Small Business, Big Impact: The Contribution of Small Businesses to the UK Economy

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Small businesses don’t just impact the UK economy, they are the UK economy, making up around 99.9% of all businesses

With over 6 million small businesses in the UK, their impact is undeniable. In fact, recent data shows that small and medium-sized businesses in the UK had a combined turnover of £2.18 trillion, which amounts to an impressive 52% of the private sector's overall turnover.  

It’s clear small businesses play a crucial role in the UK, serving as the foundation for economic growth. However, not only do they contribute to the economy at a national level, but they also have a significant impact on local communities.

Small Business Contribution to the Economy: A Closer Look

The contributions of small businesses to the economy are substantial, ranging from job creation, to innovation, to wealth generation.

Job creation

Employment rates are often used as one of the key indicators of the health of an economy. In the UK, small businesses play a crucial role in increasing employment rates, and maintaining the overall health of the economy as they employ around 16.3 million people.

When jobs are created by small businesses, it not only benefits the individuals who are employed, but it also has a ripple effect throughout the economy; newly employed individuals have more money to spend, which in turn boosts consumer spending and overall economic activity. This increased economic activity can lead to higher demand for goods and services, which can lead to increased production and employment opportunities in related industries.

Boost GDP 

Small businesses have a significant impact on the UK's GDP, single handedly generating a quarter of the country's GDP. Such a substantial contribution to the GDP makes it clear that supporting small businesses is essential to ensure long-term economic growth and prosperity in the UK.

Local economies and communities

Shopping with small businesses helps keep town centres alive. If you spend £10 at a local independent shop, it can result in up to £50 more being recirculated in the local economy than if £10 was spent at a chain. This is because business owners are more likely to spend their money locally, such as at local restaurants, pubs, and other businesses, creating a multiplier effect that benefits the entire community and allows all small businesses to thrive.

By supporting local businesses, consumers can help create a cycle of economic activity that supports the livelihoods of their neighbours and fosters a stronger sense of community.

Shopping small is shopping sustainably

Supporting small local businesses is an effective method to reduce your carbon footprint and positively impact the environment. Products sold by small businesses require less transportation to reach you, which results in a lower carbon footprint compared to products sold by chain stores. For example, the food miles of vegetables grown in your community and sold at a local greengrocer are exponentially lower than vegetables flown in from abroad and sold at a large supermarket chain. This also helps to support local farmers and manufacturers, strengthening the local economy.

Furthermore, small businesses are often more inclined to use sustainable materials in their products or packaging, and implement environmentally-friendly practices such as composting or recycling. Shopping at small businesses not only promotes a more sustainable lifestyle but also contributes towards a community-focused economy, creating a positive impact for both consumers and business owners.

Promote diversity by shopping local 

Small local businesses often showcase the distinctive cultural and ethnic characteristics of their communities, providing a wide range of products and services that cater to diverse tastes and preferences. Additionally, small businesses are typically owned and operated by underrepresented groups, who may encounter entry barriers in larger corporate environments. By supporting these entrepreneurs, consumers can help establish a more equitable business community. Lastly, small businesses prioritise building personal connections with their customers, promoting a sense of belonging and inclusivity.

By opting to shop at small local businesses, consumers can contribute towards building a more vibrant and diverse economy that reflects the needs and values of their community, promoting inclusivity and diversity.

Ways to support small businesses   

It is important to support small businesses by shopping locally and investing in their products and services. By doing so, we can help ensure that local businesses continue to thrive and contribute to the growth and prosperity of the American economy.

Buy from them: This is the most obvious way to support a small business. Even if ordering that book you really want to read is slightly cheaper online, buying it from your local bookshop will positively impact your local economy. There are also lots of ways to support small businesses online, platforms such as Etsy make shopping small easy!

Support them on social media: Supporting a small business doesn’t always have to mean spending money. Liking, sharing, and commenting on their posts helps increase their brand presence and audience. 

Purchase gift cards: Gift cards allow you to introduce your favourite small businesses to friends and family. Many small businesses also allow you to purchase gift cards online making them an easy but still thoughtful last-minute gift!

Leave a positive review: Leaving a positive review on TripAdvisor or Google helps build brand trust and encourage future customers to shop small 

Visit local markets and craft fairs: Markets and craft fairs are usually attended by local small business owners and are the perfect opportunity to purchase a unique item from a local seller. 

How Capital on Tap is supporting small businesses

Capital on Tap was started with a single goal: make the lives of small business owners easier. The Capital on Tap Business Credit Card offers tools that facilitate seamless business operations such as a variety of financial products to help small businesses manage their cash flow, invest in growth, and enhance their financial status. 

Our ethos is that empowering small business owners can lead to success and contribute to the growth of their communities. To read more about how Capital on Tap has helped small businesses across the UK, check out our inspiring customer stories.

The bottom line

Small businesses are an essential part of the UK economy, and they contribute to it in several significant ways. They create jobs, provide innovation, and support local communities.

The resilience and adaptability of small businesses have been put to the test in recent times, with rising inflation and cost of goods. Yet, despite the challenges, small businesses have continued to innovate and find ways to provide essential goods and services to their communities. It is important to support small businesses by shopping locally and investing in their products and services. By doing so, we can help ensure that small businesses continue to thrive and contribute to the growth and prosperity of the British economy.


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