Small businesses account for a very significant part of the UK economy. There are more than 5.9 million such companies, accounting for 99% of all businesses operating in the UK. They also account for 35% of all turnover and 39% of all employment. Yet the sector is one of the hardest for companies to target as a market economically. This is because the sector is not only highly fragmented, but it is anything but homogenous.

It includes more than 4.6 million sole traders, most of whom have opted to trade in this way, but it can also include individuals effectively forced into being self-employed, with an element of this now referred to as the gig economy. Some of these sole traders have ambition to grow while others choose to remain as a sole trader as a lifestyle choice. There are more than a million other micro companies, again ranging from those that have grown from sole trading through to new start-ups. A large element of tradespeople who take on apprentices to increase their opportunities are included in the sector, as well as independent retailers or other commercial operators that provide services over extended hours that cannot be undertaken by just one person. It also includes highly ambitious infant companies that will further develop in size in the future, as well as lifestyle-type operations.

The sector covers virtually every industrial and commercial sector, and the companies are active in every geographic area regularly accounting for more than 30% of the local economy, rising to 52% in Northern Ireland.

Small and medium-sized enterprises (SMEs) represent 99% of all businesses in the EU. The definition of an SME is important for accessing finance and EU support programmes targeted specifically at these enterprises, and so the EU has defined specific criteria for the sector.

The main factors determining whether an enterprise is an SME are:

• staff headcount

• either turnover or balance sheet total.

These ceilings apply to figures for individual firms only. A firm that is part of a larger group may need to include staff headcount/turnover/balance sheet data from that group too.

In addition to these categories, MBD has included sole trader status, representing businesses with zero or one employee, comprising sole proprietorships and partnerships with only the self-employed owner-manager(s) with no or one employee, and companies comprising an employee director with no or one further employee.

Companies defined as larger than the SMEs are referred to in this report as large companies, but are often called enterprises.

Turnover figures exclude financial and insurance activities, where turnover is not available on a comparable level.

All values quoted in this report are at current prices unless otherwise specified.

Some numbers in tables do not add exactly due to rounding.

The term one billion refers to one thousand million.