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UK Small and Medium-sized enterprises (SMEs) business statistics

Small and Medium-sized enterprises (SMEs)are the lifeblood of innovation in the UK. We've dived into the most recent SME statistics, exploring their contribution to the UK economy.

How many UK SMEs are there?

According to the Business population estimates for the UK and regions in 2023, there are 5.51 million SMEs, which make up 99.9% of UK private sector businesses. 5.51 million of these are classed as "small” (0 to 49 employees), and 36,905 are classed as "medium-sized” (50 to 249 employees).
A further 4,060 businesses could be classed as SMEs for R&D Tax Credits purposes as they employ between 250 to 499 people (if they fulfil the rest of the criteria – see below).

What is the definition of an SME for Research and Development (R&D) Tax Credits purposes?

While reporting the number of SMEs in the UK, the Department for Business, Energy & Industrial Strategy uses the basic criteria of between 0 to 49 employees for a small business and 50 to 249 employees for a medium-sized business.

For applying for R&D Tax Credits, the definition of an SME in the UK is more specific. The SME R&D scheme defines Small and Medium-sized enterprises as having a headcount below 500 and a turnover of under €100m, or a balance sheet that totals less than €86m (regardless of the number of employees). There are several rules that might prevent an SME from applying through the SME scheme, such as if the company’s R&D is subsidised, or if they are conducting R&D as subcontractors. Under these circumstances, SMEs would apply for tax relief under the RDEC scheme.

The process becomes simpler for accounting periods starting on or after 1 April 2024, when SMEs must apply for R&D relief through a new single scheme that merges both the SME scheme and RDEC (except when they are classed as being an “R&D intensive” SME, which means that the business’s R&D spend makes up 30% of their total expenditure).

You can read about the full criteria for qualifying as an SME for tax relief on our SME scheme page.

How many people in the UK are employed by SMEs?

The government’s statistics show that in 2023 SMEs employed 16.7 million people in the UK, 61% of the total number of people employed by private sector companies.

What is the turnover of SMEs in the UK?

The government reports that turnover for UK SMEs was £2.4 trillion in 2023, 53% of the total turnover of private businesses.

How many SMEs claim under the R&D Tax Credits scheme?

For the 2021-2022 tax year, HMRC estimates that 85,625 Small or Medium-sized Enterprises (SMEs) made R&D claims, 95% of all claims.

79,205 of these made SME scheme claims, which break down as:

  • 37,455 claims for a deduction from Corporation Tax liability
  • 14,470 claims for a payable tax credit
  • 27,275 claims for a combination of both payable tax credit and a deduction from CT liability

As well as this, there were 6,420 SMEs that claimed under the RDEC scheme.

Where are SMEs conducting R&D in the UK?

For the 2021-22 tax year, 90% of businesses who made SME R&D Tax Credits scheme claims were from England. 3% were from Wales. 5% were from Scotland and 2% were from Northern Ireland.
22% of SME scheme claims came from London, 14% came from the South East and 10% came from the North West and another 10% from the East of England. The table below shows the number and percentage share of SMEs claiming R&D Tax Credits, broken down by region for the most recent tax year.

SME R&D Tax Credits scheme claims by region 2021-2022

SME R&D Tax Credits scheme claims by region 2021-2022

Which industries benefit the most from the SME Research and Development (R&D) scheme?

For the 2021-22 tax year, the majority of SME R&D Tax Credits scheme claims came from just three industries, including Information & Communication (23%), Manufacturing (22%) and Professional, Scientific & Technical (15%).

The table below shows the number and percentage share of SMEs claiming R&D Tax Credits, broken down by industry for the most recent tax year.

SME R&D Tax Credits scheme claims by industry 2021-2022

SME R&D Tax Credits scheme claims by industry 2021-2022

How many SMEs are led by women?

According to the government’s Longitudinal Small Business Survey: SME Employers – UK, 2022, 52% of SMEs have women in management roles. This figure breaks down as:

  • 18% of SMEs are women-led
  • 23% were ‘equally-led’, with the same number of men and women in management roles
  • 11% had a minority of women in management roles

The industries most likely to be led by women are Health (44%), Education (34%), Other Services (29%) and Food & Accommodation (28%).

How many SMEs are led by members from minority ethnic groups

The government’s Small Business Survey reported that 6% of SMEs were led by a management team with at least half of its members from minority ethnic groups. The industries most likely to be led by members from ethnic minority groups are Information & Communication (9%), Health (8%), Food & Accommodation (8%), Education (8%) and Admin (8%).

Is the number of SMEs in the UK declining?

For nearly twenty years, there has been sustained growth in the number of businesses in the private sector with 0-499 employees; however, according to the latest HMRC data, the number of SMEs declined from 2021 to 2022, with growth starting to return in 2023. In the table below we show growth of UK SMEs in the private sector from 2010 to 2023.

Businesses in the private sector with 0-499 employees, UK 2010 to 2023

Businesses in the private sector with 0-499 employees, UK 2010 to 2023

How many businesses are first-time applicants for the SME R&D Tax Credits scheme?

We don’t have the full data from the 2021-22 tax year; however, we know that in the tax year 2020-21, there was a 3% decrease in the overall number of first-time applicants from the previous year.

The table below shows the number of first-time R&D Tax Credits claimants from 2000-01 to 2021-22.

the number of first-time R&D Tax Credits claimants from 2000-01 to 2021-22.

Note: the number of first-time SME scheme applications for 2021-22 is only partial and will be revised by HMRC at a later date.

What do SMEs see as their main obstacles to growth?

In the 2022 Small Business SurveySMEs reported the following obstacles to growth:

  • The level of energy prices (60%)
  • Competition in the market (41%)
  • Taxation, VAT, PAYE etc. (41%)
  • Staff recruitment and skills (40%)
  • Regulations/red tape (39%)
  • Other issues relating to costs (32%)
  • Coronavirus (COVID-19) pandemic (33%)
  • EU exit (32%)
  • Late payment (29%)
  • National living wage (24%)
  • Availability/cost of premises (20%)
  • Obtaining finance (16%)
  • Workplace pensions (12%)

How many SMEs use external finance?

The 2022 Small Business Survey reported that around three-quarters of SMEs (75%) use some form of external finance. This is up from 74% in 2021, 72% in 2020 and 63% in 2019.

How are SMEs most likely to innovate through R&D?

According to the government’s 2022 SME Survey:

  • 21% innovated through improving processes for producing or supplying goods or services in the last three years
  • 15% innovated through introducing new or significantly improved goods
  • 25% innovated through introducing significantly improved services


While many of these innovations just took place within their respective businesses, of the SMEs that innovated new processes, 19% were new to the industry. Of the SMEs that innovated goods or services, 31% were new to the industry or market. Goods and services innovations new to the industry or market were most likely to come from Construction, (42%), Manufacturing (42%) or Information & Communications (51%).


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