2014 SBA Fact Sheet. United Kingdom. In a nutshell. About the SBA Fact Sheets 1

Transcription

1 EN Enterprise and Industry 2014 SBA Fact Sheet United Kingdom In a nutshell Since 2010, the UK s SMEs have added some new jobs, bringing total employment in the sector to almost 10 million in 2013, a 7 % increase. The number of SMEs rose in the same period by some to approximately 1.8 million. This rebound was helped by a business environment which is among the most conducive for SMEs in the entire EU. In five of the SBA areas the United Kingdom ranked above the EU average. Second chance, responsive administration and internationalisation are particular strengths, but the UK also outperforms the EU in skills & innovation and environment. There are, however, also areas with room for improvement. UK SMEs tend to get less involved in the public procurement market, both within the UK and elsewhere in the EU. Recent government initiatives to make public tenders more accessible to SMEs are expected to change this. Increased efforts to help UK SMEs seize the opportunities of the single market and of non-eu markets also look promising. Increasing exports by SMEs and other companies, especially in the manufacturing sector, has been declared a policy priority, but there has been relatively little follow-up by way of specific support measures. While access to finance is more difficult in many other EU Member States, there are many UK SMEs which find it hard to get financing, in particular when it comes to bank lending. Yet, with the implementation of a number of high-profile measures, access to finance has been, together with responsive administration and the think small first principle, the focus of national SBA policy in recent years. The publication of Small Business: GREAT Ambition in December 2013 also set out a range of cross-government commitments to support small business, encourage growth and ensure that the UK is the best place to start and grow a business. The good business environment is expected to enhance the expansion of the UK SME sector in 2014 and 2015 as well, with all important indicators the number of enterprises, employment and value-added set to increase. About the SBA Fact Sheets 1 The Small Business Act for Europe (SBA) is the EU s flagship policy initiative to support small and mediumsized enterprises (SMEs). It comprises a set of policy measures organised around 10 principles ranging from entrepreneurship and responsive administration to internationalisation. To improve the governance of the SBA, the 2011 review of the Act called for better monitoring. The SBA Fact Sheets are published annually and aim to improve understanding of recent trends and national policies affecting SMEs. Enterprise and Industry

2 1. SMEs in the United Kingdom basic figures Number of enterprises Number of employees Value added United Kingdom EU 28 United Kingdom EU 28 United Kingdom EU 28 Number Proportion Proportion Number Proportion Proportion Billion Proportion Proportion Micro % 92.4% % 29.1% % 21.6% Small % 6.4% % 20.6% % 18.2% Medium-sized % 1.0% % 17.2% % 18.3% SMEs % 99.8% % 66.9% % 58.1% Large % 0.2% % 33.1% % 41.9% Total % 100.0% % 100.0% % 100.0% These are estimates for 2013 produced by DIW Econ, based on figures from the Structural Business Statistics Database (Eurostat). The data cover the 'business economy', which includes industry, construction, trade, and services (NACE Rev. 2 sections B to J, L, M and N), but not enterprises in agriculture, forestry and fisheries and the largely non-market service sectors such as education and health. The advantage of using Eurostat data is that the statistics are harmonised and comparable across countries. The disadvantage is that for some countries the data may be different from those published by national authorities. SMEs generally play a smaller role in the United Kingdom than in the EU as a whole. The structure of the UK business economy means that large enterprises (LEs) are more important than SMEs. LEs account for a higher share of value added (49 %, against an EU average of 42 %) and a higher proportion of employment (46 % against 33 %). Micro enterprises in particular contribute somewhat less in the UK their share of employment is more than 10 percentage points below the EU average. The prominent role of LEs is explained by the UK s open economy and its well-developed financial markets, which facilitate large-scale mergers & acquisitions and make the UK an attractive location for corporate headquarters. Regarding the distribution of SMEs across sectors, the UK manufacturing sector is less important than in the EU as a whole in terms of employment (5 percentage points lower) and value added (6 percentage points lower). Still, it is one of the most important sectors for British SMEs as it provides about 15 % of employment and value added. The distribution of SMEs across the other sectors is rather similar to the EU average. The British economy is growing at a slow but steady pace and GDP is expected to return to the pre-crisis level in Steady growth since 2009 is also clearly reflected in the British business economy. Here, both SMEs and LEs increased their value added between 2009 and 2013 SMEs by 24 % and LEs by 18 %). The growth of SMEs is mainly driven by medium-sized enterprises, with an increase of about 30 %. A number of factors are seen as explaining their high growth rate, notably their size advantage since larger businesses are financially better equipped than smaller ones to get through economically difficult times, fund innovation and hire the right people. On the other hand, smaller organisations are more agile, have closer links with customers and are more capable of retaining a degree of entrepreneurial spirit. The bursting of the UK s housing bubble led to falls in the growth rates of value added in the real estate sector between 2008 and 2009 of 10 % for SMEs and 11 % for LEs. Since 2009, however, it has been the fastest growing sector, with SMEs increasing value added by 35 % and LEs by 29 %. This strong performance is due in particular to the Housing Revenue Account Subsidy system. 2 The system pools all rent assumed to be collected at a local level and redistributes it back to local authorities to fund the management and maintenance of the housing stock as well as major improvements to it, and to support the borrowing costs due to the existing level of housing debt. 3 In addition, significant investments by overseas investors, especially in the London area, have propelled the market further upwards. 4 Despite these positive developments in Britain s business economy, some sectors are still suffering from the crisis. Somewhat ironically, given the real estate boom, the construction sector s value added fell between 2008 and 2013 by more than any other sector 22 % with SMEs and LEs performing equally poorly (down 23 % and 22 %, respectively). Although some recovery is visible, the growth rate of 7 % for SMEs in the period is still the lowest recorded. There are a number of reasons for this underperformance. Although the British construction industry remains one of the largest 2014 SBA Fact Sheet United Kingdom 2

