Definition of a small business
There are 5.5 million businesses registered in the UK and over 99% are classified as a small business or medium sized enterprises. These small or start up businesses operate across the whole spectrum of industries and services but when does a small business reach the next tier?
What is an SME?
There is no single definition but as guide in 2005 the European Commission published “The new SME Definition”:
- 10 employees or fewer
- Annual turnover under 2m euro
- Between 10 and 50 employees
- Annual turnover between 2m & 10m euros
- Between 50 and 250 employees
- Annual turnover between 10m and 50m euros
Insuring an SME
Every business is different and many business owners prefer to work with their brokers to design a package relevant to their needs. As there is no single definition of an SME insurers use different criteria when quoting e.g. turnover, number of employees, whether the company is owner run or a subsidiary of a larger company. This also means it is not always possible to directly company quotes from different companies. The key point to remember is to make sure that the cover is suitable when you take out a policy but keep it updated as circumstances change throughout the year.
UK Government definition of an SME
SME’s provide significant job opportunities across the UK and the Government have claimed that SME’s are the “employment engines of the economy”
The 2006 Companies Act defines a small company as one that does not have a turnover of more than £6.5million, a balance sheet total of more than £3.26 million and does not have more than 50 employees. A medium-sized company is defined as having less than 250 employees and a turnover of under £12.9 million.
Private sector definition of an SME
Yet again different organisations have different definitions e.g. the British Bankers Association defines a small business as sole traders, partnershipsand limited companies with an annual turnover of under £1m
Without a single clear definition it is sometimes difficult for small business owners to categorise their business. The team at Lockyers are here to help with your business insurance, please get in touch to review your risks.