Official Statistics

Small Business Survey 2023: panel report

Published 24 October 2024

1. Headline findings

The findings reported below relate to the group of firms that responded to the 2020, 2021, 2022, and 2023 surveys and cover only a selection of the variables included in the Longitudinal Small Business Survey (LSBS).

Adopting this ‘panel’ approach allows us, for example, to explore whether businesses that expressed significant growth expectations subsequently achieved these. For the same group of firms, the panel means we can also trace the volatility in business outcomes in the post-pandemic period.

The panel data confirms that sustained growth over the period 2020 to 2023 was uncommon. Only 14.5% of firms achieved sustained growth over all 4 years. In each year, expectations of employment growth were also unrealised for most of the panel businesses. For example, expected growth was achieved in 2023 in around half (49.3%) of businesses that reported such expectations in 2022.

Looking at the factors which might drive business growth, the most consistent relationship was that firms that provided training for their employees tended to report a higher likelihood of improved performance outcomes in terms of both employment and turnover than businesses that did not report providing training.

Looking in more detail at the panel of businesses suggests:

• employment increased in 27.2% of firms in 2020, 36.1% in 2021, 24.3% in 2022 and 29.5% in 2023. Employment growth varied widely between regions
• the proportion of businesses reporting increased sales rose sharply after 2020 (21.2%) reaching 46.7% in 2021 and 55.6% in 2022. Subsequently, it fell slightly to 43.5% in 2023
• in 2020, 20.4% of firms in the panel reported exporting either goods or services. This proportion fell slightly to 20.1% in 2021, 19.0% in 2022 and 17.6% in 2023
• around two-thirds (63.1%) of businesses in the panel had no imports from either EU or non-EU countries in 2020. Around 9 out of 10 of these businesses (93.0%) continued to have no imports in 2023
• the proportion of firms reporting either product or service innovation was 32.2% in 2020 and has fallen year-on-year to 30.6% in 2023
• around a quarter (24.1%) of the longitudinal sample sought business support in 2020. By 2021, this had risen to 25.8%, 26.8% in 2022 and 27.3% in 2023
• the majority of firms providing training in 2020 continued to do so in 2022 (77.8%), and more than four-fifths of this proportion (86.5%) continued to do so in 2023
• the proportion of firms regarding EU exit as a major obstacle increased from 23.5% in 2020 to 31.3% in 2021, 29.7% in 2022 and 30.0% in 2023

2. What you need to know about these statistics

The statistics in this report cover the period from 2020 to 2023 and follow a panel of 1,285 businesses from across the UK. These businesses have taken part in all 4 waves of the LSBS conducted during this period.

The survey covers all industries and the full range of Small and Medium Enterprise (SME) sizes, including unregistered businesses that are often excluded from official surveys and all other businesses that employ up to 249 people. Three large businesses with 250 or more employees are included in this panel, because they were SMEs in 2018. Because the survey has been explicitly designed to allow for longitudinal analysis, many questions are repeated across the years.

In this report, when we refer to business size, this is defined entirely in terms of number of employees. Levels of turnover or assets are not part of our definition, though there are definitions of business size which include these.

We have survey weights that can be used in analysis of the panel which make the weighted panel representative of the UK SME population in 2020, though this will be representative in terms of business size, country and broad industrial sector only, and not necessarily in terms of behaviours and performance.

In this report, some of the analysis is based on the unweighted data, and in any event the panel should not be thought of as representative of the wider business population, especially when looking at changes in certain variables over time.

The unweighted panel is described as ‘balanced’ in this report, to remind you that the distribution of business sizes is fairly even within the panel – there are comparable numbers of panellists in each size category, even though in the actual SME population smaller businesses are more common.

3. Introducing the LSBS Longitudinal Sample

3.1 Introduction

In this report, we provide an overview of data drawn from the most recent 4 years of the LSBS. In keeping with the overall objective of the LSBS, to explore the causal influences on small businesses growth and performance, we examine both key trends in the data, as well as the relationships between business growth and some of its precursors.

We explore whether businesses which expressed significant growth expectations subsequently went on to achieve these. We also briefly consider the factors associated with sustained growth.

For the purposes of the analysis in this report, it is important to bear in mind that in each table we are considering the responses of the balanced panel of 1,285 businesses that participated in the survey in each of the years 2020, 2021, 2022 and 2023. In practice, it is possible to analyse panels spanning different numbers of years.

This report is based on a panel covering just 4 years. This has several advantages; not the least of which is that the panel is larger, and hence more reliable, than it would be if a longer period had been used.

LSBS is designed to be representative of the SME population and each cross-sectional survey is weighted to provide representative results. Ensuring representativeness in each year is more difficult when considering the type of longitudinal sample used here, as this would require different weights to be applied to each observation in each year.

This approach is feasible but may distort any year-on-year comparisons in the behaviours or performance of our balanced panel of businesses. Therefore, we have adopted a procedure of weighting the balanced panel to be representative of the SME population in 2020 and retained those weights for 2021, 2022 and 2023. Year-on-year changes in behaviour or performance observed therefore reflect differences in businesses’ responses rather than any change in weighting.