3 sectors in Europe in terms of the number of firms, employment and value added, it is more fragmented than its major European competitors and the evidence also shows that it has higher levels of sub-contracting. These factors continue to have an impact on the rate of recovery. The reduced levels of investment and decrease in business opportunities have impacted a greater number of companies in construction than in other sectors. The UK government is trying to address these problems in its recently published Industrial Strategy for Construction. The outlook is positive, though, as the rise in the housing market and in demand for new homes is already driving growth in the sector. The gradual recovery of the British economy and the SME sector is also reflected by the positive trend in business demography. Latest figures published by Companies House for the end of the financial year 2012 (1 April 2012 to 31 March 2013) show that new private companies were registered, were dissolved and were in liquidation or in the course of removal. 5 Compared with the previous year the number of new companies registered rose by , hinting at a general increase in the dynamism of the UK s business demography as the figures for liquidations have slightly increased as well. The Department for Business, Innovation and Skills has published figures that are higher than those of Companies House. This is attributable to a large and growing number of unregistered businesses i.e. the smallest non-employing businesses that are not registered for VAT. There were more such businesses at the start of 2013 than the previous year. 6 The steadily growing British economy will continue its upward trend in the coming years. Various surveys indicate that SMEs will have a significant share in that growth. Among these is the quarterly Business Factors Index that monitors the turnover of SMEs active in the manufacturing, construction, transport and wholesale sectors. 7 Across all the industries analysed, turnover activity reached on the index (a score above 100 points signals growth) in the fourth quarter of This result rounds out a solid year for SMEs with a year-on-year increase in turnover of 1.2 %. Manufacturers, hauliers, security firms and construction companies will continue to play a vital role as the British economy bounces back from the recession. The signs are that SMEs in these areas are taking increasing numbers of orders. The latest SME Risk Index by Zurich Insurance Group further emphasises the positive position of SMEs in the UK. 8 The index has fallen to points, its lowest level in 18 months. The study was based on interviews with 586 senior decisionmakers in SMEs, of which more than 40 % confirmed that their firms had experienced growth in the last quarter. In addition, in the Aviva bi-annual SME Pulse survey of 500 SMEs conducted in December , 52 % predicted strong or robust performance and growth in the first half of 2014 a three-fold increase from the 19 % recorded in Levels of enthusiasm and job-satisfaction are also much higher than two years ago. Despite these encouraging figures, however, sustainable recovery is possible only if businesses that want to expand have access to finance. This issue poses an ongoing risk to businesses and the economy SBA Fact Sheet United Kingdom 3

