In the UK, a substantial segment of the economy is driven by 5.5 million small- and medium-sized enterprises (SMEs). These entities are pivotal to revitalising the UK’s economic landscape and addressing the prolonged stagnation in productivity that has persisted for over a decade.
Insights from a survey involving participants of the Goldman Sachs 10,000 Small Businesses (10KSB) program have been compiled in a comprehensive report titled Generation Growth: The Small Business Manifesto. This report, a collaborative effort by Goldman Sachs 10,000 Small Businesses, the Aston Centre for Growth, Saïd Business School at the University of Oxford, and Seven Hills Communications, underscores the potential of SMEs to significantly enhance worker efficiency and stimulate economic growth. The findings suggest that empowering these businesses could unlock an additional £106 billion in private sector revenue and create 88,000 new jobs.
The survey, which gathered perspectives from over 550 alumni of the 10KSB program, reveals a generally optimistic outlook about conducting business in the UK, with many companies rapidly adopting cutting-edge technologies such as generative artificial intelligence.
However, these business leaders also recognise the need for more robust government support to enhance efficiency and productivity. The UK’s productivity growth has been notably sluggish, averaging a mere 0.2% annually since 2007, a stark contrast to the 3.6% average growth in the three decades post-World War II. Only about 36,000 SMEs currently meet the criteria of “Productivity Heroes”—businesses that are more than three years old and have revenue growth outpacing workforce expansion. In a typical 12-month period, these enterprises have seen revenues soar by 196% against a 29% increase in headcount.
Charlotte Keenan, head of the Office of Corporate Engagement’s international responsibilities at Goldman Sachs, emphasises the transformative role of small businesses, noting, “Small businesses are the engines of UK growth and have the power to transform communities.” According to Keenan, these businesses represent 99% of all private sector enterprises, employing 61% of the workforce and accounting for 53% of sales turnover.
The survey respondents from 10KSB UK, many of whom are or are on the verge of becoming Productivity Heroes, offer a treasure trove of ideas to boost productivity. A significant 71% are witnessing increased sales turnover, and 73% are expanding their workforce.
The findings highlight several areas where government action is crucial. More than half of the respondents report challenges in talent acquisition, and a mere 12% believe that the current education system prepares young individuals for future work requirements. There is a strong consensus (89%) that enterprise skills should be integrated into the core secondary school curriculum.
In terms of financial access, improving SMEs’ financing options emerges as a key priority. Fifty-eight percent of respondents would consider taking their companies public, viewing the UK as a favourable market for IPOs. Yet, 37% have struggled to access needed capital for growth. Recommendations include expanding government-backed financing options and enhancing awareness among SME leaders, particularly women and ethnic minorities, about these opportunities.
Additional governmental support could include tougher legislation on late payments, varied business rates to reflect sector differences and productivity potential, and strategic partnerships with SMEs to achieve the UK’s net-zero targets. Moreover, embracing AI technology and integrating it into small business operations is seen as a vital move, with 80% of firms already using or planning to use generative AI tools within the next year.
The Generation Growth manifesto calls for stable, long-term policies to support SMEs, such as a five-year National Small Business Plan, emphasising the necessity for SMEs to have a significant voice in policy-making. “Too often their voices have been overlooked in the corridors of policy making, yet it is these SMEs who have an indispensable role to play in shaping the narrative and sparking UK productivity into life,” Keenan concludes. By implementing these strategies, the UK can not only bolster its SME sector but also drive broader economic growth and prosperity.