Table 1 compares key performance indicators for the panel sample of businesses - those that responded in all 4 LSBS waves (2020, 2021, 2022 and 2023) - with the non-panel sample, that is businesses that were interviewed in the first year (2020) but did not respond consistently in other years. Panel firms are seen to differ from non-panel firms in several respects. They are significantly more likely to be aiming to grow their business, to be exporting, innovating and accessing business support. The proportions of women-owned businesses are very similar in the panel to those in non-panel firms.

Minority ethnic group-owned (MEG-owned) firms are under-represented in the panel. As such the panel results are not strictly representative of the business population as a whole. Panel analysis is critical, however, in enabling us to understand the year-to-year experience of the group of panel businesses and how business activities in a given year relate to subsequent performance. More representative results for the SME population are reported in the 2023 reports on businesses with and without employees.

Table 1: key differences between the panel and the overall SME population

	Non-panel firms	Firms in the longitudinal panel
Percentage of firms:	N=6,351	N=1,285
Aiming to grow turnover (3 years)	74.5***	82.3
Women-owned firms	20.8	18.8
MEG-owned firms	4.3***	3.0
Exporting firms	21.5***	25.4
Innovating firms	30.5	32.6
Accessing business support	25.1*	27.6
Accessing external finance	10.3	11.6
Providing training	56.5	54.4

Notes for Table 1: comparison relates to firms inside and outside the longitudinal panel in 2020.

*** indicates significant difference at the 1% level

** significant difference at the 5% level and * at the 10% level.

Observations are unweighted and are therefore unrepresentative of the population of firms.

Businesses in the LSBS panel sample are interesting for a number of reasons. These businesses allow us to see how their attitudes, behaviours and performance have changed over the 4-year period. In addition, we can see associations between these attitudes and business behaviours and subsequent, potentially lagged, impacts on business performance.

The group is special, however, both in terms of their survival and their willingness to respond to repeated requests for information. Their survival may mean that our respondent businesses are, in some sense, ‘stronger’ than the average business. It is difficult to know specifically how any response bias is likely to work in influencing businesses’ responses.

In any case, the panel sample offers valuable insights as to how businesses respond to changes in a dynamic economic setting, while data from cross-sectional surveys can only provide snapshots.

Macroeconomic conditions and the political environment during each survey may influence businesses’ responses, particularly indicators of ambition or anticipated growth. Approximately half of the 2020 survey took place post EU exit but during the transition period. The remainder of the 2020 and later surveys were undertaken after EU exit and the onset of the pandemic, and the associated restrictions on social and economic activities. The 2022 and 2023 surveys were conducted during a period of increasing cost pressures see (Figure 1 Input and Output producer price index values).

Other firm-specific aspects of our longitudinal sample of businesses are more stable; particularly those related to the ownership background of the businesses. For example, 18.6% of our longitudinal sample of companies were women-owned in 2020.

However, this proportion varied significantly by sector: in 2020, 42.6% of ‘other services’ businesses are women-owned compared to only 10.0% of businesses in Production and Construction. These proportions remain stable across the period covered by this report.

One other aspect of the longitudinal sample worth considering is whether some year-on-year differences are due to the maturing process in the respondent businesses. In 2020, 52.3% of the businesses in the longitudinal sample had been established for more than 20 years and only 4.9% were less than 5 years old. In 2023, these proportions were 60.3% and 1.3% respectively. None of the retained sample of businesses in 2022 can be less than 4 years old, although the overall age structure of panel businesses reflects that relatively closely in the general population of small firms.

4. Structure of the report

The LSBS contains a wide range of data on SME characteristics and performance, and this report provides a selective overview of the movement and interaction of some of the key indicators.

Each table is based on the same group of businesses in the longitudinal sample, and therefore provides an indication of changing strategy, business behaviours and performance among that group of businesses.

Beyond this, the analysis also shows associations, if not necessarily evidence of causality, between business behaviours and subsequent performance.

The sections are as follows:

• trends in the drivers of SME growth: which focuses on a range of variables which previous research studies have linked to business growth and productivity including exporting, innovation, training, use of business support and access to finance. The section considers how these changed during the 4 years of the longitudinal sample
• growth and expected growth: what proportion of SMEs seek and anticipate growth? Are these expectations realised? How do the factors considered in the previous section influence whether businesses are able to sustain growth from year to year?
• ambition and future growth plans: focusing on businesses’ growth ambitions over a longer horizon
• detailed tables: with weighted estimates for some key measures for the panel using our longitudinal weights

5. Trends in the drivers of SME growth

5.1 Introduction

In this section we consider the influence of a range of factors normally assumed to shape business performance, comparing these with the actual experiences of the panel business. Specifically, we delve into key aspects of SMEs’ paths to growth associated with innovation and export performance, external finance acquisition, use of business support and employee training.

The 4-year window available for observing the 1,285 UK SMEs which comprise the LSBS balanced panel offers interesting insights into their behaviours and strategic dynamics over a period spanning the aftermath of the COVID-19 pandemic and the subsequent period of cost inflation and higher interest rates.

5.2 Innovation

In the LSBS, businesses are asked a series of questions about their innovation activities, including their adoption of product or service innovations.

This question is aligned with the UK Innovation Survey and the OECD Oslo Manual and asks about businesses’ innovation activity in the 3-year period prior to the survey. The proportion of firms reporting either product or service innovation was 32.2% in 2020 and has fallen year-on-year to 30.6% in 2023 (see Figure 1).

