Small Business Performance Survey 2022 – SME performance in the UK For Businesses with no Employees

UK Small Business Performance Survey

The UK Small Business Performance Survey (2022), conducted by the Department of Trade and Industry, provides a comprehensive examination of the performance and challenges faced by small and medium-sized enterprises (SMEs) with no employees. This analysis delves into key statistical findings, exploring various aspects such as exporting activities, technology usage, growth ambitions, and the impact of external factors on business operations. By analysing these data points, we aim to uncover trends, identify constraints, and offer insights into the overall health and prospects of non-employing SMEs in the UK business landscape.

1. Exporting Activities

  • A significant portion of small businesses (88%) do not export their products or services.
  • Among those that do export, only a small fraction (4%) plan to increase their exports.
  • Some businesses have had overseas sales consistently every year, while others have experienced gaps, highlighting challenges in sustaining exports.
  • The primary reasons for some years without exports include:
    • Preference for focusing on UK markets (30%).
    • Only occasional one-off overseas orders (18%).
    • Lack of time or resources to pursue exporting opportunities.

2. Export Strategies and Future Intentions

  • Export Strategy: The majority of businesses do not have a formal written export strategy (98%). This suggests a lack of structured planning towards international markets.
  • Plans for Exporting: Among those who do not currently export but have suitable products, a very small proportion plan to start exporting within the next 12 months (10%).

region-wise export analysis of SMEs without employees

Here are three charts for the region-wise export analysis of SMEs without employees:

  1. Businesses Exporting by Region: Scotland and Northern Ireland have higher percentages of businesses exporting (35% and 47%, respectively), compared to England (10%) and Wales (3%).
  2. Businesses Planning to Increase Exports: A significant portion of businesses in Northern Ireland plan to increase exports (45%), while only small proportions plan this in other regions.
  3. Businesses Not Exporting by Region: A high percentage of businesses in Wales and England do not export (97% and 90%, respectively), while Scotland (65%) and Northern Ireland (53%) have lower percentages of non-exporting businesses.

These charts highlight regional differences in export activities and future plans.

3. Digital Adoption and VAT Compliance

  • VAT Record Keeping:
    • Record-keeping software is widely used (66%), especially in England and Northern Ireland.
    • Paper-based record keeping is still prevalent (34%), showing a mixed level of digital adoption.
  • Making Tax Digital (MTD):
    • A significant portion (68%) of businesses use MTD for VAT, which indicates compliance with digital VAT submissions.
    • Confidence from using MTD includes more oversight of business finances (42%) and confidence in getting tax right (49%).

4. Technology Usage and Digital Confidence

  • General Technology Adoption:
    • Around 35% of SMEs use digital tools for selling to customers or managing the business.
    • Accountancy software is the most commonly used technology (64%), followed by electronic invoicing (45%).
  • Digital Confidence:
    • Using MTD for VAT has helped boost digital confidence among SMEs (41% report increased confidence).

Use Of Technology For Business Management

Four charts comparing digital adoption rates by sector for SMEs without employees:

  1. Use of Record Keeping Software: Sectors like J (75%) and C (68%) show a high usage of record-keeping software, while sectors like ABDE (34%) have significantly lower adoption.
  2. Use of Spreadsheets: Spreadsheets are widely used across most sectors, with sectors J (53%) and M (44%) having higher adoption. However, some sectors like H (16%) have lower reliance on spreadsheets.
  3. Use of Paper-Based Records: Paper-based records are still prevalent in sectors like H (84%) and N (70%). This shows that traditional methods are still being used despite the availability of digital alternatives.
  4. Use of Technology for Business Management: Sector J (54%) shows the highest use of technology for business management, while sectors like S (8%) and F (28%) show lower adoption rates.

5. R&D Investment and Grants

  • R&D Activities:
    • Only 9% of SMEs invested in R&D in the last three years.
    • Of those that invested in R&D, the majority invested less than £5,000, indicating limited financial resources for innovation.
  • R&D Grants and Tax Credits:
    • A very small proportion (1%) of businesses received R&D tax credits.
    • UK government and EU funding support for R&D is minimal, with only a few businesses applying for or receiving such grants.

R&D investments and Grants

Analysis of R&D investments and grants for SMEs without employees:

  • R&D Investment Levels:
    • The majority of SMEs invest less than £5,000 in R&D (50%).
    • Around 24% invest between £5,000 and £24,999, while fewer SMEs invest larger amounts.
    • Only 5% of SMEs invested between £100,000 and £499,999.
  • R&D Grants:
    • Only a small proportion of SMEs have applied for (7%) or received (5%) R&D grants, indicating limited participation in R&D funding programs.
  • Uncertainty:
    • About 9% of SMEs reported that they “Don’t Know” how much they invested in R&D, suggesting potential gaps in financial oversight or awareness.

These findings highlight that most SMEs are engaging in relatively small-scale R&D efforts and have low participation in grant programs. Encouraging more SMEs to access available funding and improve awareness could help boost innovation efforts.

6. Business Process Innovation

  • Around 14% of businesses introduced new or significantly improved processes in the last three years, which suggests that most businesses are not innovating operationally.
  • Of the businesses that introduced new processes, about 70% said these were new to the business but not necessarily to the industry, indicating incremental rather than disruptive innovation.

business process innovation for SMEs without employees
Detailed analysis of business process innovation for SMEs without employees:

  1. Introduced New Processes (14%): Only a small percentage of SMEs have introduced new or significantly improved processes, indicating limited innovation in their business operations.
  2. New to the Industry (30%): Among those that innovated, 30% introduced processes that were new to the entire industry, highlighting a smaller but meaningful contribution to industry-wide innovation.
  3. New to the Business Only (70%): The majority of the new processes (70%) were new only to the specific business, suggesting that most SMEs are focusing on incremental improvements rather than pioneering novel methods at the industry level.

This shows that SMEs tend to focus on internal process improvements rather than broader innovations. Supporting SMEs in accessing resources, expertise, and funding for larger-scale innovations could help foster more industry-wide impact.

7. Sales Impact Due to COVID-19

  • Around 12% of businesses began selling online due to the COVID-19 pandemic, while 80% were already selling online prior to the pandemic. This shows that the pandemic prompted some, but not a majority, to shift to online sales.

8. Sectoral and Regional Differences

  • There are notable differences in activities based on regions and sectors:
    • Scotland had a relatively higher percentage of businesses engaging in exports (35%) compared to other regions.
    • Digital tools and MTD for VAT were more commonly adopted in some sectors, such as financial services and professional services, compared to traditional sectors like construction and retail.

Summary of Challenges and Opportunities

  • Challenges:
    • Most SMEs lack formal strategies for exports and R&D.
    • There is limited digital adoption and inconsistent use of technologies across sectors.
    • Financial and knowledge constraints prevent SMEs from exporting and innovating consistently.
  • Opportunities:
    • Increased adoption of digital tools and tax digitalization can help streamline business operations.
    • There is potential for more SMEs to explore international markets if they have structured export strategies.
    • Targeted government programs could encourage more R&D and innovation by providing accessible funding and support.

Key Insights From SME Performance Data

 

Summarizing the key insights from the SME performance data:

  • VAT Record Keeping and MTD for VAT have the highest adoption rates, showing compliance with VAT requirements.
  • Technology Adoption and Business Process Innovation have moderate adoption, indicating room for growth in digital transformation.
  • Export Strategy and R&D Investment have low percentages, suggesting limited focus on international market expansion and innovation.

This article contains public sector information licensed under the Open Government Licence v3.0.

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