4 SME trends in the UK SBA Fact Sheet United Kingdom 4

5 2. The United Kingdom s SBA profile 11 The United Kingdom maintained the very competitive SBA profile it has enjoyed in recent years. With one major exception the UK s profile remained stable compared with the previous year. Traditionally, second chance, responsive administration, skills and innovation, environment and internationalisation are the UK s trump cards, and this held true in For entrepreneurship, access to finance and the single market the UK s performance is in line with the EU average. The major difference from the previous year was in public procurement, where the UK`s relative performance deteriorated. In a longer-term perspective, almost all SBA areas in the UK have improved since 2008, the year the SBA was adopted. Environment and responsive administration show the biggest gains. In some areas, the improvement in performance was accompanied by real progress in policy implementation. Indeed, the UK has made good progress in implementing a broad range of measures that address key principles of the SBA. Noteworthy examples stem in particular from think small first (e.g. the 2010 One-in, two-out policy on new legislation that imposes a cost on businesses); responsive administration (e.g. the 2010 Prompt Payment Initiative); access to finance (e.g. the creation of the British Business Bank, announced in 2012); and skills and innovation (e.g. the creation of catapult centres (technology and innovation centres), R&D tax relief for SMEs, and innovation vouchers). On the other hand there were also a few areas, such as the single market and environment, where no SME measures were taken over the period. In 2013 the approach to SBA implementation remained focused on a few areas identified as especially critical for SMEs in the UK: responsive administration, access to finance (e.g. the growth voucher scheme), and state aid and public procurement. In particular the latter entails a major change for SMEs, with a series of very significant SME-focused measures geared to opening up the 230 billion (around 281 billion) public procurement market to them. Business stakeholders acknowledge that, on balance, 2013 saw progress in implementing the SBA agenda in the UK, albeit on a modest scale. The UK government has not adopted a specific SBA implementation strategy, though in February 2013 it launched an Industrial Strategy to help the UK economy and business to compete and grow that addresses a number of topics and aims comparable to those recommended by the SBA. The initiative, being implemented by the Department for Business, Innovation and Skills, identifies five policy areas of major importance for SMEs: better access to finance, strategic partnerships with industry, support for emerging technologies, working with business to improve skills development, and changing public procurement and government support products and services to improve SME access. It should be noted that certain aspects of the SBA, such as second chance, are not priorities for UK implementation as the UK is already a leader in these areas. In addition the publication of Small Business: GREAT Ambition in December 2013 set out a range of cross-government commitments to support small businesses, encourage growth and ensure that the UK is the best place to start and grow a business. All in all, the UK government s policies and measures in 2013, in the context of the Europe 2020 strategy, can be considered to be in line with the expectations of the SME sector and the SBA principles SBA Fact Sheet United Kingdom 5

6 The United Kingdom s SBA performance: status quo and development between 2008 and Think small first principle A key to implementing a successful SME policy is systematically applying the think small first principle. Six main measures have been implemented in this area over the past five years that put SMEs at the heart of government policy-making (although no significant measures were added in 2013). These are: the One-in, two-out policy on new legislation that imposes a cost on businesses (2010); Small Business Rate Relief (2010); Transposition Guidance to end the practice of gold-plating EU legislation (2011); a moratorium to exempt micro enterprises and new start-ups from new domestic regulations (2011); changes in employment legislation to reduce the cost of compliance to small businesses (2011); the Small Firms Consultation Database (2011) and the small and micro business assessment as from Overall, the UK performs in line with the EU average. A key instrument the UK government uses to ensure that the think small first principle is applied in practice is the Regulatory Policy Committee (RPC). The RPC is composed of independent, external policy experts that scrutinise every new policy or legislation to assess its costs and benefits for businesses. SME tests or evaluations are also carried out and specific focus is given to micro enterprises. The RPC also consults with a wider range of businesses, not only organisations representing SMEs. There is evidence from stakeholders that this instrument is used properly and that policy makers often consult SMEs and SME organisations when designing or revising regulations or administrative procedures, and do assess the impact on SMEs. In summary, the United Kingdom is well advanced in integrating the TSF principle into all mainstream policy-making areas. Key elements such as the SME test are systematically applied and acted upon. However, further efforts might be needed: according to the 2013 European Commission/European Central Bank Survey on the Access to Finance of Small and Medium-Sized Enterprises (SAFE), it is estimated that over 40 % of UK SMEs still find regulations a pressing problem SBA Fact Sheet United Kingdom 6

7 Entrepreneurship Variation from the EU average (measured in standard deviations, EU average=0) Early stage entrepreneurial activity (%); 2013; United Kingdom: 7.1; EU avg: 8 Early stage entrepreneurial activity for female population (%); 2013; United Kingdom: 6; EU avg: 6 Established business ownership rate (%); 2013; United Kingdom: 6.6; EU avg: 6.4 Opportunity-driven entrepreneurial activity (%); 2013; United Kingdom: 45.2; EU avg: 47 Entrepreneurial intentions (percentage of adults who intend to start a business within 3 years); 2013; United Kingdom: 7.2; EU avg: 13.5 Degree to which school education helped develop an entrepreneurial attitude; 2012; United Kingdom: 35; EU avg: 50 Entrepreneurship as a desirable career choice (%); 2013; United Kingdom: 54.1; EU avg: 56.9 High status given to successful entrepreneurship (%); 2013; United Kingdom: 79.3; EU avg: 65.5 Media attention given to entrepreneurship (%); 2013; United Kingdom: 49.6; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. The UK s general score in this area is in line with the EU average. This is somewhat surprising, given the rather positive start-up trend referred to earlier and the fact that entrepreneurship is traditionally held in high regard in British society (as shown by the 79% share of the population who think that successful entrepreneurs enjoy a high status, against 66 % for the EU as a whole). Still, the UK scores below average on early-stage entrepreneurial activity and entrepreneurial intentions. Set against this it should be noted that data from the Global Entrepreneurship Monitor for show that young people in the UK are nearly twice as likely as other age groups to aspire to start a business. This aspiration among young people virtually doubled between 2002 and An interesting feature of the UK s profile in this area is its very low score on the role school education plays in developing entrepreneurial intentions. It is, by some margin, the lowest in the entire EU. In June 2014 the third independent report on enterprise and small business, Enterprise for All, was published. This looks at how the UK can embed enterprise and entrepreneurship all the way through the education system. The report is about motivating young people to learn about entrepreneurship, through contact with businesses and work, and making education relevant to this. The report makes a number of recommendations, including: the introduction of an Enterprise Passport as a digital record of students enterprise learning and work experience throughout their education a new national volunteer network of Enterprise Advisers, coordinated by Local Entreprise Partnerships, to work closely with school heads providing teachers with experience in business as part of their Continuous Professional Development universities to offer an optional enterprise module available to all students a start-up programme in all universities that have business schools holding Small Business Charter status, and a new Enterprise E-Star award to distinguish the universities doing best at promoting and supporting entrepreneurship SBA Fact Sheet United Kingdom 7

