The businesses propping up Britain’s local economy are disappearing fastest where they are needed most
Established SMEs – businesses with 5 to 249 employees that are critical for sustaining local economies – are vanishing fastest in exactly the places that rely on them most, according to new research from Allica Bank.
The report, Good Growth Icons, finds that while the UK’s SME population is larger today than it was a decade ago, growth has stalled in the past three years and is increasingly concentrated in London.
Between 2016 and 2026, SME numbers increased by just under 7% across the UK, with London accounting for 44% of net growth.
But in the past three years all UK regions, with the exception of London and Northern Ireland, have seen SME numbers decline, with Northern Ireland registering just 0.2% growth (40 businesses).
The South West recorded the steepest recent decline of any region, with its SME base declining by 3.8%, followed by Wales (-3.4%) and the West Midlands (-3.1%).
Rural areas are most at risk to the recent decline in SME numbers
The research – based on the Office for National Statistics’ latest UK business counts data –suggests that SME numbers are disproportionately declining in the areas where they support the greatest share of jobs.
In the most rural local authority districts in the UK, SMEs have declined by 2.3% in the past three years, compared with 1.2% growth in the most urban areas. These urban districts are three times more likely than rural districts to have experienced recent SME growth.
Yet it is these rural areas that rely most heavily on SMEs for employment, supporting 48% of jobs on average compared with just 33% in the most urban areas.
The report identifies certain local authorities that have experienced the sharpest decline in SME numbers in the past three years, including Erewash (-20%), Wyre Forest (-18%), Stratford-on-Avon (-17%) and Blackpool (-16%).
Good growth in every postcode starts here
Prime minister Andy Burnham has pledged to deliver “good growth in every postcode” and Allica Bank argues that pledge cannot be met without SMEs.
The UK’s 592,500 SMEs employ around 10.7 million people and generate 37% of private sector turnover. The report estimates there are 16,300 SMEs in the UK that grew turnover by over 20% in the past year and can make a meaningful contribution to future growth.
While these high-growth potential SMEs are disproportionately concentrated in London, there are 10,700 outside the capital growing at such a rate as to fund significant local investment in all parts of the UK.
To back them, Allica Bank is calling on the government to take four steps:
A Scale-up Guarantee: Create a new tier of the Growth Guarantee Scheme offering a 70% guarantee on facilities between £2m and £5m for high-growth firms that lack tangible assets.
Support regional skills development: Fully devolve adult skills funding to Strategic Authorities and introduce a Growth & Skills Levy pool, with a focus on developing SME AI skills
Reform business owner taxes: Reduce the cost of doing business for SMEs and introduce an SME Reinvestment Relief to encourage business reinvestment
Establish regional SME Growth Forums: Give SMEs a permanent voice with local leaders to identify barriers to growth and shape Local Growth Plans.
Richard Davies, CEO of Allica Bank, said: “The prime minister has pledged to deliver ‘good growth in every postcode’, and established businesses can make it happen.”
“These firms are the engine of regional growth across the UK. They keep local economies running and communities thriving. They may not be the hyper-growth scale-ups that grab the headlines, but they sustain local jobs for decades, often in the very places national growth strategies overlook. We urge the government to put established businesses at the heart of its growth agenda and its mission to deliver good growth in every postcode.”