1

SMEs and UK growth:

the opportunity for
regional economies
November 2018
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Table of contents
FOREWORD 3

1: INTRODUCTION 4

2: EXECUTIVE SUMMARY 5

3: SMES AND UK REGIONAL GROWTH 7

Contribution of SMEs to employment and wealth creation 5
Role of SMEs in stimulating innovation and productivity growth 9
Challenges facing SMEs 9
Business survey findings 10
Future scenarios 11
Scenario 1 13
Scenario 2 14
Conclusions 16
 3

Foreword
Small and medium sized enterprises (SMEs) are central issues such as access to talent, building business
to the success of the UK economy, contributing around networks to allow SMEs to learn from each other’s
experience and supporting first time exporters.
60 percent of all jobs and more than half of all turnover
of the private sector in the UK. Helping SMEs grow will The research we have supported has shown that there
boost growth and deliver new jobs in all areas of the are significant regional variations in the importance of
SMEs to regional economies. In areas like Wales, South
country.
West England and Northern Ireland SMEs currently
account for 70 percent of all private sector jobs.
Santander has a presence across the UK. We deliver
banking services to over fourteen million people in the
Business growth and business creation is however,
UK and are an ambitious challenger in the business
stronger in areas such as London and the South East
banking market. This means that we are committed to
and major cities like Manchester and Birmingham.
supporting the growth of SMEs and the impact that they
have on providing new employment opportunities that
Our research has highlighted that a small proportion of
support household incomes in all areas of the UK.
fast-growing SMEs are driving much of the innovation
and growth in the UK economy. There is a major and
We have worked with the economic research
growing subset of SMEs who appear to have no appetite
consultancy Development Economics and the market
for external finance and would prefer to grow more
research company ComRes to help us to build our
slowly than borrow to grow more quickly. Supporting
understanding of the importance of the SME market to
just a small proportion of those SMEs to access finance
the UK economy and what role the banking sector could
and boost their growth would have a significant positive
play in helping SMEs to grow. We have focused on how
impact on the UK economy.
the banking sector can help in delivering a rebalanced
economy by supporting SME growth in areas of the
The banking sector should consider what more can be
country where employment and business growth has
done to ensure that we have both the products and the
been weaker.
strength of relationships to give SMEs more confidence
to consider using external financing. Policymakers
Santander supports the growth of SMEs through the
should consider how changes to the banking market
provision of banking services and providing access to
can encourage the delivery of these changes. Greater
credit to help business invest to grow and manage their
competition will give SMEs more choice.
cash flows. Our support, however, goes beyond the
provision of bank accounts and credit to include support
We hope that this research will help to contribute to a
and advice on business growth.
better understanding of the role SMEs play in the UK
and how the banking sector and policymakers can work
Most importantly, our nationwide network of relationship
together to help them do even more to deliver growth
mangers means that we understand the needs of
for the whole of the UK.
our customers. This has helped us to appreciate the
challenges they face and the support they need to help
their businesses break through barriers to growth.

Our support to growing businesses through our

Breakthrough programme, includes assistance with
4

1: Introduction
The purpose of this study is to assess the importance of SMEs to the
UK economy in general and individual regions in particular. The report
considers the relationship between SMEs and regional growth, the impact
of constraints on SME growth and develops alternative future scenarios
that assess the extent to which SMEs could contribute even more to the
economy in terms of job creation and the generation of economic output.

