Small and mid-sized businesses will contribute more of UK business turnover by 2025 as they bounce back quickly from the expected recession, researchers have predicted.
Forecasters at the Centre for Economics and Business Research analysed growth trends after the financial crisis in 2007 to 2009 and from these estimated that by 2025 the number of small and mid-sized businesses (SMBs) would have increased by 342,000 to 5.8 million, and would be generating 51.9 per cent of all business turnover, up from 51.1 per cent in 2022.
The rise, which the centre said would largely occur in 2024 and 2025, would reverse several years of decline, with about 400,000 small firms closing their doors during the pandemic, the majority of them sole traders.
The centre said the number of small firms operating in 2008, at the peak of the last recession, fell only 0.2 per cent across the five countries it studied in Europe, before growing again. Between 2010 and 2015, entrepreneurs in the UK set up an average of 184,000 businesses a year, and employed two million more people than those trading in 2010.
It said: “Our analysis shows SMBs were vital in the economic bounceback from the worst recession in over half a century. In fact, SMBs have not only recovered from the crisis, but, in many economies, quickly exceeded pre-crisis levels, thereby fuelling economic growth and employment while adding to innovation, particularly through technical-based activities.”
Derk Bleeker, from the accountancy software group Sage, which supported the research, said the government should not underestimate the contribution that small firms made during recessions.
“In a downturn, SMBs have the distinctive ability to pivot quickly in a way that larger businesses simply can’t,” he said. “Their agility and focus means they can redirect resources, update plans, and find new ways of doing things—not just to mitigate the impact of the challenging economic backdrop, but also to capitalise on new opportunities that inevitably emerge in periods of change.”
London had the highest number of new companies created between 2007 and 2022, with more than one million trading, up 37 per cent. In contrast, Yorkshire and Humberside recorded only a 10 per cent rise over the period, after a sharp fall in the total trading since hitting a peak of 419,000 in 2017. Northern Ireland had fewer SMBs trading in 2022 than it did in 2007.