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I need information on small medium businesses in the UK and their accounting habits.
OVERVIEW
Hi there! Thank you for your question about small medium businesses in the UK and their accounting habit. The short version is that there were 5.4 million SMEs in UK in 2016 which accounted for over 99% of all businesses. In 2016, SMEs by industry were 4.1 million businesses in the services industries (professional, scientific and technical industry), three quarters of all businesses in the UK and accounted for 79% of employment and 72% of total turnover. SMEs in United Kingdom are obligated to use the International Financial Reporting Standards (IFRS).
Below is a deep dive of my findings.
FINDINGS
After reviewing the data extensively, we were unable to find specific information on how SMEs in the UK do their accounting. However, we were able to find several sources on the number of SMEs in the UK, the amount of employees, jobs and sector of operations broken down by industries. We also found general information on their accounting practices. We have composed the best response to your request and documented our findings below.
BREAKDOWN OF THE SME SECTOR IN THE UK
According to FSB, there were 5.5 million private sector businesses in the UK at the beginning of 2016. Small businesses accounted for 99.3% of all private sector businesses at the start of 2016 and 99.9% were small or medium-sized (SMEs). Additionally, total employment in SMEs was 15.7 million, representing 60% of all private sector employment in the UK. In the UK SMEs account for at least 99% of the businesses in every main industry sector. Less than one fifth of all SMEs operate in Construction, compared to 1% in the Mining, Quarrying and Utilities sector.
Statistics shows the percentage of small and medium enterprises in the United Kingdom (UK) in 2016, by sector. It shows that 27% of SMEs are in real estate, renting and business activities, while 19% are in construction, 12% in transport, storage and communication. Other community include: 12% in social and personal service activities, 10% in wholesale and retail trade, 7% in health and social work, 6% are in manufacturing, 4% in hotels and restaurants, 23% in agriculture and 3% in hunting and forestry.
Additionally, reports in Small Business show that SMEs in UK currently employ 15.7 million people nationally, which represents almost 50% of the entire working population in the UK. There are approximately 5.6 million SME's in the country who have created jobs for 1.8 million people in the past five years alone. The report further says that the top performing SME sectors are in seven cities: "Birmingham, the City of London, Hull, Leeds, Liverpool, Manchester and Newcastle: and expected to create a total of 25,000 jobs by 2021, adding approximately £1.2 billion to the economy. Moreover, SME growth is reportedly being driven by a number of sectors including: "film and TV production, machinery repair, and healthcare." At the city level, other notable sectors were "mobile food services, education support and healthcare activities."
According to the House of Commons Business Statistics, 5.4 million SMEs (less than 250 employees) were in the UK in 2016, which accounted for more than 99% of all businesses. There were 5.3 million micro-businesses (0-9 employees) in the UK in 2016, representing 96% of all businesses. Although the vast majority of businesses in the UK employ fewer than 10 people, this type of business only accounts for 32% of employment and 19% of turnover. Large businesses (more than 250 employees) on the other hand, accounted for 0.1% of businesses but 40% of employment and 53% of turnovers.
Furthermore, the statistics show that in 2016 there were 4.1 million businesses in the services industries (professional, scientific and technical industry), 75% of all businesses in the UK. The service industry accounted for 15% of businesses, 79% of employment and 72% of total turnover. In addition, construction sector businesses accounted for 18% of all businesses, but only 8% of employment and 7% of turnover and, manufacturing firms accounted for 5% of businesses, 10% of employment and 15% of turnover.
ACCOUNTING PRACTICES OF SMEs IN THE UK
CIMA highlights three main areas of practical application in SMEs in the UK.
a) "management accounting" is usually done by the owner-manager/ entrepreneur and this could involve a "significant opportunity cost" in terms of senior management time, which might be more usefully dedicated to "advancing the business in other areas" such as sales and marketing, new product development etc.
b) "owner-managers were inclined to have a ‘bean counter’ image of accountants" and were unaware of the possible contribution that management accountants, and in particular "accountants as ‘business partners’ could make."
c) "entrepreneurs were disinclined to employ a management accountant", as they normally communicated the desire to "preserve control and have complete access to information they considered sensitive."
Recent research shows the most trusted advisers for small businesses is small and medium-sized accountancy practices. Meanwhile, it is said that 50% of small firms in the UK that have sought business support have "approached their accountant."
Based on this source, SMEs in the UK are obligated to use the International Financial Reporting Standards(IFRS). While they may use a national standard that is based on the IFRS for SMEs Standard, they have to do so with significant modifications. Alternatively, they may use IFRS as adopted by the EU.
According to insights from Exact, "speed is the number one priority" demanded by UK SMEs in accounting. Furthermore, it emphasizes that the number of UK accountants turning to digital solutions "has almost tripled" over the last year, and with great results. This resulted in SMEs' level of satisfaction with their accountants being doubled.
CONCLUSION
To wrap it up, review of the data revealed that there were 5.4 million SMEs in UK in 2016 which accounted for over 99% of all businesses. In 2016, SMEs by industry were 4.1 million businesses in the services industries (professional, scientific and technical industry), three quarters of all businesses in the UK and accounted for 79% of employment and 72% of total turnover. SMEs in United Kingdom are obligated to use the International Financial Reporting Standards (IFRS).
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