2: Executive Summary
Job creation: SMEs generate a large portion of jobs in
UK. We found that they contribute around 60% of all
jobs and 51% of all turnover generated by the private
sector and are particularly important to the economies
of South West England, Wales and Northern Ireland,
where they account for over 70% of all private sector
jobs. Since 2011, just over 70% of all new jobs created
across the entirety of the UK economy have been
created by SMEs. The importance of SMEs in creating
jobs has been particularly notable in the largest cities,
such as London, Birmingham and Manchester. Over the
past five years SMEs have created over two million jobs
for the UK economy.
Productivity: Apart from their contributions in
generating jobs and Gross Value Added (GVA) – the
measure of goods and services produced in an area,
industry or sector –the OECD has shown that SMEs
help advanced economies develop and adopt new
technologies and other forms of innovation, which
lead to productivity increases. SMEs operating in high-
value added sectors such as Professional Services and
Information & Communications Services are also a key
component of the UK’s growing ‘knowledge-economy’,
with knowledge clusters in London and major regional
centres, such as Manchester and Birmingham, playing
an increasingly important role.
Constraints to growth: SMEs are currently responsible
for generating around 43% of national economic output.
A review of background literature and the results of a
new business survey commissioned for this report by
Santander both identify that SMEs could be contributing
even more than they do already to the UK economy.
However, they face a series of growth constraints,
including access to and appetite for credit to fuel growth
.
Reluctance to borrow: There is also evidence in the
research that an increasing proportion of UK SMEs can
be regarded as ‘permanent non-borrowers’, meaning
that a large number would rather grow more slowly than
borrow to invest to grow more quickly.
1 2017 prices
5
Competition: The diminished trust and confidence
that many SMEs appear to place in their own bank and/
or the business banking sector more generally could
be mitigated if the SME banking market was subject
to more competition, with the more even distribution
of business banking services to support the growth
of small businesses across the UK, rather than just in
metropolitan centres.
Alternative scenarios: The report considers
two alternative scenarios for the future economic
contributions of SMEs in the UK under a range of
different assumptions about future constraints on
growth and demand and supply conditions for business
credit. Scenario 1 looks at the potential growth for
UK SMEs given the current economic landscape,
whereas scenario 2 looks at the potential effects of
more competition in the business banking market,
which would be delivered by an extensive UK-wide
network. The findings show that, by 2023, UK SMEs
could be generating much more growth, worth around
£23 billion per annum (above annual levels expected
under the business-as-usual scenario). SMEs would also
have the potential to support employment amounting
to an additional 157,000 jobs by 2023 compared to
employment levels expected under the business as
usual scenario.1
6

Under the second scenario there would be expected to
be significant rebalancing of UK growth, particularly in
employment, from London and the South East to the UK
regions. For example, under the second scenario, there
would be expected to be an additional 16,000 jobs creat-
ed by SMEs by 2023 in North West England compared to
the anticipated situation under the first scenario. Other
examples of the regional boost to employment growth
attributable to SMEs expected by 2023 under the second
scenario include:
• an extra 14,000 jobs in South West England;
Rebalancing UK growth: Under the second scenar-
io, the expected increase of GVA occurring outside of
the ‘Greater South East’ by 2023 would amount to an
increase of £11.6 billion, compared to about £11.4 billion
in London, the South East and the East of England. This
means that the ‘Rest of the UK’ is expected to provide
51% of the GVA boost compared to 49% in the Greater
South East. The second scenario would therefore be ex-
pected to provide significant progress towards rebalanc-
ing growth across the UK, by delivering stronger growth
outside the Greater South East.

• 10,000 additional jobs in Scotland;

• 6,000 extra jobs in Wales; and

• 3,000 extra jobs in Northern Ireland.

In addition, under the second scenario we could expect

additional economic output worth £23 billion per annum
generated annually by 2023 at a national level. For North
West England, the expected increase in the size of the
regional economy is expected to amount to over £2.6
billion per annum Other expected increases include:

• increase annual GVA in South West England by £1.8

billion per annum or 3.6%.

• additional GVA in Scotland worth nearly £1.4 billion

per annum or 3.1%.

• extra GVA worth £0.67 billion per annum in Wales or

3.1%

• £0.46 billion per annum in Northern Ireland or 2.4%.

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3: SMEs and UK Regional Growth

Contribution of SMEs to employment and wealth creation

The standard definition of an SME is any business with fewer than 250 employees. The most recent data from the
Government (Office for National Statistics, ONS) is that at the start of 2017 there were just under 5.7 million such
businesses in the UK. The latest data also confirms that SMEs contribute around 60% of all jobs which amounts to 51% of
all turnover generated by the private sector in the UK.

