AXA UK report shows younger owners are helping small businesses bounce back

• Landmark ‘Small Businesses: The Big Picture’ report from AXA UK reveals younger owners of small and medium-sized enterprises (SMEs) have kept reductions in turnover to a minimum during the COVID-19 pandemic compared to older owners.
• During the pandemic, older bosses (55-64) have faced an average 29% decrease in turnover compared to just 7% among the youngest bosses (18-24).
• Although fewer businesses started up during the pandemic, the -1.1% drop was perhaps not as large as expected.
• The six-year average national business survival rate up to and including 2020 stood at 42.5%.

AXA UK has released a landmark report – in partnership with the Centre for Economics & Business Research (CEBR) – looking at the landscape of small and medium-sized firms in the UK today. ‘Small Businesses: The Big Picture’ explores the motivations of small business owners, the impact of the COVID-19 pandemic and the biggest challenges and opportunities facing SMEs in the coming months and years.

The report shows that younger business owners have been able to respond particularly strongly to the challenges posed by the pandemic. The oldest decision makers (55-64) faced on average a 29% decrease in turnover. But this fell to 12% amongst 25-34-year-olds and to only 7% in businesses with decision makers aged between 18-24. However, not all SMEs have seen their turnover decrease over the course of the pandemic – one in five of the businesses surveyed reported that turnover had risen.

The research indicates that younger people proved more resilient because they introduced new products and services as well as focused on helping people in need during COVID-19, with more than half (51%) of under-35s saying this was a priority. However, 40% of older business owners did say they had discovered newfound appreciation for other local businesses and the wider community during the pandemic, although this was slightly less than the 45% of under-35s.

Furlough has proved a major support to many firms – over half of all businesses surveyed made use of it during the pandemic. But alternative forms of funding also proved popular, with nearly half of all female-run businesses turning to friends and family compared to around 40% of male-run SMEs. Additionally, younger business owners were less likely than those aged over 35 to rate the effectiveness of the furlough scheme highly despite seven in 10 utilising it.

The average monthly number of new businesses starting up declined by -1.1% during the pandemic compared to 2019 – which was a record year for birth rates. However, this drop is perhaps not as large as expected and shows that rather than being put off by the economic uncertainty caused by the pandemic, many people may have used it as an opportunity to start a business.

During the pandemic, the average business birth rate stood at 13% of the total business population – ranging from lows of 10.4% in Northern Ireland and 10.7% in the South West of England to a high of 15.7% in London.

The national business survival rate over a six-year period currently stands at 42.5%. Regional differences are clear – survival rates over six years were highest in the South West of England at 45.9% and lowest in London at just 39.2%. But London has seen 41% growth in total SME numbers since 2010. Whereas the South West has had fewer opportunities for new business, with only 24% growth in the SME population since 2010.

Looking ahead, when it comes to the next 12 months, concerns over the impact of the pandemic remain high up in business owners’ thoughts. Future restrictions due to COVID-19 or other diseases remain a worry for 18% of SMEs. High levels of debt accumulated during the pandemic is the most common worry, with 24% of decision makers concerned. 18% are concerned that the pandemic will have resulted in lasting changes to consumer behaviour.

“This is an important piece of research that we have undertaken with CEBR to get a genuine picture of the reality facing SMEs today and how they have dealt with the challenges posed by the pandemic. Understanding the current and potential future outlook for SMEs means organisations like AXA can continue providing products and services that support them in a rapidly changing landscape. The findings of our report demonstrate the extraordinary resilience, perseverance and motivation that drives the owners and leaders of these businesses, and they give us cause for optimism as we work together to make the most of the opportunities and face the challenges to come.” 

Deepak Soni, Director of Commercial, AXA UK

“The findings of this report highlight how pivotal SMEs are for the UK’s economy. Accounting for more than half of all UK business turnover, the economy would not be able to function without them. The strength of SMEs is likely to improve as time goes by, with the growth rate of employment in small and medium businesses outstripping that of large businesses over the last decade. Although larger businesses may be more financially resilient to shocks such as the COVID-19 pandemic, the dynamism of smaller businesses will allow them to bounce back strongly.” 

Josie Dent, Managing Economist at CEBR

Authored by AXA