A Study Of UK Government’s Policies On SMEs Since The Global Financial Crisis

The UK government has increasingly recognized the importance of Small and Medium Sized Enterprises (SMEs). They are the "engine" of the UK’s economy (Cabinet Office), as they account for almost half of the private sector turnover, contribute to a large proportion of job creations, and stimulate innovation and competition.In contrast with their importance and contribution, SMEs bear disproportionate burdens which hold back their growth and development. The financial crisis in2008and the subsequent recession caused a global economic downturn and a sharp shrink of bank lending, which was a big blow to SMEs who are heavily dependent on bank lending. Other external barriers, such as heavy taxes, inefficient regulations, difficulty in employing staff and stimulating innovation also curb the growth of SMEs.To help SMEs out of the crisis and release their growth potential, the UK government has implemented a wide range of policies from macroeconomic measures to tailored services. The purpose of this paper is to evaluate and assess whether the UK government’s policies have met the needs of SMEs and helped them grow and expand. This paper is divided into four chapters. Chapter One introduces the significance of this study, reviews researches regarding UK government’s policies on SMEs, and then introduces the methodology and the structure of this paper. Chapter Two examines the definition and importance of SMEs. In this chapter, difficulties of SMEs will be identified. Chapter Three illustrates and assesses the government’s policies in response to those problems. In this chapter, this author firstly examines policies that improve the access of SMEs to finance, then deals with efforts that reduce tax burdens for SMEs. Assessment of tax policies is followed by discussion of policies on three more areas, that is, policies that reduce unnecessary and ineffective regulations, measures that help create a fair and effective labor market and efforts that stimulate innovation in SMEs. In the following section, an overall review and evaluation of SME policies are made stating success and problems of the present policies. In the end of this chapter, lessons that China can draw from the UK are discussed and expounded. The paper concludes that many policies are effective and efficient, which contribute to the recovery of the UK economy, although some fail to meet the UK government’s original objectives, either due to SMEs’ weak awareness of those policies or problematic operating mechanisms. This author suggests that the government simplify the policies both in terms of quantity and operating procedures, while raising SMEs’ awareness of the policies by advertising these policies and guiding them to use the schemes.Through assessing UK’s policies in support of SMEs, this paper aims to expand the academic study of SME policies in the UK, and offer help in the design of SME policies in the mentioned areas in the UK and China.