Research reveals where UK SMEs are struggling

Posted on 22 Jan 2024 by The Manufacturer

There are over a quarter of a million manufacturing SMEs in the UK, making up the lion's share of the sector. New research, conducted by Qardus, has analysed data from the ONS to determine where SMEs are thriving and where they are in fact struggling.

The analysis was based on six different factors, including the following: The Active Enterprise Change between 2021-2023, the change in the count of births of new enterprises 2020-2022, the change in the count of deaths of new enterprises 2020-2022, the change of high growth enterprises per 1,000, and the survival rate of SMEs across three to five years.

Considering these factors, a process called minimum to maximum normalisation was used to convert metrics to a score between 0 and 10, where 0 is the worst score in the range and 10 is the best. Each metric had a weighting for how much it contributes to the final score, the score was then scaled to a maximum of 100 using the weightings provided. Local authorities were then ranked based on their overall score out of 100.

Bromsgrove is the local authority where SMEs are struggling the most with a score of 80.75 out of 100. Bromsgrove recorded a -30.22% drop in SME enterprises being registered between 2021 and 2023 – the biggest drop of any local authority. There was a 5.81% survival rate of SMEs in Bromsgrove recorded in the last five years too, contributing to Bromsgrove’s ranking in the study.

Rochdale ranked second for where SMEs are struggling the most with a score of 69.75 out of 100. The Greater Manchester town scored particularly low when it came to the growth of existing SMEs in the area, with just 1.91 SMEs per 1,000 growing.

Worcestershire ranked third with a score of 66.12 out of 100. There was a 26.58% decrease in registered SMEs in the area between 2020 and 2022, as well as just under a fifth of SMEs surviving for more than five years in Worcestershire.

Bury ranked just below Worcestershire in fourth with a score of 64.56 out of 100. The Greater Manchester borough has an alarming five-year survival rate at 14.52%, contributing to its low overall ranking.

Rossendale ranked fifth for where SMEs are struggling the most in the UK. The Lancashire borough recorded a low score of 64.37 out 100. When broken down into the factors analysed, between 2021 and 2023, there was a decrease of 6.3% in registered businesses in the area, likely due to the high business ‘death rate’ of 70.21%, wherein just over seven in ten SMEs in Rossendale have ceased operating between 2020 and 2022.

Leicester ranked sixth with a score of 63.89 out of 100. The local authority saw a reduction in SMEs being registered between 2021 and 2023, with the rate of business registered reduced by 15.31%. Similarly, just over a third of SMEs in Leicester (34.38%) have survived in the last five years.

Cheshire East ranked seventh with a score of 62.92 out of 100. The Cheshire borough recorded a 3.41% drop in businesses being registered between 2022 and 2020. Meanwhile, Somerset West and Taunton (62.25 out of 100), Rhondda Cynon Taf (62.20 out of 100) and Buckinghamshire (61.22 out of 100) rounded off the ten local authorities in the UK where SMEs are struggling the most.

On the other end of the scale, Ceredigion is the local authority where SMEs are thriving the most. The area in Wales recorded a score of 29.03 out of 100. Both their three and five-year survival rates were recorded at 67.44% and 55.81% respectively.

Selby (29.15 out of 100), South Staffordshire (29.31 out of 100), South Hams (29.74 out of 100) and South Derbyshire (29.95 out of 100) all also recorded scores of under 30 and rank among the areas where SMEs are thriving.

Hassan Daher, the founder of Qardus, commented: “The findings of this study ultimately indicates that some local authorities are better equipped to host new SMEs than others. What is interesting to note is that no London based local authority ranked in the top ten, suggesting that it is difficult for SMEs to start out successfully in the capital.”

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