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Small businesses need more support as growth slows

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

The proportion of small firms that were expanding their workforce fell 40 per cent between 2012 and 2022. The new report also warns the support available to small and medium-sized enterprises (SMEs) is also currently insufficient and too fragmented.

In particular, SMEs need more investment and support on exports, innovation, achieving net zero and supporting employees with their mental health.

Stephen Roper, Director of the ERC and Professor of Enterprise at Warwick Business School said, “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.

“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 the rising cost of living.

“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.”

The challenges that SMEs face were highlighted in the ERC’s 10th annual State of Small Business Britain report, which draws on a decade of research to create a manifesto for helping small businesses grow.

The ERC’s core leadership and research team are 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.

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

However, it warns that the government should not concentrate on a small proportion of exceptionally high-growth firms or celebrate 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.

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. These funding decisions must be based on solid evidence, such as those outlined in our report, to ensure policymakers provide small businesses with the tailored support they need.”

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