Last edited 09 Mar 2021

Small and medium-sized enterprises SME

Small and medium-sized enterprises (SMEs) are defined by the European Union as enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million (ref. EU, What is an SME?)

Within this category, a small enterprise is one which employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million.

A microenterprise is one which employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million.

A firm which is part of larger grouping may need to include employee numbers, turnover and balance sheet data from that grouping.

According to the European Commission, 99% of businesses in the EU are SMEs and as such, they are “a key driver for economic growth, innovation, employment and social integration”. The Federation of Small Business (FSB) states that over 99% businesses in the UK are SMEs, and the Department for Business Innovation and Skills suggest that 99.9% of UK construction contracting businesses are SMEs (ref. BIS UK CONSTRUCTION, An economic analysis of the sector JULY 2013).

Despite this, construction SMEs find it difficult to break into the market for larger projects, particularly within the public sector. A report by the Federation of Master Builders in 2013 suggested that 40% of construction SMEs were failing to win nine out of ten public sector contracts and more than half reported their success rate falling over the last five years. This is partly due to the cost and difficulty of pre-qualifying and tendering (see Building SMEs slam poor government procurement practices). The government has attempted to tackle this with the introduction of standard documentation such as PAS91 and continues to consult on strategies for making public sector procurement more accessible to SMEs.

In December 2013, then-Enterprise Minister Matthew Hancock set out how a range of measures intended to make it easier for small businesses to grow in Small Business: GREAT Ambition. Measures were announced to tackle late payment and to remove the barriers to public contracts by abolishing pre-qualification questionnaires (PQQs) for low-value contracts and mandating the use of core PQQs for high value contracts.