8 The UK government intends to give its response to the report in September Second chance Variation from the EU average (measured in standard deviations, EU average=0) Time to resolve insolvency (in years); 2014; United Kingdom: 1; EU avg: 2 Cost of resolving insolvency (cost of recovering debt as percentage of the debtor's estate); 2014; United Kingdom: 6; EU avg: Degree of support for a second chance (%); 2012; United Kingdom: 83; EU avg: 82 Fear of failure rate (%); 2013; United Kingdom: 36.4; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. On giving failed entrepreneurs a second chance, the UK has the highest average score in the EU, highlighting its generally positive attitude to entrepreneurship. The high ranking in this area is largely due to the excellent conditions for dealing with a failed business. The time needed for insolvency is only half that in the EU in general and the associated costs are also lower (6 % of the debtor s estate as opposed to 10 %). Fear of failure is less manifest in the UK than elsewhere in the EU, probably due to these favourable conditions. Furthermore, society s attitude towards second chance entrepreneurs is more positive than in the EU in general. To build on this already highly regarded insolvency regime, the government is proposing a range of significant improvements. These include reducing unnecessary regulation and modernising and simplifying some insolvency procedures, strengthening the regulatory framework for insolvency practitioners, ensuring that so-called pre-pack administrations offer the best outcome for all creditors, and measures to tackle the small minority of company directors who don t follow the rules SBA Fact Sheet United Kingdom 8

9 Responsive administration Variation from the EU average (measured in standard deviations, EU average=0) Time to start a business (in calendar days); 2013; United Kingdom: 3; EU avg: 4.2 Cost of starting a business (in euros); 2013; United Kingdom: 32.5; EU avg: 318 Paid-in minimum capital (percentage of income per capita); 2014; United Kingdom: 0; EU avg: Time required to transfer property (in calendar days); 2014; United Kingdom: 21.5; EU avg: 27.7 Cost required to transfer property (percentage of property value); 2014; United Kingdom: 4.7; EU avg: 4.7 Number of tax payments per year; 2014; United Kingdom: 8; EU avg: Time it takes to pay taxes (hours per year); 2014; United Kingdom: 110; EU avg: Cost of enforcing contracts (percentage of claim); 2014; United Kingdom: 39.9; EU avg: Fast-changing legislation and policies are a problem for doing business (percentage of respondents who agree); 2013; United Kingdom: 39; EU avg: 70 The complexity of administrative procedures is a problem for doing business (percentage of respondents who agree); 2013; United Kingdom: 31; EU avg: 63 SMEs interacting online with public authorities (%); 2013; United Kingdom: 90.53; EU avg: Licenses and permit systems (1=lowest level of complexity, 26=highest level of complexity); 2011; United Kingdom: 9.8; EU avg: Burden of government regulations (1=burdensome, 7=not burdensome); 2013; United Kingdom: 3.7; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. The United Kingdom continues to rank top of the EU in this area. The UK beats the EU average on all indicators, in particular the very low share of businesses that see fast-changing legislation and policies as a problem for doing business (39 % against 70 %) and the complexity of administrative procedures (31 % against 63 %). Only some northern European countries, including Sweden, Estonia and Finland, score better than the UK on these indicators. Businesses also feel generally less burdened by government regulation. As for specific administrative procedures, start-up conditions in the UK are better than the EU average in terms of both costs and time. The cost of starting a business ( 30, against 343 in the rest of the EU) and the minimum paid capital required (as % of income per capita) are much lower than the EU average. The administration of taxes is also less burdensome, with UK businesses spending more than 80 hours (or 75 %) less time on tax declarations than their EU peers on average. Only one issue appears to be a concern: the relatively high cost of enforcing contracts, which can reach almost 40 % of the claim against 21 % in the EU as a whole. This is seen as linked to the relatively high costs of legal services, which are largely outside the government s direct control. Against this very positive background, and on the back of numerous policy initiatives in the recent past, considerable action is being taken in The government is about to introduce a series of measures designed to simplify government support products and services and make them easier to find. These include the re-launch of a website bringing business advice and guidance together in one place; a new tool that will direct businesses to the most relevant support for their needs; and the launch of a simplified government service for businesses with high growth potential SBA Fact Sheet United Kingdom 9

