1.2 At the start of 2015, there were 5.4 million businesses in the UK. Over 99% of these were SMEs. Of these, most were micro-businesses, employing fewer than ten people.1 The Office for National Statistics estimates that SMEs create around £35 of gross value added to the UK economy for every £100 of turnover, while larger companies create around £24.2
1.3 Central government spends nearly £45 billion each year on goods and services provided by non-public sector organisations. It estimates that over £12.1 billion of this reaches SMEs. The government defines an SME as an entity engaged in economic activity that:
• employs fewer than 250 people; and
• has annual turnover less than or equal to 50 million euros (£39 million); or
• has a balance sheet total of less than or equal to 43 million euros (£33 million).3
The government's definition includes most voluntary, community and social enterprise (VCSE) organisations.
1.4 The government does not know how many SMEs were awarded government contracts directly in 2014-15. The Cabinet Office's Crown Commercial Service (CCS) collected data from larger providers about spending with SMEs within their supply chains. However, there are gaps in these data so it is not possible to be sure of the actual number of SMEs working for the government, nor the types of SMEs involved.
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1 Department for Business, Innovation & Skills, Business Population Estimates for UK and the Regions, 2015.
2 Office for National Statistics, Annual Business Survey, 2013.
3 European Commission definition, available at: http://ec.europa.eu/growth/smes/business-friendly-environment/sme- definition/index_en.htm