Figure 1: percentage of firms reporting product or service innovation over the period 2020 to 2023

Note for figure 1: responses are weighted.

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5.3 Exporting

The weighted data shows that in 2020, 20.4% of firms in the panel reported exporting either goods or services. This proportion fell marginally to 20.1% in 2021, 19.0% in 2022 and 17.6% in 2023.

Figures 2 and 3 show that the majority of SMEs in the panel that reported exports in 2020 persisted in exporting in 2022 (83.5%) and 2023 (91.2% of the 2022 proportion). It is perhaps interesting to note that of the 54 businesses (16.5%) that had ceased their exporting activities in 2022, more than two-fifths (40.7%) had resumed exporting again by 2023.

Figure 2: exporters persistence for the period 2020 to 2023

Notes for Figure 2: using businesses that exported in 2020 as the starting point. Arrows indicate year-to-year transitions between groups. Darker boxes indicate businesses continuing to export, lighter ones indicate non-exporting businesses. 2021 has been omitted for presentational purposes. Based on unweighted data.

Figure 3: exporters and non-exporters for the period 2020 to 2023

Notes for Figure 3: using all panellists as the starting point. Based on unweighted data.

5.4 Imports

Complementary to exporting activities, imports amongst UK SMEs present an interesting pattern of change (see Figure 4).

Out of the 14.9% of businesses in the panel which reported imports exclusively from EU countries in 2020, a half of them (50.0%) continued to import goods and services only from the EU in 2023, while 13.6% of them had diversified and sought goods and/or services from both within and outside the EU by 2023. Around two-thirds (63.1%) of businesses in the panel had no imports from either EU or non-EU countries in 2020. Around 9 out of 10 of these businesses (93.0%) continued to have no imports in 2023.

Figure 4: import persistence for the period 2020 to 2023

Notes for Figure 4: arrows indicate year-to-year transitions between groups. Dark blue boxes relate to imports from the EU only; mid-dark to imports from outside the EU only; mid-light to imports from the EU and externally; and light blue no imports. Figures for 2023 relate to the cohort of firms (N=160) asked the importing question in 2020.

5.5 External finance

External finance, whether debt or equity, has often been linked to business growth and performance. In the LSBS, respondents are asked whether they have sought external finance, whether this was debt or equity (but excluding any COVID-19 related grants, loans or support from the furlough scheme) in the 12 months prior to the survey.

The weighted proportion of firms in the panel using external finance varied somewhat between 2020 and 2023. Specifically, 10.3% of businesses in the longitudinal panel acquired external finance in 2020, falling to 7.8% in 2021, before increasing somewhat to 11.7% in 2022 and 12.5% in 2022.

Figure 5 shows the reasons businesses gave for not seeking external finance. The relative significance of these factors remains fairly stable throughout the period up to 2023. Uncertainty and risk remain the most important factors driving businesses’ decisions not to seek for external finance.

The proportion of SMEs in the panel reporting not wanting to take on additional risks rose from 40.1% in 2020 to 51.3% in 2021, before falling to 35.0% in 2022 and 29.9% in 2023.

Figure 5: main reasons for not seeking external finance, 2020 to 2023 - percentages

Notes for Figure 5: unweighted estimates, each year’s percentages based on number of panellists not seeking finance that year

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5.6 Business support

Another important theme in LSBS is business support. Respondents are asked whether, in the last 12 months, they have sought ‘external advice or information’ on matters affecting their business which involved more than a ‘casual conversation’.

The panel data shows a steady increase in the proportion of SMEs using business support between 2020 and 2023. Weighted data suggests that around a quarter (24.1%) of the longitudinal sample had sought business support in 2020. By 2021, this had risen to 25.8%, 26.8% in 2022 and 27.3% in 2023 (Figure 6).

Figure 6: percentage of firms accessing external business support over the period 2020 to 2023

Notes for Figure 6: responses are weighted.

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5.7 Training

Employee training is considered an important driver of productivity gains and business growth. In 2020, the weighted data suggests that 44.6% of the overall panel of SMEs reported investing in employee training. This proportion fell to 43.4% in 2021 before recovering to 48.1% in 2022 and 47.2% in 2023. These changes may be related to the impact of COVID-19 disruption and changing work patterns.

The majority of firms providing training in 2020 continued to do so in 2022 (77.8%), and more than four-fifths of this proportion (86.5%) continued to do so in 2023. However, 22.2% of those who provided training in 2020 did not do so in 2022, but more than half (51.4%) of this proportion did so in 2023 (see Figures 7 and 8).

Figure 7: training investment commitment for the period 2020 to 2023

Notes for Figure 7: using businesses that provided training in 2020 as the starting point. Arrows indicate year-to-year transitions between groups. Darker boxes indicate businesses continuing to provide training. Lighter boxes indicate a firm not providing training. 2021 has been omitted for presentational purposes. Based on unweighted data.

Figure 8: training investment commitment for the period 2020 to 2023

Notes for Figure 8: using all panelist employers in 2020 as the starting point. Based on unweighted data.

5.8 Associations between business behaviours and future performance

Table 2 describes how firms in the panel that reported a range of business behaviours that are generally considered to be associated with growth in 2020 subsequently performed in terms of employment and turnover growth in 2021, 2022 and 2023.