10 State aid and public procurement Percentage SMEs account for in the total value of public contracts awarded (%); 2013; United Kingdom: 26; EU avg: 29 Percentage of businesses participating in public tenders (%); 2013; United Kingdom: 20; EU avg: 37 Average delay in payments from public authorities (in days); 2013; United Kingdom: 16; EU avg: Percentage of businesses submitting proposals in a public electronic tender system (e-procurement) (%); 2013; United Kingdom: 13.1; EU avg: Variation from the EU average (measured in standard deviations, EU average=0) Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. The UK s relative performance has shifted somewhat since the last analysis. The below-average score in 2013 is partly due to a change in indicators. However, access to public procurement is a challenge for many UK SMEs, as recent policy initiatives have acknowledged. The share of British businesses taking part in public procurement has dropped to just over half that for the EU in general (20 % against 37 %). Consequently the share UK SMEs obtain in terms of the total value of public contracts is also lower than in the EU-28. On the upside, those SMEs that win public tenders get paid faster than their peers elsewhere in the EU (in 16 days against 28). The mediocre result of the indicators contrasts starkly with the high level of policy-making in this area in recent years. This might imply that many of the measures taken need more time to have an impact. This is certainly true for the host of measures implemented in 2013 and the first quarter of To boost SMEs competitiveness, the government has introduced a series of measures to open up public procurement contracts worth 320 billion (around 281 billion) to SMEs. These include: a commitment to ensure 25 % of central government expenditure goes to SMEs by 2015 creation of a simpler public procurement system a new rating system (Spotlight) for public bodies and suppliers to rate each other extension of the mystery shopper system (an anonymous way for SMEs to report unfair treatment) to include spot-checks on treatment of SMEs by public bodies. These measures aim at implementing the European Code of Best Practices facilitating SMEs access to public procurement SBA Fact Sheet United Kingdom 10

11 Access to finance Variation from the EU average (measured in standard deviations, EU average=0) Rejected loan applications and unacceptable loan offers (percentage of loan applications by SMEs); 2013; United Kingdom: 21.9; EU avg: 14.4 Access to public financial support including guarantees (percentage of respondents that indicated a deterioration); 2013; United Kingdom: 11.9; EU avg: 17.3 Willingness of banks to provide a loan (percentage of respondents that indicated a deterioration); 2013; United Kingdom: 17.7; EU avg: 24.6 Cost of borrowing for small loans relative to large loans (%); 2013; United Kingdom: 29.55; EU avg: Total amount of time it takes to get paid (days); 2013; United Kingdom: 38.33; EU avg: Bad debt loss (percentage of total turnover); 2013; United Kingdom: 3.7; EU avg: 3.83 Venture capital investments (percentage of GDP); 2012; United Kingdom: 0.038; EU avg: 0.04 Strength of legal rights index (0-10); 2014; United Kingdom: 10; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. The United Kingdom s score in this area is in line with the EU average, but down from above-average the previous year. The overall picture from the various indicators is of a mixed performance. On credit financing, the situation appears to be better than in the EU as the share of British SMEs reporting a deterioration in the willingness of banks to provide loans is considerably lower than elsewhere. Also, only slightly more than one in ten SMEs reported a deterioration in access to public financial support, against 17 % for the EU as a whole. On the downside, though, there is evidence that banks have rejected loan requests more frequently, at least than the EU average. Moreover, the mark-up paid by SMEs for their typically smaller loans is higher in the UK than in the rest of the EU. It is still more costly to obtain smallscale financing than larger-scale loan funding (typically reserved for large businesses), even if the gap has narrowed from 31 % in the previous year to 19 %. For other aspects of financing the conditions are broadly more favourable. UK SMEs are helped in their cash-flow positions by receiving payment relatively quickly (38 days against almost 51 days for the EU), although there is still some room for improvement (in Finland, the best in class, it takes just 21 days to get paid). The share of debt losses in relation to total turnover is also smaller than the EU average (again, Finland performs best here with only 1.5 %, against 3.7 % for the UK). Somewhat surprisingly, given the UK s well-developed finance sector, venture capital investments are only in line with the EU average. Overall, SMEs access to finance seems to be improving but there are still many areas, such as credit financing, where they struggle to get finance. Good policy progress was made in this area, with a number of substantial new measures adopted: A Growth Vouchers Programme was launched to help small businesses: pay for private sector advice on how to overcome barriers to growth; raise finance and manage cash flow; market to, attract and keep customers; make the most of digital technology; improve leadership and management skills; and recruit and develop their staff. Businesses taking part will be able to access hundreds of expert advisers through a private sector online market place]. In the first three months of the scheme nearly businesses applied to the programme and vouchers worth 3 million were issued. The programme is being run as a randomised control trial (RCT) which will provide an important contribution to research on entrepreneurship and business advice SBA Fact Sheet United Kingdom 11

