Derailing the future of economic growth: Demographic risks and financing pressures facing the UK SME economy

Today, small business owners, economists, institutions and government are beginning to look further into the future with regards to risk; no doubt, in part, due to the short-termism which resulted in the financial crisis. As part of this, it is becoming widely recognised that the UK is facing a major demographic challenge, with the ageing population becoming an increasing socio-economic risk.

Much focus has been given to the demographic ‘timebomb' in relation to healthcare and welfare provision, national debt and wider social implications. However, it is notable that there has been less attention given to the implications for the small business and the UK SME sector. 

The UK's small and medium-sized enterprises (SMEs) face a complex mix of demographic and financing pressures - as baby-boomers reach retirement age - with worrying consequences for both SMEs themselves and the broader UK economy.

A survey of 549 SMEs, conducted by The Economist Intelligence Unit on behalf of global insurer Zurich, finds a dangerous conflation of shifting age demographics, poor succession planning, dwindling pension incomes and a new generation of would-be entrepreneurs stifled by poor access to start-up funding and low levels of personal capital. This combination is likely to create business challenges that may act as a drag on the UK's economic growth in the long term.

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