For each of the 5 behaviours considered, performance outcomes in firms that reported such behaviours in 2020 are compared to the outcomes in those firms that did not report these behaviours in that year.

Table 2: business behaviours and subsequent performance

Year	2020	2021	2021	2022	2022	2023	2023
Description	Number of businesses	Increased employment %	Increased turnover %	Increased employment %	Increased turnover %	Increased employment %	Increased turnover %
Innovation	419	39.5	47.9	26.8	56.4	31.4	48.1
No innovation	866	34.5	46.1	23.2	56.1	28.6	40.9
Accessed capital	147	34.5	44.4	27.6	68.6	38.2	45.5
Did not access capital	1125	36.6	46.9	24.0	54.7	31.4	43.2
Provided training	692	40.1	47.1	32.9	60.3	33.8	48.6
Did not provide training	580	30.8	46.4	18.3	51.7	26.4	39.4
Exported	327	39.0	49.6	27.8	52.9	34.5	47.2
Did not export	958	35.4	54.9	23.4	57.1	28.2	42.2
Used business support	351	39.6	47.1	32.9	60.8	29.4	47.4
No business support	952	35.1	46.7	21.7	54.8	29.6	41.8

Firms that undertook innovation in 2020 generally performed somewhat better than those that did not.

Firms that accessed external capital in 2020 were more likely to report gains in employment and turnover in 2022 and 2023. However, in 2021 the opposite pattern is observed.

The most consistent relationship was that firms that provided training for their employees tended to report a higher likelihood of improved performance outcomes in terms of both employment and turnover than businesses that did not report providing training.

Throughout this period, there is little consistency in the relationship to exporting. In some years, non-exporting firms outperformed exporting businesses.

Firms that used business support generally outperformed those that did not in terms of turnover and employment growth.

6. Growth and expected growth

6.1 Introduction

A key theme in the LSBS is business growth, measured by employment and sales. In this section we profile the growth performance of our longitudinal sample of businesses over the period 2020 to 2023.

We then consider how their growth expectations have changed and finally we consider whether their growth expectations were actually achieved.

One of the strengths of the longitudinal data available as part of the LSBS is that it provides a means to relate businesses’ aspirations and expectations of growth to subsequent performance outcomes. Again, it is important to acknowledge that this is an analysis based on a balanced panel of respondents and may be subject to biases either due to survival and non-survival and/or patterns of non-response.

6.2 Profiling SME growth

The LSBS asks questions about levels of employment and turnover, and whether these have changed over the year prior to the survey. We consider each measure in turn.

Detailed tables are included later in the report. Clearly, the 2020 and 2021 data need to be understood in the light of challenging conditions created by the COVID-19 pandemic.

Many businesses in our longitudinal sample report no change in employment each year (see detailed data Table 8). These proportions increased in the first 3 years of the panel before falling marginally in 2023: 38.9% in 2020 to 40.2% in 2021 and 50.6% in 2022 before falling slightly to 47.0% in 2023. This fall reflects a variable proportion of firms which increased employment over this period: 27.2% of firms increased their employees in 2020, 36.1% in 2021, 24.3% in 2022 and 29.5% did so in 2023.

Within this, there are notable variations in the proportions reporting growth by region. For example, 36.9% of businesses based in the East Midlands reported employment gains in 2023 compared with just 21.4% in the North East (see detailed data Table 12).

LSBS asks a similar question relating to turnover growth of businesses over the year prior to the survey and again asks businesses to indicate whether their sales have increased, decreased or remained the same (see detailed data Table 11).

Overall, there is a sharp increase in the proportion of businesses reporting sales increases in 2020 (21.2%), reaching 46.7% in 2021 and 55.6% in 2022. Subsequently, it fell slightly to 43.5% in 2023 (see detailed data Table 11). This trend is relatively consistent across business sectors (see detailed data Table 14). Again, it is important that these data are understood in the context of the COVID-19 pandemic.

However, there are notable spatial variations. For example, Scotland and Wales reported particularly low proportions of businesses experiencing turnover growth in 2020 before showing marked increases in subsequent years (see detailed data Table 13). Small and medium sized businesses in the panel were consistently the most likely to report turnover growth (see detailed data Table 11).

6.3 Expected growth over the next year

The LSBS also asks businesses about expected changes in their employment and turnover over the next 12 months. The response to this question inevitably reflects the respondent’s own assessment as well as the broader context within which the firm operates.

In 2021, 27.1% of businesses in the panel expected to increase the number of employees over the coming year (see detailed data Table 17). In 2022, this proportion was slightly lower at 24.5% (see detailed data Table 18).

In terms of turnover, the proportion of businesses anticipating growth remained relatively stable, 40.6% in 2020, 39.9% in 2021, and 43.5% in 2022 (see detailed data Table 4). The proportion of businesses anticipating an increase in sales was highest in medium-sized businesses (see detailed data Table 15).

By region we also see considerable variation in the proportion of longitudinal respondents anticipating turnover growth. For example, in 2022, these proportions varied from 41.1% in London to just 16.8% in the East Midlands (see detailed data Table 16).