12 The Funding for Lending Scheme, which was introduced in August 2012 and is aimed at providing government backed guarantees for lending, was extended to Moreover, in April 2013, the government announced that the scheme would be focused solely on businesses. The amount pledged for the British Business Bank, which aims to make finance markets for smaller businesses more effective, was increased to 1.25 billion in December It is expected to become fully operational later in It should be noted that these measures are following on from an already impressive record of recent policy initiatives that includes the creation of R&D tax credits, the Seed Enterprise Investment Scheme (SEIS), the Young Entrepreneurs Access to Start-up Loans, and the announcement of the British Business Bank. UK Export Finance has introduced products designed to improve access to finance for SME exporters. It is able to provide bank guarantees for working capital and bond facilities and insurance policies to exporters to protect against non-payment risks. Its products complement those on offer in the private sector. To raise awareness of these products and support exporters using them, it has put in place a network of Export Finance Advisers. By end-2014 it expects to have 24 advisers supporting SMEs throughout the UK. Single market Variation from the EU average (measured in standard deviations, EU average=0) SMEs with intra-eu exports of goods (percentage of SMEs in industry); 2011; United Kingdom: 19.95; EU avg: SMEs with intra-eu imports of goods (percentage of SMEs in industry); 2011; United Kingdom: 18.57; EU avg: Public contracts secured abroad by SMEs (percentage of total value of public contracts); 2013; United Kingdom: 0.8; EU avg: 2.6 Number of single market directives not yet transposed; 2013; United Kingdom: 7; EU avg: 8.69 Average transposition delay for overdue directives (in months); 2013; United Kingdom: 8.3; EU avg: 8 Number of pending infringement proceedings; 2013; United Kingdom: 30; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. Traditionally, the single market is not among the SBA areas where the United Kingdom has excelled, and 2013 is no different. The overall score is in line with the EU average. UK businesses outperformed the rest of the EU in terms of exports and imports within the single market: one in five British manufacturing SMEs exported to EU partner countries, while only around one in seven of their EU peers did so. 13 However, they still have some catching up to do in terms of the EU procurement market: fewer than 1 % of UK SMEs managed to win a public contract elsewhere in the single market, against an EU average of 2.6 %. On the policy side, the UK is now more or less in line with the EU average when it comes to the numbers of single market directives and pending infringement proceedings. No significant new policy measures were announced or implemented in 2013 and the first three months of SBA Fact Sheet United Kingdom 12

13 Skills & innovation Variation from the EU average (measured in standard deviations, EU average=0) Percentage of SMEs introducing product or process innovations; 2010; United Kingdom: 21.26; EU avg: Percentage of SMEs introducing marketing or organisational innovations ; 2010; United Kingdom: 30.64; EU avg: 40.3 Percentage of innovative SMEs collaborating with others; 2010; United Kingdom: 25.23; EU avg: Sales of new-to-market and new-to-firm innovations (percentage of turnover); 2008; United Kingdom: 7.31; EU avg: Percentage of SMEs selling online; 2013; United Kingdom: 18.37; EU avg: Percentage of SMEs purchasing online; 2010; United Kingdom: 43.12; EU avg: Turnover from e-commerce; 2013; United Kingdom: 18.24; EU avg: Percentage of all enterprises that train their employees; 2010; United Kingdom: 80; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. The UK ranks above the EU average in skills and innovation, as in the previous year. There are substantial variations in the performance of the individual indicators, however. The UK does better than the EU average on training and educating employees. UK SMEs collaborate more with each other, and get more of their turnover from e- commerce. Intriguingly, while there is a high proportion of SMEs in hi-tech and knowledgeintensive sectors, the UK has yet to catch up with the EU average on sales of innovative products and, to a lesser extent, in terms of SMEs selling innovations. On the policy front, there was only one significant policy measure implemented in 2013 and the first three months of 2014: to reduce corporation tax on profits from patent-related inventions and certain other innovations, Patent Box was implemented. This enables companies to apply a lower rate of corporation tax (10 %) to profits earned after 1 April 2013 from their patented inventions and certain other innovations. The objective is also to encourage innovative businesses to invest in the UK by improving the competitiveness of the UK tax system for high-tech companies SBA Fact Sheet United Kingdom 13

