Established small and medium-sized businesses are declining fastest in some of the parts of the UK most dependent on them for employment, according to research from Allica Bank.
The bank’s analysis found that the number of established SMEs — defined as businesses employing between five and 249 people — has fallen across most UK regions over the past three years, despite increasing by just under 7% nationally between 2016 and 2026.
London accounted for 44% of the net increase over the 10-year period. More recently, however, every region apart from London and Northern Ireland has recorded a decline, while Northern Ireland registered growth of just 0.2%, equivalent to 40 businesses.
The South West experienced the largest fall over the past three years, with its established SME population down 3.8%. Wales recorded a 3.4% decline and the West Midlands a fall of 3.1%.
RURAL ECONOMIES UNDER PRESSURE
Allica’s Good Growth Icons report, which draws on Office for National Statistics business counts data, found a marked difference between rural and urban areas.
Established SME numbers fell by 2.3% over three years in the UK’s most rural local authority districts, while the most urban districts recorded growth of 1.2%. According to the research, urban districts were three times more likely than rural areas to have experienced growth in the number of established SMEs.
The findings are significant because established SMEs account for an average 48% of employment in the most rural areas, compared with 33% in the most urban locations.
Some local authority areas recorded substantially larger falls. The number of established SMEs dropped by 20% in Erewash, 18% in Wyre Forest, 17% in Stratford-on-Avon and 16% in Blackpool over the three-year period.
Across the UK, Allica estimates there are 592,500 established SMEs, employing around 10.7 million people and generating 37% of private sector turnover.
The bank also identified 16,300 established SMEs whose turnover increased by more than 20% in the past year. Of these, 10,700 are based outside London.
CALL FOR GREATER FINANCE SUPPORT
Allica is using the report to call for changes to government support for established SMEs, including a new tier of the Growth Guarantee Scheme. It wants a 70% guarantee to apply to facilities of between £2 million and £5 million for high-growth businesses without sufficient tangible assets.
Its other proposals include further devolution of adult skills funding, measures intended to encourage business reinvestment and the creation of regional established SME growth forums to give businesses a role in shaping local growth plans.
Richard Davies (pictured), chief executive of Allica Bank, says: “These firms are the engine of regional growth across the UK. They keep local economies running and communities thriving.
“They may not be the hyper-growth scale-ups that grab the headlines, but they sustain local jobs for decades, often in the very places national growth strategies overlook.
“We urge the government to put established businesses at the heart of its growth agenda and its mission to deliver good growth in every postcode.”