6.4 From expected to achieved growth in employment and turnover

One of the most significant benefits of having longitudinal data is being able to track firm growth through time. Here we consider whether businesses in the longitudinal sample which anticipated employment and turnover growth over the next year were able to realise these expectations. This comparison is relevant as the research literature suggests that business owners and entrepreneurs tend to be over-optimistic about these changes.

One note of caution is relevant in considering these results. Overall, the subset of businesses in the longitudinal sample that anticipated employment growth over the next 12 months in 2021 is only 468 businesses.

Breaking this sample down further, for example, by region, reduces sample sizes meaning that a degree of caution is necessary in interpreting regional and business size differences. It is worth noting that expectations of future performance are likely to be particularly affected by the COVID-19 pandemic.

As shown in Table 3, in 2021, 27.1% of all businesses in the longitudinal sample anticipated employment growth over the next twelve months. In 2022, this figure was marginally lower at 24.5% of businesses in the panel.   

In practice, expectations of employment growth were unrealised for most of the panel businesses. In 2022, employment remained unchanged in over a third (35.5%) of those businesses that had anticipated growth in 2021. Employment levels also remained stable in just less than a third (28.3%) of those businesses anticipating growth in 2022.

Around two-fifths (44.1%) of the businesses that expected employment growth in 2021 achieved this over the following year. The expected growth was achieved over the following year in around half (49.3%) of businesses that reported such expectations in 2022.

In 2020, 2021 and 2022, panel businesses were somewhat more likely to report achieving anticipated turnover growth than they were for anticipated employment growth see data table Table 4).

More than half (54.9%) of the panel businesses expecting turnover growth in 2020 reported achieving this. In 2022, 66.3% of the businesses expecting turnover growth achieved this, although this figure fell to 56.2% in 2022.

Table 3: from anticipated employment growth to outcomes in the next year

Expected Growth	% Firms anticipating growth	Employment Declined	Employment Stable	Employment Increased
2021	27.1	20.5	35.5	44.1
2022	24.5	22.5	28.3	49.3

Table 4: from anticipated turnover growth to outcomes in the next year

Expected Growth	% Firms anticipating growth	Turnover Declined	Turnover Stable	Turnover Increased
2020	41.8	21.4	23.8	54.9
2021	45.0	20.6	13.1	66.3
2022	34.2	22.8	20.9	56.2

Note: question on anticipated employment growth was not asked in the 2020 survey.

6.5 Achieving continuous growth

The panel analysis of LSBS allows us to consider what proportion of businesses are able to sustain growth in either employment or turnover and also to compare the characteristics of businesses in each group. Here we focus on the group of businesses in the longitudinal sample with 10 or more employees and their record of sustained jobs growth.

Figures 9 and 10 illustrate the continuity of growth over the 4 years of this LSBS survey for the 376 businesses in the longitudinal panel which reported growth in the year preceding the 2020 survey. Of these, around a third (34.4%) had sustained growth in 2022 and over two-fifths (42.2%) of these businesses sustained growth in 2023. Overall, only 14.5% of firms achieved sustained growth over all 4 years.

These data confirm that sustained growth is unusual; overall, just 54 of the original sample of the 376 businesses reporting growth in the year before the 2020 survey experienced growth throughout the 4 years. However, it is again important to recognise that the 2020 and 2021 data reflect a period when businesses were affected by the COVID-19 pandemic.

Notably, the probability of experiencing growth in jobs in subsequent years is only weakly related to prior growth. For example, nearly half (45.5%) of those businesses that had experienced a reduction in their employee numbers in 2022 subsequently increased employment in 2023 (Figure 9).

Figure 9: employment growth trajectories of businesses over the previous 12 months, 2020 to 2023

Notes for Figure 9: using businesses who showed employment growth in 2020 as the starting point. Arrows indicate year-to-year transitions between groups. Dark blue boxes indicate businesses continuing to grow employment in each year. Light blue indicates employment declines and mid blue no change in employment. 2021 has been omitted for presentational purposes.

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Figure 10: Employment growth trajectories of businesses over the previous 12 months, 2020 to 2023

Notes for Figure 10: using all panellists as the starting point. Based on unweighted data.

6.6 Changes in business behaviours and performance after the COVID-19 pandemic

The 2020 LSBS survey occurred during the transition period following the UK exiting the EU. The 2021 survey occurred after EU exit and after the onset of the COVID-19 pandemic and its associated constraints on business. The 2022 and 2023 surveys were conducted during rapid cost inflation and increased interest rates.

In this section, we consider changes in business behaviours and performance in 2020, 2021, 2022 and 2023 in response to these conditions. Note that these comparisons relate to firms which were part of the survey in 2020, 2021, 2022 and 2023 and, therefore, provide an indication of how the same firms responded to changing conditions over this period.

As part of the survey, firms were asked whether UK exit from the EU was a major obstacle to the success of their business. The proportion of firms regarding EU exit as a major obstacle increased from 23.5% in 2020 to 31.3% in 2021, 29.7% in 2022 and 30.0% in 2023.

Detailed data Table 5 describes business performance in 2020, 2021, 2022 and 2023. In 2020, employment remained stable in 38.9% of the panel businesses. This proportion rose slightly to 40.2% in 2021 and increased further to 50.6% in 2022 and 47.0% in 2023. The proportion of firms with rising employment was almost stable through 2020 and 2021 but fell slightly through 2022 and 2023.

