Allica warns established SMEs are declining fastest in areas most reliant on them

Established SMEs are declining fastest in parts of the UK where local economies are most dependent on them for employment, according to new research from Allica Bank.

The bank’s Good Growth Icons report identifies 592,500 established SMEs (eSMEs) – defined as businesses employing between five and 249 people – which collectively employ around 10.7 million people and generate 37% of UK private sector turnover.

However, Allica’s analysis of the latest Office for National Statistics UK business counts data found that growth in the eSME population has stalled over the past three years, with declines recorded across every UK region except London and Northern Ireland.

While the number of eSMEs across the UK increased by just under 7% between 2016 and 2026, London accounted for 44% of the net growth over the decade.

More recently, the South West recorded the largest decline, with its eSME population falling 3.8% over the past three years. Wales experienced a 3.4% reduction and the West Midlands a 3.1% fall, while Northern Ireland recorded growth of just 0.2%, equivalent to around 40 businesses.

Rural economies face greatest exposure

Allica’s research highlights a particular challenge for rural economies, where established SMEs account for a greater proportion of employment but their numbers are declining more quickly.

In the UK’s most rural local authority districts, eSME numbers have fallen 2.3% over the past three years, compared with growth of 1.2% in the most urban areas.

Urban districts were three times more likely than rural districts to have experienced recent eSME growth.

At the same time, eSMEs support an average of 48% of employment in the most rural areas, compared with 33% in the most urban areas.

Some individual local authorities have experienced considerably larger declines. The report found eSME numbers fell 20% in Erewash over the past three years, 18% in Wyre Forest, 17% in Stratford-on-Avon and 16% in Blackpool.

16,300 eSMEs achieve more than 20% growth

Despite the broader decline, Allica argues that established SMEs have significant potential to contribute to economic growth across the UK.

The report estimates that around 16,300 eSMEs increased turnover by more than 20% during the past year.

While these high-growth businesses are disproportionately concentrated in London, around 10,700 are based outside the capital, highlighting what Allica describes as the potential for established SMEs to support investment and employment across the regions.

Richard Davies, CEO of Allica Bank, said: “The Prime Minister has pledged to deliver ‘good growth in every postcode’, and established businesses can make it happen.

“These firms are the engine of regional growth across the UK. They keep local economies running and communities thriving. They may not be the hyper-growth scale-ups that grab the headlines, but they sustain local jobs for decades, often in the very places national growth strategies overlook.

“We urge the Government to put established businesses at the heart of its growth agenda and its mission to deliver good growth in every postcode.”

Allica calls for greater support for established SMEs

Alongside the findings, Allica is calling on the Government to take four stepsaimed at supporting established SMEs and encouraging regional growth.

The bank is calling for a new Scale-up Guarantee under the Growth Guarantee Scheme, providing a 70% guarantee on facilities between £2 million and £5 million for high-growth businesses without sufficient tangible assets.

It also wants adult skills funding to be fully devolved to Strategic Authorities alongside a Growth & Skills Levy pool, with a particular focus on developing AI skills within eSMEs.

Allica is proposing reforms to business owner taxation, including an eSME Reinvestment Relief designed to encourage businesses to reinvest, as well as the creation of regional eSME Growth Forums to give established businesses a permanent role in identifying barriers and shaping Local Growth Plans.