Small businesses have a positive effect on local communities, according to the findings of a new study.
A report by Uswitch has analysed a range of data sources to shed light on the impact that small businesses can have on local economies. Its findings suggest that areas with a greater number of small businesses see more wealth creation and higher employment.
Small firms make up a substantial amount of UK business employment and turnover. The latest figures from the Office for National Statistics (ONS) show that SMEs (with less than 250 staff) accounted for 45% of all UK employees and 44% of UK turnover in 2023. The number of small firms (and their combined turnover) is rising every year, suggesting that small businesses are a growing market, creating more employment opportunities.
The findings of the Uswitch report indicate that local authorities with a higher density of small businesses see lower unemployment benefit claims. In addition, ONS data reveals that many small businesses are outperforming their larger competitors in terms of growth.
For example, ONS figures show that small shops saw sales rise by 5.2% year-on-year between 2022 and 2023, compared to just 2.4% for large retailers. Specifically, small food stores saw a year-on-year sales increase of 11.1%, compared to 8% for larger stores; small clothing businesses saw a rise in sales of 32.9%, compared to 2.9% for larger retailers.
A recent study by Capital On Tap found that 51% of consumers prefer to shop small to support their local community and economy, and 38% felt that small businesses provided better customer service and quality of products.
"It's clear to see that small, local businesses are continuing to grow in popularity with consumers … Shopping at small businesses is more than just a transaction; it's an investment in the community. By choosing local stores, consumers help create jobs, retain money within the local economy and encourage the unique character of their neighbourhoods to thrive." Andy Elder, Uswitch.
How small business owners support their local communities
A recent study by the Federation of Small Businesses (FSB) has also found that many communities have flourished due to the support of local small business owners. Its findings show that:
- 80% of FSB members have volunteered and/or contributed to a local community organisation or charitable cause in the past three years, typically by donating their time (38%) and providing skills, resources and mentoring (32%).
- 27% of FSB small businesses hold a position within their local community.
- 42% of small businesses engage with schools, colleges and youth organisations.
- 41% of small business employers offer work experience.
Written by Rachel Miller.