Over this period, the proportion of businesses reporting turnover growth also varied, rising sharply between 2020 and 2021, and 2021 and 2022, before falling somewhat in 2023.

These changes in performance reflect modest changes in the percentages of respondent businesses reporting behaviours that are normally associated with growth. As shown in Table 6, respondent businesses were less likely to report exporting and innovating in each year since 2020. However, the proportions of firms providing training, accessing capital and using business support recovered slightly in 2022 and 2023.

Table 5: business performance - employment and turnover (percentage of businesses)

Year	2020	2020	2020	2021	2021	2021	2022	2022	2022	2023	2023	2023
	Fell	Stayed the same	Rose	Fell	Stayed the same	Rose	Fell	Stayed the same	Rose	Fell	Stayed the same	Rose
Employment	27.2	38.9	33.8	23.7	40.2	36.1	25.0	50.6	24.3	23.5	47.0	29.5
Turnover	52.6	26.0	21.4	27.1	26.3	46.7	25.6	18.2	56.2	30.9	25.9	43.2

Table 6: growth related business behaviours (percentage of businesses)

Year	2020	2021	2022	2023
Innovation	32.1	31.6	31.0	30.6
Accessed capital	10.3	7.8	11.7	12.5
Provided training	44.5	43.4	48.1	47.2
Exported	20.8	20.1	19.0	17.6
Used business support	24.1	25.9	26.8	27.3

7. Ambition and future growth plans

7.1 Introduction

The survey also includes questions about businesses’ growth ambition and strategic intentions over the next 3 years. These indicators, discussed in this section, indicate levels of optimism about future growth among the balanced panel of respondents.

Note here that the time horizon over which ambitions and businesses’ strategic intent is measured is 3 years rather than the single year asked of anticipated growth discussed earlier in this report.

7.2 Sales growth ambition

LSBS asks whether businesses aim to grow their sales over the next 3 years. Overall, levels of growth ambition have declined slightly in the panel of businesses over these 4 years, with 79.6% of businesses aiming to grow in 2020, 76.0% in 2021, 74.4% in 2022, and 71.5% in 2023.

When respondents to the LSBS survey indicate, they are aiming to grow their sales over the next 3 years, they are then asked by how much. The results are summarised in Table 7.

The profile of growth ambition is rather stable, with most panel businesses reporting relatively modest levels of ambition. The most common level of ambition is between 10% and 24% growth.

Table 7: sales growth objective over the next 3 years (percentage of businesses with a growth ambition), 2020 to 2023

Size of growth in sales	2020	2021	2022	2023
1 to 9%	14.4	18.8	19.3	19.3
10 to 24%	43.1	46.3	47.0	49.4
25 to 49%	21.0	18.5	19.1	19.6
50 to 74%	8.9	7.7	8.0	5.3
75 to 99%	1.5	0.9	0.5	0.6
100% or more	11.1	8.0	6.1	5.7

Notes and Sources: based on longitudinal respondents’ sample who indicated an ambition to grow sales over the next 3 years. Responses are weighted to give representative results. Source: LSBS 2020 to 2023.

Figures 11 and 12 present the evolution of UK SME growth ambition and expectations (over the next 3 years) for the period 2020 to 2023.

These data suggest that 3-year growth ambition tends to be persistent; of the 1,057 businesses reporting ambition in 2020, 931 (88.1%) retained this in 2022 and 842 businesses (90.4% of the 2022 proportion) remained ambitious in 2023.

However, these findings also show that non-ambitious businesses can become ambitious. Around a third (34.1%) of the businesses that reported having no growth ambition in 2022, reported being ambitious in 2023.

Figure 11: evolution of growth ambition (turnover) for the period 2020 to 2023

Notes for Figure 11: using businesses who had an ambition to grow in 2020 as the starting point. Arrows indicate year-to-year transitions between groups. Dark boxes indicate businesses continuing to have an ambition to grow the firm’s turnover over the next 3 years. Light boxes indicate no growth ambition. Based on unweighted data. 2021 has been omitted for presentational purposes.

Figure 12: firms expecting growth in the next year, 2020 to 2023

Notes for Figure 12: using all panellists as the starting point. Based on unweighted data.

8. Technical information

We have published a separate technical report outlining the sampling and weighting methodology for the survey, with detailed information on sample sizes and response rates, and a copy of the questionnaire. The report is available at https://www.gov.uk/government/collections/small-business-survey-reports#2023

The main aim of the survey is to collect a range of information on SMEs. The survey measures:

• recent turnover and employment growth
• capabilities (in terms of their ability to innovate, export, train staff, etc.)
• experience of accessing finance
• use of business support
• expectations of growing turnover and employment
• the major obstacles that prevent SMEs fulfilling their potential
• the characteristics of SMEs such as the number of sites they occupy, the number of owners, whether they have separate business premises, etc
• the characteristics of their owners and leaders

There are 3 main reports based on the 2023 LSBS:

• a cross-sectional report based on SME employers. A cross-sectional report is a snapshot of the state of SMEs at any particular stage in time, this one being the latter quarter of 2023 to the end of the first quarter of 2024 (this was published on 26 September 2024)
• a cross-sectional report based on businesses with no employees (this was also published on 26 September 2024)
• a longitudinal report based on those businesses that responded in the last 4 years of the survey. This looks at the main changes that apply to the ‘panelists’ from year to year, and what appears to influence these changes (this report).