Moreover, ONS data also shows that the contribution of SMEs is growing in importance. Since 2011, just over 70% of all of
the net new jobs created across the entirety of the UK economy have been created by SMEs.

However, SMEs are not equally important for all sectors of the UK economy. For example, in terms of the provision of
jobs, SMEs are of above-average importance to sectors such as Professional Services, Construction, Property Services
and Agriculture. On the other hand, SMEs are of below-average importance for employment in sectors such as Financial
Services and Retail Distribution.

There are also differences in terms of regional patterns of SME contributions. When it comes to employment creation,
SMEs are particularly vital to the economies of South West England, Wales and Northern Ireland, where they currently
account for over 70% of all private sector jobs.

When contributions to economic output, or GVA, are considered, the importance of SMEs to the London economy is
especially notable: in the capital, around 54% of overall economic output is attributable to the activities of SMEs. 2

The above-average importance of SMEs to the creation of wealth in the UK’s largest cities is also evident in places such as
Manchester and Birmingham. This is because larger cities are particularly important locations for ‘knowledge-intensive’
economic activities such as Professional Services and Information & Communications industries. The evidence also
suggests that there are above-average concentrations of SMEs in these high-value sectors, especially in larger cities.

Similarly, SMEs play an especially important role in the UK’s high-value clusters. Business clusters are dynamic networks of
inter-connected companies or organisations operating within specific sectors and in close proximity. Such clusters are also
seen by a high volume of productive interactions between firms of different sizes, where creative and professional people
meet, exchange ideas, and develop innovative products or processes. Such interactions often lead to the formation of new
joint ventures or business enterprises (i.e. new SMEs) between different organisations operating in the cluster.

2 This statistic excludes the contribution of the Financial

Services sector as data is not available from the Office for
National Statistics.
 8

Since 2012 it is estimated that SMEs have been responsible for net employment growth amounting to just over 2 million
jobs across the UK. The largest proportion (355,000 jobs, about 18% of the total) occurred in Professional Services, but other
sectors such as Accommodation & Food Services (292,000 jobs, 14.5%) and Business Support Services (238,000 jobs, 11.8%)
were also important.

SMEs contribution to employment SMEs contribution to business turnover

£824bn

8.7m

10.5m

£1,834bn

£540bn

4m

3.2m £541bn

Micro (0-9) Small (10-49) Medium (50-249) Large (250+) Micro (0-9) Small (10-49) Medium (50-249) Large (250+)

The strongest area for net job growth attributable to SMEs was London with 527,000 jobs created, 26% of the total. South
East England contributed a further 304,000 jobs (15% of the total).

Another important aspect of the UK’s SME landscape is the extent to which new businesses are established. Data on
business start-up rates are gathered annually by the ONS: the data reveals that in 2016, just over 414,000 new businesses
started across the UK. Of these, slightly over 102,000 – nearly a quarter – were founded in London.

Furthermore, when considered on a ‘per capita basis’ (i.e. taking into account the relative sizes of each region’s economy), by
far the highest regional business start-up rate is found in London, where the rate of formation is over 71% higher than the
overall UK average start up rate. On the other hand, the start-up rate in Northern Ireland is only about half the UK average,
and start up rates in Wales, Scotland and North East England are also much lower than the national average.

Apart from the importance of London as a hot-bed for new business formation, on a sub-regional basis it is also notable
that larger cities in the various regions (such as Manchester, Birmingham, Southampton and Leicester) are also important
centres for new business creation, with each possessing a level of per capita entrepreneurship that is much higher than their
respective regional averages, with the rates also comparing well with the national average.
 9

Role of SMEs in stimulating innovation and productivity growth

As well as their contributions to generating jobs and GVA, SMEs are shown to play a role in helping advanced economies
develop and adopt new technologies and other forms of innovation and productivity increases. They contribute directly
through their above-average levels of activity in sectors such as Professional Services and Information industries, and
indirectly through increased competitive pressure on larger and other incumbent firms.

