What is an SME?

Definition of an SME

The phrase ‘SME’ stands for ‘small and medium-sized enterprises’.

SMEs in the UK

The Companies Act 2006 states that for a business to qualify as an SME in the UK it should meet at least two of the following criteria:

• A turnover of no more than £36 million
• No more than 250 employees
• Gross assets (balance sheet total) of no more than £18 million

Qualifying SMEs can be categorised further into:

• micro-businesses
• small businesses
• medium-sized businesses

According to the UK government, micro-businesses have up to nine employees, small businesses have between 10 and 49 employees and medium-sized businesses have between 50 and 249 employees.

In 2020 it was reported that there were 5.94 million SMEs in the UK, which equated to 99.9% of the business population.

SMEs in the European Union

It is worth noting that the EU defines SMEs slightly differently to the UK. For a business to qualify as an SME in the EU it must have fewer than 250 employees, an annual turnover of no more than €50 million and/or an annual balance sheet total of no more than €43 million.