Please note that the findings presented in this report relate to ‘full panelists’ only – the 1,285 businesses that have taken part in all 4 waves of the LSBS 2020 to 2023. There are a handful of large businesses included because they were SMEs in 2020 but have since become large enterprises.

9. Definitions

Term	Description
Balanced	In this report this is used to describe the panel of firms that is the focus of the report. The panel is balanced in the sense that there are roughly equal numbers of business of each of the main size categories in the survey. This is unlike the real population of SMEs in the UK, where the larger businesses are much rarer than smaller ones.
Business, enterprise, firm	In this report these terms all mean the same – they are interchangeable.
Exports	In this report this means a UK business selling goods or services to a customer outside the UK. An English business selling to a Northern Irish business is not exporting, but a Northern Irish business selling to a customer in the Republic of Ireland is exporting.
Family-owned business	This means a business where a majority of the owners are in the same family. A business with a single owner is automatically a family-owned business, although a business with no owners is not. ‘Majority’ means more than half, but ultimately, we require the respondent to the survey to interpret this: where a business has more than one working owner or partner, they are simply asked if the business is family-owned and this is defined in the questionnaire as ‘majority-owned by members of the same family’.
Finance	In this report when we talk about businesses accessing finance or applying for finance, we usually mean borrowing money for business reasons. This might be from banks or other financial institutions or might be less formal arrangements such as money borrowed from friends and family.
Imports	In this report this means a UK business buying goods or services from a business outside the UK. A Northern Irish business buying from a Welsh business is not importing, but a Northern Irish business buying from a business in the Republic of Ireland is importing.
Innovation	This refers to a business implementing a new or significantly improved product or process (which can also include new marketing methods or organisational methods). The international manual on collecting data about innovation is known as the Oslo Manual.
Longitudinal	A longitudinal study is one which collects data from the same unit at different times. We call this survey longitudinal because each year we try to re-interview businesses that took part in the survey in previous years. Analysts have specific methods for analysing longitudinal data. This report focusses on longitudinal analysis, and the dataset is available to approved researchers to perform their own longitudinal analysis if they wish. The dataset can also be used for cross-sectional analysis, which takes each year of data separately.
Medium-sized business	A business which has between 50 and 249 employees (whether they are full-time or part-time). These are the largest SMEs, since businesses with 250 or more employees are defined as large businesses in this survey. Alternative definitions of business size are sometimes used by other studies (which might include consideration of annual turnover or total assets belonging to a business).
MEG-led business	A business where at least half of the leadership team comes from minority ethnic groups (as this is a UK survey, minority ethnic groups are those that are not of any White background, including White British, White Irish, White Gypsy or Irish Traveller, or any other White background). The leadership team comprises the directors and working owners. We can include members of several ethnic groups and can include people who describe themselves as mixed ethnicity where any White background is one of those ethnicities.
Micro business	A business which has between 1 and 9 employees (whether they are full-time or part-time).
Panel	In this report, the panel (sometimes referred to as the longitudinal panel or the full panel) means the 1,285 firms that have taken part in all 4 waves of the LSBS so far. As shown in Table 1 the panellists are rather different in a number of ways from the original full sample of SMEs in the 2020 survey, and they are also different from the general population of SMEs in 2020.
R&D	This stands for ‘research and development’ and in this survey is usually referred to in the context of ‘R&D spending’, meaning spending on creative and systematic work to increase the stock of knowledge or to devise new applications of existing knowledge. The international manual on collecting data about R&D is known as the Frascati Manual.
SIC 2007	This is the specific version of the Standard Industrial Classification that is used for this survey, in common with most official statistics in the UK. This is a useful page from the Office for National Statistics website for more detail on SIC 2007.
Small business	A business which has between 10 and 49 employees (whether they are full-time or part-time). In some contexts people use the term ‘small business’ to refer to all businesses that are smaller than large and medium-sized businesses (in other words all businesses with fewer than 50 employees) but in the LSBS we always use the narrower definition when referring to small businesses specifically.
SME	This stands for ‘Small and Medium Enterprises’, but this is commonly meant to refer to all businesses, firms and enterprises that have fewer than 250 employees, including those that have no employees at all. This means that in the LSBS ‘SMEs’ actually comprise business with no employees, micro businesses, small businesses and medium-sized businesses.
Turnover	In the LSBS this term is usually synonymous with ‘sales’. Although for the purposes of preparing accounts ‘turnover’ may be defined differently from ‘revenue’ or ‘sales’ we do not specify a particular definition in our questionnaire and assume that respondents interpret it to mean revenue from sales which do not take account of costs.
Weighted, unweighted	We have longitudinal weights which apply to the panel to give the businesses the same distribution as the general population of SMEs in the UK in 2020 with respect to size, industry and country. In practice this makes the smallest businesses relatively more important, since in the SME population there are far more smaller businesses than larger ones. When we refer to weighted estimates we are describing the results of calculations that give more weight to the smaller businesses. In contrast, unweighted estimates treat all members of the balanced panel equally.
Women-led business	Women-led businesses are defined as those majority-led by women, that is controlled by a single woman or having a management team of which a majority are women. ‘Majority’ here means more than 50%.