However, it has been estimated that of the 5.7 million SMEs in the UK, the number of ‘high growth small businesses’ – defined
as businesses that employ more than 10 people and which experience more than 20% growth in employee numbers
over a minimum of three years – amounts to only around 1% of this population, i.e. around 10,000 businesses in total.3
This suggests that only a very small proportion of the overall SME population is driving much of the innovation and growth
occurring in the UK economy.

Challenges facing SMEs

Various reports have found constraints on the more ambitious UK SMEs in achieving their growth potential. For example,
the Scale-Up Report commissioned by the UK Government and published in 2014 identified four key constraints: (1)
Leadership challenges; (2) access to talent and skills; (3) constrained access to capital; and (4) internationalisation and
innovation challenges.

Following this, an important theme of this report is on the third of these: access to finance. Although there has been a
marked improvement compared to the restrictive conditions between 2008 and 2012, nevertheless, problems remain.
For example, the SME Finance Monitor (September 2018) indicates that there has been a significant increase (compared
to 2011) in the proportion of SMEs in the UK that can be identified as ‘permanent non-borrowers’, meaning they appear to
have no appetite for external finance.4

Furthermore, responses to the Monitor’s questionnaire revealed that nearly three-quarters (73%) of SMEs interviewed
said that they would rather grow more slowly than borrow to grow more quickly. This pattern may be related to a general
lack of trust in the banking sector. We found that 1 in 10 SMEs do not have confidence in their own bank, and over two-
fifths of SMEs report a lack of trust in the banking sector. However, despite this, most SMEs do have trust in their bank.

3 Enterprise Research Centre (2016), The UK’s Productivity

Challenge, pages 14-15

4 BDRC, SME Finance Monitor 2018Q2, September 2018. The

SME Finance Monitor is based on a quarterly survey of 4,500
UK SMEs and has been running since 2011.
10

Business survey findings

o explore growth constraints a bit further, a new survey of 1,200 UK SME business owners and decision makers with
fieldwork was undertaken by ComRes during September 2018.

When asked about the main barriers to business growth, SMEs were most likely to report the competitiveness of their sector
(31%), uncertainty surrounding Brexit (29%), and a perception that the market within which they operate is not growing
(18%). Access to investment for expansion was cited by only 10% of SMEs as being a barrier to business growth.

We don't experience any barriers

Other (6.2%) to growth (18.4%)

Lack of access to technology (3%)

Infrastructure problems (4.5%)

Advice and support about how

to export (1.8%) Sector is highly competitive (30.8%)
Advice and support about how to What are the
grow the business (6.3%) main barriers to Uncertainty about Brexit (29.4%)
Access to investment for your business
expansion (10.1%)
growing? The market in my sector isn’t growing (17.8%)

Uncertainty about a change Difficulties in employing Taxes or government regulation (16%)

of government (12%) people with the right skills
(15.5%)

In addition, one-in-five (19%) of respondents said that their business had experienced serious financial difficulties at some
stage. Of those SMEs that had experienced times of financial difficulty, three in ten (29%) reported that their business’
bank was overall unsupportive during this time, while two in five (39%) said that the bank was supportive.

Among those SMEs who anticipate growing significantly in the next 12 months, more than a third (37%) say that their bank
has been unable to provide the help they needed to grow quickly, while 23% said that their business’ bank has been able
to help ‘a little’.
 11

Fast-growth
Business Survey Results:

37% 23% 34%

say that their bank has said that their business’ of SMEs reported that they
been unable to provide any bank has been able to help would like their bank to offer
help they needed to grow ‘a little’ more help to enable them to
quickly grow more quickly

Additionally, around one-third (34%) of SMEs reported that they would like their bank to offer more help to enable them to
grow more quickly.

Future scenarios

The report considers two alternative scenarios for the future economic contributions of SMEs in the UK, through a range
of different assumptions about future constraints on growth and demand and supply conditions for business credit. The
timeframe for the scenarios is 2018-2023.

