Customisable business insurance
What do your local hair salon, restaurant, florist, undertaker and bakery have in common? They’re likely to be some kind of SME.
Read on to discover what this means, the different varieties and what the future holds for SMEs.
What does SME stand for?
In the UK, SME stands for a small to medium-sized enterprise with fewer than 250 employees. The EU also defines an SME as having fewer than 250 employees, as well as a turnover that's less than €50 million, or a balance sheet of under €43 million.
The meaning of SME sometimes varies from sector to sector. For example, the mining industry considers some mines to be SMEs with 250 or fewer employees, while others can have as many as 1,500 employees.
There are considered to be three different types of SME, these are: medium-sized, small and micro businesses.
How many SMEs are there in the UK?
Out of 5.9 million businesses in the UK over 99% of them are SMEs.
Driving forward innovation and growth across the country, SMEs have certainly earned their reputation as ‘the backbone of our economy’.
They may be small, but SMEs tend to play an outsize role in a healthy economy. Not only are they entrepreneurial but the sheer number of them shows how truly influential they are.
What are the varieties of SMEs?
The abbreviation 'SME' is an umbrella term with three different categories within it: medium-sized, small and micro-businesses. The criteria is based on the turnover and number of employees of the company.
What are medium-sized businesses?
In the UK, a medium-sized business has 50-250 employees, an annual turnover of less than £25.9 million (or over €10 million but below €50 million in the EU) and a balance sheet total of no more than £12.9 million.
What is a small business?
A small business has no more than 50 employees, a turnover of no less than £6.5 million and a balance sheet total of no more than £3.26 million.
If you're thinking about starting a new small business, you should consider buying business insurance to make sure you're protected from the risks that could affect it, which is especially important during the early stages.
Check out our insurance for small businesses to learn more about the covers you need.
What is a micro business?
A micro business has ten or fewer employees, a turnover of less than £632,000 (or under €2 million in the EU), a balance sheet of no more than £316,000.
There are around 5.7 million micro businesses in the UK, making up around 96% of businesses. Micro businesses often operate out of somebody’s home rather than an office, factory or workspace. If you run a business from home, you might need insurance cover to protect assets such as computers, tools or equipment.
Even if your home insurance covers the physical parts of your business, you may still need dedicated business insurance to cover professional indemnity if you provide advice, legal costs in case of an accident at your workplace, or data security breaches.
Examples of SMEs
There are thousands of types of SMEs out there, but here are just some of the businesses and business owners you might expect to be SMEs:
- Builders, decorators and other tradespeople
- Cleaners and cleaning businesses
- Hair salons
- Photographers and videographers
- Self-employed people and sole traders
What support is there for SMEs from the government?
SMEs have had a hard time over the last few years and many are still trying to recover from the effects of the pandemic.
While it isn't extensive, there is some support from the government that SMEs can use to help them get back on track. These include:
- A number of small business loans and grants. Use Support For Business’ grant finder, the government’s Finance and support for your business search function, or the Local Enterprise Partnerships (LEP) Network website to find if out if your SME is eligible.
What does the future hold for SMEs?
SMEs, and micro businesses in particular, can be vulnerable to shocks. With a small team, few resources and cash buffers, it’s no surprise that the Covid-19 pandemic has hit many SMEs particularly hard.
But it’s not all bad news. Some of the most flexible, innovative and adaptable organisations are SMEs. Many SMEs have risen to the challenge, and will come out of the pandemic more resilient than ever.
This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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