10. Further information

10.1 Future updates to these statistics -update

The Department for Business and Trade (DBT) intends to continue the survey for at least 3 further waves.

The delay to field start date that occurred in 2020 impacted in turn on the 2021 and 2022 fieldwork dates. Interviewing which was planned to commence in July 2020 and continue to February 2021 was delayed to September 2020 and continued to April 2021 because of the uncertainty and upheaval caused by the COVID-19 pandemic. In 2022, this had a further impact in delaying field start to November 2021, which then continued to the end of April 2023. 

Interviewing for the 2023 survey took place between 2 October 2023 and 26 April 2024. The field dates for the 2024 survey will follow those of 2023. 

10.2 Related statistics

The related reports on SME employers and SMEs with no employees were published on 26 September 2024. DBT has published the technical report at the same time as this panel report.

The Scottish Government produces its own publication based on the same data but focused on Scottish businesses Small Business Survey Scotland: 2022-2023 - gov.scot (www.gov.scot)

DBT publishes the Innovation Survey which covers the topic of innovation in much greater detail, and covers large businesses (which the LSBS excludes) but not micro businesses and non-employers (which the LSBS includes). Also the National Survey of Registered Businesses (NSRB) which covers business sentiment around exporting and trade. The survey focuses on businesses with a turnover over £500,000 or more due to their higher potential to export.

The Office for National Statistics (ONS) conducts many surveys of businesses, many of which cover topics that the LSBS examines too. A good starting place is the Annual Business Survey, which does not cover all the sectors of the economy but has very good coverage of large businesses.

10.3 Uses of these statistics

As a wide-ranging survey of SMEs, the LSBS is of interest to many government departments and agencies. Department for Energy Security & Net Zero (DESNZ) makes use of the questions on energy use by SMEs to develop policies on business energy such as non-domestic smart meters.

Statistics are used by the Government Equalities Office to monitor rates of women-led businesses in the SME population. The figures for MEG-led SMEs are published by the government’s Race Disparity Unit as part of its Ethnicity Facts and Figures service.

DBT also uses the LSBS data to understand more about the export and import behaviour of UK SMEs and the operation of the UK internal market.

As mentioned above, Department for Digital, Culture, Media & Sport (DCMS) makes use of the social enterprises data and the Scottish Government uses the data for evidence and analysis on a broad range of policy areas. 

In the past, the Department for the Environment, Food and Rural Affairs (Defra) has analysed rural SMEs, and the Low Pay Commission has looked at what businesses say about the National Minimum Wage and National Living Wage.

HM Revenue and Customs (HMRC) has sponsored questions looking at SME preparedness for the Making Tax Digital Programme.

Innovate NI looks at Northern Irish companies and their innovation activities. The British Business Bank makes use of the data on access to finance.

The LSBS is increasingly widely used in the academic and research community, in the UK and abroad. We will run a mini competition later in 2024 for research teams to apply for small grants to conduct research using the latest LSBS data, and the data will continue to be made available by the ONS Secure Research Service, Integrated Data Service and the UK Data Service for approved researchers.

The Institute for Family Business makes use of the survey in its ‘State of the Nation’ reports, and the Federation for Small Businesses has used the LSBS in its research work, for example the Unlocking Opportunity report https://www.fsb.org.uk/resource-report/unlock.html

10.4 User engagement

Users are encouraged to provide comments and feedback on how these statistics are used and how well they meet user needs. Comments on any issues relating to this statistical release are welcomed and should be sent to business.statistics@businessandtrade.gov.uk.

The department statement on statistical public engagement and data standards sets out the department’s commitments on public engagement and data standards as outlined by the Code of Practice for Statistics.

10.5 Statistics error and revision policy

The DBT statistics error and revision policy sets out the revisions policy for these statistics, which has been developed in accordance with the UK Statistics Authority Code of Practice for Statistics.

10.6 Pre-release access to statistics

Principle T3 of the Code of Practice for Statistics requires that access to official statistics before their public release is limited to certain individuals. This includes those involved in the production of the statistics and the preparation of the release, and those involved for quality assurance and operational purposes.

Pre-release access may only be granted in accordance with the rules and principles set out in the Pre-release Access to Official Statistics Order 2008. In addition, the order requires that records are published of those who have access prior to public release.

Below is the list of roles for people who received pre-release access to LSBS panel report 2023:

• Secretary of State, Department for Business and Trade (DBT)
• DBT Parliamentary Under Secretary of State, Minister Gareth Thomas
• DBT Special Advisers
• DBT Permanent Secretary
• DBT Deputy Director, Chief Statistician
• DBT Press Officers x1

11. Contact

Responsible statistician: Jayshree Varsani

Email: business.statistics@businessandtrade.gov.uk

Media enquiries: 020 7215 2000

Public enquiries: 07741 703241

DBT is an economic growth department. We ensure fair, competitive markets at home, secure access to new markets abroad and support businesses to invest, export and grow. Our priorities are the Industrial Strategy, Make Work Pay, the Trade Strategy and the Plan for Small Business.

Legal disclaimer

Whereas every effort has been made to ensure that the information in this document is accurate, DBT does not accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned.

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