The first scenario, the ‘Reference Case’, assumes that investment by UK SMEs continue along their recent and currently
forecast short-to-medium term future trajectories. The Reference Case scenario essentially assumes ‘business as usual’
carries on among UK SMEs. It assumes that business credit demand and supply conditions continue to operate at levels
similar to those prevailing in 2017-2018.

The second scenario – ‘Enhanced SME Growth’ – assumes that the existing national provision of Financial Services to
the UK’s SMEs is supplemented by the entry of a new national full-service provider delivered through a national branch
network that would provide enhanced levels of business banking services to SMEs across all UK regions.
12

Examples of the types of financial services that could be offered to SMEs across all UK regions under the second scenario
might include the following:

• Easier access to tools enabling improved cash flow management;

• Enhanced integration of business banking with clients’ accounting software;

• Access to a national banking relationship management network;

• Enhanced business current account functionality;

• Improved access to growth finance; and

• Full access to trade-related banking services, such as improved access to trade finance and
foreign exchange services.

The provision of improved service offering on the part of a new entrant might also be expected to result in incumbent
service providers enhancing their own service offerings, thereby producing a sector-wide improvement in financial
services provided to UK SMEs.

We expect that the provision of an enhanced range of Financial Services to SMEs through a regional branch network
under the second scenario would help address a number of supply and demand side constraints that influence
the appetite for credit among the UK’s small and medium-sized businesses. For example, it would help address the
reluctance of many SMEs to consider bank lending to fuel future growth and reduce the proportion of SMEs that are
permanent non-borrowers, as well as help to decrease the proportion of SMEs who say that they would rather grow
more slowly than borrow to grow.

The entry of a new full-service business banking provider with national scale and infrastructure would also deliver better
rates of investment on the part of growth-orientated SMEs by unlocking and/or accelerating investment decisions that
are being held up by constrained access to finance. It could also help to lift SME growth rates by improving rates of
access to new markets, particularly export markets for goods and services produced by SMEs. It is also likely to enhance
SME productivity by improving the efficiency of internal processes and management of resources through more
accurate information and access to enhanced software and business management tools.
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Scenario 1
Under the Reference Case scenario, annual GVA from UK SMEs is expected to grow by about £66.7 billion
per annum by 2023 in real terms, to about £758 billion annually.5 This is an increase of 9.7% in real terms
compared to the position at the start of 2017. About 43% of this increase is expected to come from two sectors:
Professional Services and Business Support Services. About 56% of growth is expected to occur in London, the
South East and the East of England.

Furthermore, under Scenario 1, employment contributions by SMEs by 2023 would be expected to increase
by 682,000 jobs compared to 2017 levels. Overall SME employment contribution would be expected to reach
16.827 million jobs by 2023, which is a 4.2% increase compared to the 2017 baseline position. The largest shares
of this growth would be expected to come from Professional Services, Business Support Services, Information
& Communications, and Accommodation & Food services. Around 50% of growth is expected to take place in
London, the South East and the East of England.

Of that growth London is expected to contribute around 24% of overall growth (165,000 of the total expected
UK increase of 682,000 jobs). A further 14.9% is expected to be contributed by the South East (102,000 jobs) and
11.5% is expected to be contributed by the East of England (78,000 jobs).

Scenario 2

Although the contributions of SMEs under Scenario 1 would be large and important, they are less than could be
delivered if growth constraints were addressed. This is what Scenario 2 aims to offer, and through this shows the
potential to rebalance UK economic growth, with stronger SME growth in the UK regions other than London and
the ‘Greater South East’.

Overall, under Scenario 2 annual GVA attributable to UK SMEs is expected to grow by about £89.7 billion per
annum in real terms by 2023, to just under £781 billion. This is an increase of 13.0% in real terms compared to
the 2017 position.

The overall annual increase in GVA generated by SMEs under Scenario 2 by 2023 amounts to about £89.7 billion
per annum This compares to an increase of £66.7 billion by 2023 predicted under Scenario 1. The increase in
annual GVA delivered by SMEs under Scenario 2 by 2023 is about £23.0 billion per annum greater than under
Scenario 1, which is an uplift of around 3.0%.

