The UK’s business landscape is made up of millions of enterprises of all shapes and sizes. 5.5m, in fact, around 1.16m of which are micro-businesses. Throw sole traders into the barrel as well, and that figure’s closer to 5.2m.
Micro-businesses (or micro-enterprises) represent a significant portion of the UK’s business population. They play an important role in the economy and in peoples’ daily lives.
It’s worth getting under the skin of what makes a business a micro-business. Given a closer look, they reveal some surprising statistics.
The UK's micro-business landscape at a glance
All statistics are up-to-date at the time of publishing.
- There are 5.5m businesses in the UK, around 1.16 million of which are micro-businesses with employees
- Small businesses (including micro-businesses) are the largest group in terms of population, at 5.45 million, accounting for 99.2% of the UK's businesses
- The second-largest group are non-employing businesses (ie sole traders) of which there are four million. This is followed by medium-sized businesses (37,800) and large businesses (8,250)
- If you count both sole traders and employing micro-businesses, the UK has 5.2 million micro-businesses.
Small difference?
There’s a temptation to think of micro-businesses and small businesses as being little and the same. Especially when you see them grouped together with small businesses in stats reports. Or even SMEs (small-to-medium enterprises).
Beyond the headline stats, though, there are some crucial differences between micro-businesses and small businesses.
It's best to start with some definitions…
What is a micro-business?
According to HMRC, for a business to be registered with Companies House as a ‘micro entity’ (their official term for a micro-business or micro-enterprise), it has to meet two of these criteria:
- up to 10 employees
- a maximum turnover of £632k
- assets worth up to £316k.
Obviously, HMRC has to draw a firm line between micro-businesses and small businesses for tax and accounting purposes. So its definition of a micro-business is bound to be prescriptive.
That said, micro-business definitions can and do vary across stats reports. Most measure them according to employee size while others focus on revenue.
In addition, some reports treat sole traders as separate entities while others will include them in small business or micro-business categories. (The best, of course, will show you both.)
What's the difference between a small business and micro-business?
To prevent confusion between small businesses and micro-businesses, it’s worth glancing over HMRC's definitions again.
By their reckoning, for a business to be classified as a small business, they must have two of the following:
- up to 50 employees
- a maximum turnover of £10.2m
- assets worth up to £5.1m.
Clearly, ‘small' businesses aren’t that small. Especially when compared with micro-businesses. A property law firm, for example, might employ only four staff members yet generate enough revenue to be registered as a small business.
In the same way, a pasta subscription box start-up company can’t call itself a small business because it employs a team of more than 10 people. As far as HMRC’s concerned, it’s a micro-business until the moment it starts earning over £632k a year or has assets on its balance sheet that are worth up to £5.1m.
Are sole traders and freelancers classed as micro-businesses businesses?
Ultimately, the differences between small businesses and micro-businesses stretch beyond company size, turnover, and assets.
They play very different roles in the UK’s business landscape. Both in terms of structure and in the services they offer.
In terms of types of businesses, there’s lots of variation within the micro-business community. And especially if you count freelancers and sole traders as well.
For example, a micro-business could be a marketing consultant who’s left their firm to go it alone. Or a café employing eight members of staff.
What about SMEs?
According to most stats reports, an SME (small-to-medium enterprise) can have anywhere between 1-249 employees. Which technically means micro-businesses are SMEs too.
SMEs are a broad but important category when gauging the UK’s business landscape. The stats speak for themselves: 99.9% of all UK businesses are SMEs. Plus, they generate over half (52.5%) of the UK’s total business turnover.
How many micro-businesses are there in the UK?
At the start of 2024, the UK’s business population was 5.5 million. Of those, 5.45 million were small (1-49 employees), 37,800 medium-sized (50-249 employees), and 8,250 large businesses (250+ employees).
According to those stats, small businesses (including micro-businesses) make up 99.2% of all UK businesses.
However, seperate micro from small and it becomes clear that micro-businesses outnumber small businesses by a wide margin. Then, the UK has around 1.16m micro-businesses and only 220,000 small businesses.
Throw sole traders (AKA ‘non-employing businesses’) into the mix and things get even more interesting. As there are over four million sole traders in the UK, This puts the total number of micro-businesses at 5.2 million.
However, it's important to note that, in terms of numbers, micro-businesses have declined slightly since 2022. Prior to that year, they'd peaked at 1.18 million employing micro-businesses.
What is the average turnover for a UK micro-business ?
First, let’s look at the average turnover for a business of any size in the UK. In 2023, the average UK business earned £806,000 a year. The turnover was 50% higher in London, at £1.2m.
Per worker, this works out to an average turnover of £162,751. Or £228,000 for those working in London.
However, the total turnover of all UK businesses was £4.48 trillion. Small businesses contributed 15% to that pot, micro-businesses 13%, and sole traders 7%.
The biggest contributors were large businesses, representing just 0.14% of businesses but generating 46.6% of the UK's business turnover.
Taking care of (micro)business
Nobody knows exactly what's in store for the UK's micro-businesses. But when asked what their expectations for the following year were, over half of micro-businesses (53.5%) expected their turnover to stay the same. 17.5% expected it to increase and 13.6% to decrease.
We're here to protect micro-businesses from all manners of risks. If you're not sure what insurance your micro-business might need, have a read through our guide to the different types of insurance small businesses need.
Otherwise, give us a call on 0345 561 0320 and one of our friendly advisers will help you out.
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