UK small business showing a big bump

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While news from the US suggests small businesses are no longer the engines of growth they once were, Britain’s prime minister, David Cameron, is applauding his nation’s entrepreneurs (paywall). Big companies may continue to cut staff in large numbers, but small and medium sized businesses are still fueling the UK economy. In the last fiscal year, there were more than 455,000 newly incorporated companies, up from about 400,000 the year prior, according to companies registrar Companies House. Company closures dropped during the same period to about 288,000 from nearly 510,000 the year before. And small and medium-sized enterprises (SMEs) account for a disproportionate share of jobs: 59% of private sector employment, according to government statistics.

From the Conservative party conference in Birmingham, Cameron said:

We’re getting our entrepreneurial streak back: last year the rate of new business creation was faster than any other year in our history.

Smaller companies are still hurting from a lack of funding. Priyen Patel of the Federation of Small Businesses (FSB), a UK policy advisor, says that while money is out there, it’s going to fund larger and more secure companies. Small companies that applied for credit so far this year, were no more successful than those that applied last year.

Lending to UK small and medium enterprises is flat
Lending to UK small and medium enterprises is flat
Image: The Federation of Small Businesses

There is good news, says Patel. Small businesses are still looking to expand and when people lose their jobs these companies will hire them. Statistics from the FSB show that 88% of people out of work find their way back by either joining or starting a small business.