14 Environment Percentage of SMEs that have taken resource-efficiency measures; 2013; United Kingdom: 99; EU avg: 95 Percentage of SMEs that have benefited from public support measures for their resource-efficiency actions; 2013; United Kingdom: 39; EU avg: 35 Percentage of SMEs that offer green products or services; 2013; United Kingdom: 31; EU avg: 26 Percentage of SMEs with a turnover share of more than 50% generated by green products or services; 2013; United Kingdom: 18; EU avg: 22 Percentage of SMEs that have benefited from public support measures for their production of green products; 2013; United Kingdom: 34; EU avg: 26 Variation from the EU average (measured in standard deviations, EU average=0) Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. As in previous years, the United Kingdom scores above the EU average in this area. This is mainly because there are more SMEs that have undertaken resource-efficiency measures and also more businesses offering environmentally-friendly goods and services. The share of these firms increased from 28 % in 2012 to 31 % in However, there seems to be a decline in green specialists, i.e. firms that make more than half their turnover from green products and services. Given that this still represents a relatively small share of the total SME population, such fluctuations are not surprising. On policy support the UK is well ahead of the EU average on both the number of SMEs which received public support for resource-efficiency measures as well as for those offering green goods or services. No new policy measures were implemented or announced in 2013 and the first quarter of 2014; Internationalisation SMEs with extra-eu exports of goods (percentage of SMEs in industry); 2011; United Kingdom: 14.35; EU avg: 9.68 SMEs with extra-eu imports of goods (percentage of SMEs in industry); 2011; United Kingdom: 13.85; EU avg: 8.18 Variation from the EU average (measured in standard deviations, EU average=0) Cost required to import (in USD); 2014; United Kingdom: 1050; EU avg: Time required to import (in days); 2014; United Kingdom: 6; EU avg: Number of documents required to import; 2014; United Kingdom: 4; EU avg: 4.68 Cost required to export (in USD); 2014; United Kingdom: 1005; EU avg: Time required to export (in days); 2014; United Kingdom: 8; EU avg: Number of documents required to export; 2014; United Kingdom: 4; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. Internationalisation is traditionally one of the SBA areas where the United Kingdom performs above the EU average, and in 2013 the UK led the EU on all indicators SBA Fact Sheet United Kingdom 14

15 The excellent overall score is driven by the aboveaverage trading performance of UK SMEs. Roughly one in seven UK manufacturing SMEs is directly exporting to or importing from third country markets (the corresponding share for the EU is fewer than one in ten). However, this share has been stagnant for the past five years. According to national data sources, SMEs contribution to British exports outside the EU has been declining in the recent past. Figures from the UK Select Committee show that in 2011 SMEs with 10 or more employees contributed only about one third to the value of British exports, while they accounted for 40 % ( 115 billion) in 2010 and 53 % ( 135 billion) in As in previous years, the relatively light administrative burden on internationally active businesses was another factor behind the UK s high ranking in this SBA area. The time required to import and export is relatively short with comparably few documents needed to accompany transactions. The UK s competitive edge on the transaction costs of importing and exporting is less significant. Despite this rather favourable administrative situation, in the UK as in the EU in general only a rather small minority of SMEs take advantage of opportunities on the international markets. On the policy side, feedback from stakeholders suggests that the government needs to step up its efforts to support the internationalisation of British SMEs through enhanced financial support (guarantees, export credits etc.) and practical, strategic and operational measures such as more `boots on the ground or staff to provide training and information on external markets, standards, legal procedures, tax matters, etc. UK Export Finance works closely with the commercial sector to provide credit insurance and trade finance for exporters. In the past two years UKEF has committed to back nearly 1 billion worth of export orders, but many small businesses are still not aware of the support it offers. To address this UKEF is: launching a marketing programme, targeting small businesses which are exporters or have export potential doubling the number of regional Export Finance Advisors who can offer impartial advice about the different types of export finance support available, from both government and the private sector working with banks to make them more aware of UKEF support and better equipped to advise their customers for example, by providing banks with a simpler and clearer product guide that they can give to customers. simplifying application forms and speeding up turnaround times for applications for working capital support. These are now down to four days from twenty previously. In addition, UK Trade and Investment (UKTI) focuses on helping UK businesses to export. It runs various schemes such as the 10-year-old Passport to Export initiative which has proved quite successful in providing firms with the knowledge, skills and contacts needed to break into new markets. It also manages the new and growing Overseas Business Networks Programme, which offers business-to-business support in emerging markets and is delivered in partnership with UK business bodies. UKTI is rolling out this support in 21 high-growth and emerging markets, with a further 20 potential markets to come. To make sure that more businesses know about its services, UKTI has launched a new marketing campaign and is working with local and overseas partners to provide information to small businesses. By , UKTI aims to give advice and support to businesses per year SBA Fact Sheet United Kingdom 15

