According to research from Goldman Sachs, the British Business Bank and the Enterprise Research Centre, SMEs could be the key to closing the productivity gap in the economy.
Productivity in the UK has been declining since 2008 and it currently lags behind its international counterparts such as Germany, France and the US. Currently around 10,000 high growth SMEs represent less than 1% of established businesses in the UK but generate 20% of all UK job growth, according to Goldman Sachs.
Small businesses account for 60% of all private sector jobs and 47% of revenue, a total of £1.6trn. As a result, boosting SME productivity growth could have a significant impact on the wider economy, the report said.
It also found there is a “clear growth ambition gap” between UK SMEs and those in other G8 countries. This gap could be closed by improving access to capital and educating companies on how to expand their business.
Despite the contributions SMEs can make to the UK economy, most of them are currently not boosting productivity. Around 90% of SMEs have fewer than five employees and only 20 to 30% will survive for a decade.
The ONS said in September the UK is 33% less productive than Germany, with its output per hour worked being 20% below the average for the rest of the G7 countries.
Additionally, the Small Business Outlook 2015 report by Centre for Cities found last month small firms in creative, professional and digital sector are driving job growth, productivity and average wages in UK cities.
Goldman Sachs also announced the expansion of its 10,000 small businesses UK programme from its four current hubs to the entire country. The programme supports small business leaders who are seeking to grow their businesses.