The predicted GVA results for 2023 under Scenario 2 show a stronger comparative performance of the North
of England, South West England and also of Wales, Scotland and Northern Ireland. For example, whereas the
national increase in GVA per annum expected under Scenario 2 (compared to Scenario 1) is 3.0%, for South West
England the anticipated increase is 3.6%, and for the North East the increase is 3.5%. In the case of Northern
Ireland, the annual increase in GVA is expected to amount to £465 million per annum by 2023, which is an
increase of 2.9% compared to Scenario 1.

5 Due to the lack of available baseline GVA data, this prediction

excludes the potential contribution from SMEs operating in the
financial services sector
14

Turning next to employment, under Scenario 2 the predicted aggregate SME employment levels across the UK
would be expected to reach 16.98 million by 2023, an increase of 839,000 jobs compared to the 2017 baseline
position. This represents a 5.2% increase compared to the 2017 baseline. By comparison, under Scenario 1 the
2023 employment level is predicted to increase by 682,000, so Scenario 2 is expected to deliver an uplift in jobs
amounting to 157,000 in total.

The largest sectoral contributions to the predicted uplift of 157,000 jobs by 2023 (when Scenario 2 is compared to
Scenario 1) are anticipated from Professional Services (about 23% of the total); Business Support Services (16%);
the Hospitality sector (11%) and Information & Communications (also 11%).

Although the ‘Greater South East’ (including London) is still expected to be the dominant driver of SME
employment growth, its proportion of total growth would be slightly lower. In contrast the contributions of regions
in the North of England, and also from the Wales, Scotland and Northern Ireland is also expanded under the
second scenario.

We see that under Scenario 2 London provides about 21% of SME jobs growth. Lower than the nearly 24% under
Scenario 1. Northern Ireland, on the other hand, would be expected to gain an extra 3,000 jobs under Scenario 2
compared to Scenario 1. Under the second scenario, Northern Ireland would provide 1.7% of the overall national
gain in employment expected under this scenario, which is an increase compared to the 1.5% anticipated under
Scenario 1.
15
 16

Conclusions
SMEs are a vital source of jobs and economic output for the UK economy, especially in knowledge intensive sectors such
as Professional Services, and Information & Communications Services. They are also important sources of innovation and
productivity growth throughout the economy, both directly and indirectly through emulation and competitive effects on
larger players in key industries.

However, there is consistent evidence that growth-orientated SMEs are constrained in achieving their potential through
limited access to credit and other forms of support from their bank. There is also evidence that an increasing proportion
of SMEs are reluctant to borrow and would rather constrain their growth rather than take on borrowing. If just a portion of
these business had access to products and support from their banks which would give them more confidence to borrow
the impact on SME growth rates would be significant.

The diminished trust and confidence that many SMEs appear to place in their own bank and/or the business banking
sector more generally could be mitigated if the SME banking market was subject to more competition, with the more even
distribution of business banking services to support the growth of small businesses across the UK. Scenarios developed
for this study that have explored the potential effects of enhanced competition in the business banking market through an
extensive UK-wide network has identified that, by 2023, UK SMEs could be:

• generating additional annual economic output (GVA) worth around £23 billion per annum (2017 prices)
over and above annual levels expected under the business-as-usual scenario; and

• supporting additional direct employment amounting to an additional 157,000 jobs by 2023 compared
to employment levels expected under the business as usual scenario.

The scenario results show that the removal of barriers to growth and an increase in the quality of business banking
support for small businesses in regional areas will have significant benefits for regional economies. Indeed, this study
shows a proportionate reweighting of UK growth from London to the UK regions.

Enhanced competition in business banking services is expected to produce both an increased supply of business finance
products to SMEs, and also to boost the appetite for finance to stimulate growth amongst SMEs that are currently
reluctant to borrow to fuel growth.