16 3. Good practice Below is an example of an interesting policy practice from the United Kingdom to show what governments can do to support SMEs: Giving SMEs access to 230 billion of public sector contracts This measure is in fact a series of measures to open up 230 billion of public procurement contracts to SMEs. The measures include: Channelling 25 % of central government spending to SMEs by 2015 and implementing major changes to open up the rest of the public sector to help SMEs do business with it; A simplified public procurement system that abolishes Pre-Qualification Questionnaires (PQQs) for low-value contracts, helps SMEs find contract opportunities via a single online portal, and mandates prompt payment terms all the way down the supply chain so that all businesses get treated fairly; Introduction of a new rating service called Spotlight by early 2014 so that SMEs can judge public bodies on their procurement credentials, and public bodies can rate their suppliers so that SMEs can build up their reputation; Extending the reach of the mystery shopper scheme, so that it not only investigates reports of unfair treatment but also spot-checks public bodies to make sure that their procurement is small-business friendly. This set of measures can be considered an interesting or innovative policy practice because it applies to all SMEs and it is working towards creating a more level playing field on which SMEs can compete on fairer terms with large contractors for high value public sector contracts. Simplifying the public procurement system is also good practice because less complexity helps SMEs to participate. Also, the new Spotlight rating service helps both sides in the procurement process to recognise each other and build trust with transparency. The mystery shopper facility is another interesting approach, as it provides an anonymous reporting process for SMEs that are perhaps afraid of upsetting key (larger) clients by complaining about unfair treatment received.. References: Important remarks The Small Business Act (SBA) Fact Sheets are produced by DG Enterprise and Industry as part of the SME Performance Review (SPR), which is its main vehicle for economic analysis of SME issues. They combine the latest available statistical and policy information for the 28 EU Member States and nine non-eu countries which also contribute to the EU s Competitiveness and Innovation Framework Programme (CIP). Produced annually, the Fact Sheets help to organise the available information to facilitate SME policy assessments and monitor SBA implementation. They take stock and record progress. They are not an assessment of Member States policies but should be regarded as an additional source of information designed to improve evidence-based policy-making. For example, the Fact Sheets cite only those policy measures deemed relevant by local SME policy experts. They do not, and cannot, reflect all measures taken by the government over the reference period. More policy information can be found on a database accessible from the SPR website. Please also see the end notes overleaf SBA Fact Sheet United Kingdom 16

17 For more information SME Performance Review: Small Business Act: The European Small Business Portal: 1 The 2013 SBA Fact Sheets benefited substantially from input from the European Commission s Joint Research Centre (JRC) in Ispra, Italy. The JRC made major improvements to the methodological approach, statistical work on the dataset and the visual presentation of the data. 2 _doc.pdf, accessed: accessed: aspx 5 accessed: accessed: & accessed: accessed: accessed: The three graphs below present the trend over time for the variables. They consist of index values for 2008 to 2015, with the base year 2008 set at a value of 100. As from 2012, the graphs show estimates of the development over time, produced by DIW Econ on the basis of figures from the Structural Business Statistics Database (Eurostat). The data cover the business economy, which includes industry, construction, trade and services (NACE Rev. 2 sections B to J, L, M and N). They do not cover enterprises in the financial sector, agriculture, forestry and fisheries or largely non-market service sectors such as education and health. A detailed methodology can be consulted at: 11 The policy measures presented in this SBA Fact Sheet represent only a selection of the measures taken by the government in 2013 and the first quarter of The selection was made by the national SME policy expert contracted by CARSA Spain (DG Enterprise s lead contractor for the 2014 Fact Sheets). The experts were asked to select only those measures that, in their view, were the most important, i.e. were expected to have the highest impact in the specific SBA area. The complete range of measures that the 2014 SBA Fact Sheet United Kingdom 17

18 experts compiled in producing this year s Fact Sheets will be published alongside the Fact Sheets in the form of a policy database on the DG Enterprise website. 12 The quadrant chart combines two sets of information: first, it shows the status quo performance based on data for the latest available years. This information is plotted along the x-axis measured in standard deviations of the simple, non-weighted arithmetical average for EU-28. The vertical corridor marked by the dotted lines defines the EU average. Secondly, it reveals progress over time, i.e. the average annual growth rates for The growth rates are measured against the individual indicators which make up the SBA area averages. Hence, the location of a particular SBA area average in any of the four quadrants provides information not only about where the country is located in this SBA area relative to the rest of the EU at a given point in time, but also about the extent of progress made in It should be noted that the definition of the indicators has been slightly adapted to last year, so as to measure trading in manufacturing, only (due to the lack of corresponding data for services sectors). This may explain potential differences to last year s results SBA Fact Sheet United Kingdom 18