They are responsible for 60 percent of all employment. This means that there’s plenty of choice when it comes to job-hunting. Online job databases like Indeed that collect all local job vacancies in one place are a great place to start. There, you can search for all SMEs in your area or refine your search to only include vacancies in certain industries.

Networking through LinkedIn is also a great way of getting hired by an SME. Companies like tech start-ups - which recruit individuals with specified skillsets – commonly use LinkedIn to hire the next generation of talent. The same applies for the likes of marketing companies, recruitment firms and publishing agencies.

If you’re looking for a bit more independence, starting a franchise is also a great way of getting involved with an SME. There are many SMEs that are a part of the Point Franchise network that are actively looking for franchisees. These include – to name but a few – LockRite, Barking Mad and Banana Moon.

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