In terms of regional competitiveness and economic outcomes, this could be seen in the following:

• Under the second scenario, a significant uplift would be expected (compared to the Reference Case scenario 1)
in levels of business turnover generated by SMEs in areas such as the North of England and in the South West.
An improved level of aggregate business revenue performance is also expected among SMEs located in Wales,
Scotland and Northern Ireland. The contributions of SMEs located in the same areas towards economic output
(GVA) is expected to be stronger under the second scenario.
 17

• The increase in SME business turnover – and associated GVA – under the second scenario would be expected because
of the enhanced availability and improved take-up of financial products and services by a larger number of SMEs that
have higher growth potential and above-average growth ambition. This would be delivered through an extensive full-
service branch network covering all nations of the UK and associated investment in client relationship methods that
would be expected to help increase the appetite for financial products to fuel otherwise unrealized growth potential.

• Although London and the South East are expected to continue to enjoy the greatest share of job growth under the
second scenario, the comparative performance of the more peripheral regions is expected to be significantly improved
by enhanced competition for the provision of banking services to SMEs. Under the second scenario, the relative shares
of overall employment expected to accrue to regions such as Northern Ireland, Wales, South West England are all
greater than is the case under a Reference Case scenario where levels of competition in the business banking sector
remain unchanged.

Under the second scenario, there would be expected to be an additional 16,000 jobs created by SMEs by 2023 in North
West England compared to the anticipated situation under the first scenario. Other examples of the regional boost to
employment growth attributable to SMEs expected by 2023 under the second scenario include:

• an extra 14,000 jobs in South West England;

• 10,000 additional jobs in Scotland;

• 6,000 extra jobs in Wales; and

• 3,000 extra jobs in Northern Ireland.

18

In addition, under the second scenario there would also be expected to be additional economic output worth £23 billion
per annum generated annually by 2023 at a national level. For North West England, the expected increase in the size of
the regional economy is expected to amount to over £2.6 billion per annum Other expected increases include:

• a boost to annual GVA in South West England worth over £1.8 billion per annum.

• additional GVA in Scotland worth nearly £1.4 billion per annum.

• extra GVA worth £0.67 billion per annum in Wales and £0.46 billion per annum in Northern Ireland.

• a stimulus for the re-balancing of the future performance of the UK’s regions.

SMEs and UK growth:

The opportunity for regional economies

Scotland North East

1.90% 0.77% 1.73% 0.65%
1.36% 0.61% 1.26% 0.51%

Turnover Job Growth Turnover Job Growth

North West Yorkshire & Humber

1.80% 0.71% 1.77% 0.69%
1.32% 0.57% 1.30% 0.55%

Turnover Job Growth Turnover Job Growth

Nothern Ireland East Midlands

1.84% 0.62% 1.62% 0.67%
1.25% 0.50% 1.30% 0.55%

Turnover Job Growth Turnover Job Growth

West Midlands East

1.65% 0.69% 1.84% 0.86%
1.32% 0.57% 1.46% 0.71%

Turnover Job Growth Turnover Job Growth

Wales London
1.83% 0.73% 1.94% 0.95%
1.33% 0.58% 1.56% 0.81%

Turnover Job Growth Turnover Job Growth

South West South East

1.70% 0.61% 1.73% 0.76%
1.22% 0.47% 1.39% 0.64%

Turnover Job Growth Turnover Job Growth

Current projections A more competitive business banking market
 19

Specifically, under the second scenario, the expected increase is GVA occurring outside of the ‘Greater South East’ by
2023 would amounts to an increase of £11.6 billion, compared to about £11.4 billion in London, the South East and the
East of England. This means that the ‘Rest of the UK’ is expected to provide 51% of the GVA boost compared to 49% in
the Greater South East. The second scenario, therefore, would provide significant progress towards rebalancing, as under
Scenario 1 the latter area accounts for 51% of the overall GVA expected to be produced by the UK during 2023 under that
scenario.

Therefore, the provision of additional competition in business banking services to SMEs would be expected to provide a
significant boost to regional economic competitiveness, and as such would constitute a stimulus for the re-balancing of
the future performance of the UK’s regions.
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