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Small and Medium Sized Enterprises : Definitions
What is a SME? |
SME is the recognised abbreviation for Small and Medium Sized Enterprises.
The majority of the workforce is employed by SMEs. Statistics for 2008
published by the BIS (previously BERR) Small Business Service (SBS)
Statistics Unit show
that out of 4.8 million businesses in the UK, 99.9% were SMEs (Small and Medium
Sized Enterprise Statistics for the UK and Regions 2008, published
14th October 2009) Despite governments and many of the multinational organisations targeting this group for special financial business support, there is no single definition for a SME either nationally or internationally. |
|
UK |
In the UK, sections 382 and 465 of the Companies Act 2006 define a SME for the purpose of accounting requirements. According to this a small company is one that has a turnover of not more than £6.5 million, a balance sheet total of not more than £3.26 million and not more than 50 employees. A medium-sized company has a turnover of not more than £25.9 million, a balance sheet total of not more than £12.9 million and not more than 250 employees. It is worth noting that even within the UK this definition is not universally applied. | |
British Bankers Association |
The British Bankers Association (BBA) embeds its own definition within the introduction of its voluntary code, The Business Banking Code (March 2008). Here small business customers are defined as sole traders, partnerships, limited liability partnerships and limited companies with an annual turnover of under £1 million, as well as associations, charities and clubs with an annual income of under £1 million. If the concern applying for the business account is a group of businesses, the turnover threshold applies to the combined turnover of a group of limited companies and not individual companies within the group. | |
European Commission |
The European Commission adopted Recommendation 2003/361/EC on 6th May 2003, to take effect from 1st January 2005 (published in OJ L 124 of 20.5.2003, p.36). The Commission has a third category called Micro Enterprises. A micro enterprise has a headcount of less than 10, and a turnover or balance sheet total of not more than €2 million. A small enterprise has a headcount of less than 50, and a turnover or balance sheet total of not more than €10 million. A medium-sized enterprise has a headcount of less than 250 and a turnover of not more than €50 million or a balance sheet total of not more than €43 million. The Commission considers application of this definition by Member States, the European Investment bank (EIB) and the European Investment Fund (EIF) to be an aid to improving consistency and effectiveness of policies targeting SMEs. Recommendation 2003/361/EC allowed in Article 9 for the application of the definition to be reviewed March 2006. Depending on the results, the Commission may adapt it, particularly the ceilings for turnover and balance sheet totals. Work has been done on considering the reporting burdens for micro enterprises, and as a result it is proposed that the burden be relieved for those with a balance sheet total of less than €500,00 or net turnover of less than €1,000,000. The proposed directive was reported in COM(2009) 83 final/2. | |
USA |
In the USA, the definition of small business is set by a government
department called the
Small
Business Administration (SBA) Size Standards Office. The SBA uses the term “size standards” to indicate the largest a
concern can be in order to still be considered a small business, and
therefore able to benefit from small business targeted funding. The
concern cannot be dominant in its field, on a national basis. It must also
be independently owned and operated. Unlike the UK and the European Union
which have simple definitions applied to all industries, the US has chosen
to set size standards for each individual NAICS coded industry. This
variation is intended to better reflect industry differences. The most
common size standards are
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