What Is an SME?

SMEs account for 99.9% of the UK’s business population. They’re the biggest driver of the UK’s economy and employ millions of people. But what is an SME? What does SME stand for, and what is the difference between the UK and EU definitions? Read on for answers to these questions and more in our handy guide.

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What does SME stand for?

SME stands for Small to Medium-sized Enterprises. It’s an umbrella term that includes three different categories: micro, small and medium-sized businesses. Which category your business belongs to depends on your annual turnover and number of staff.

Until recently, UK and EU SME definitions were the same: firms with fewer than 250 employees. But after a UK survey revealed medium-sized businesses – 50-249 employees -- were spending an average of 22 days a month dealing with paperwork and regulations, the government widened its criteria.

On 3rd October 2022, in a bid to cut red tape and stimulate growth, the UK changed its definition. Now businesses with under 500 employees are exempt from certain regulations.

So, what’s the difference between the EU and UK SME definitions? Let’s start with the new, UK criteria:

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SME definition UK

From 4th October 2022, a UK SME is a business with:

- under 500 employees

- an annual turnover under £100 million.



Number of employees

Annual Turnover


Under 500

Up to £100 million


Under 50

Up to £10 million


Under 10

Up to £2 million

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SME definition EU

The EU definition of an SME is:

- a business with under 250 employees

- an annual turnover of under €50 million.

The three EU SME categories are defined like this:



Number of employees

Annual Turnover


Under 250

Up to €50 million


Under 50

Up to €10 million


Under 10

Up to €2 million

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What is an SMB?

The term SMB is used in the USA to describe a Small and Midsize Business.  Again, it’s an umbrella term that includes two categories: small and mid-size businesses.

The US definition of a small business is:

- an organisation with under 100 employees

- an annual turnover of up to £50 million.

The US definition of a mid-size business is:

- an organisation with between 100 and 999 employees

- an annual turnover of more than $50 million and less than $1 billion.

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How many UK SMEs are there?

At the start of 2022, there were an estimated 5.5 million UK private sector businesses. 99% of these were SMEs and roughly 5.25 million were micro-businesses (firms employing fewer than 10 people). Now the government has widened the criteria, it’s expected that another 40,000 businesses will be classed as SMEs.

According to government data, the 7,700 large businesses in the UK make a major contribution to employment and turnover. But SMEs are a huge driver of the economy. Total employment in SMEs at the start of 2022 was 16.4 million (61% of the total) with turnover estimated at £2.1 trillion (51%). For more statistics on the UK’s business population visit the government’s web page.

On the flip side, over 580,000 companies were dissolved in 2021-2022. This year is looking even worse for many small business owners struggling with the cost-of-living crisis. A recent survey of 1,000 small-business owners revealed that 38% are on the verge of burnout with 17% blaming rising energy prices, sky-rocketing inflation and supply chain delays. More than half said they were considering folding their companies altogether.

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SME funding

The change in definition shows the government’s commitment to stimulating SME growth. But what about financial support?  It can be hard to find all the different forms of funding available to SMEs. To help, we’ve put together a list of resources. Read our article on grants for SMEs to find out if you’re eligible and how to apply.

With energy prices soaring, cutting consumption is a high priority for everyone now – businesses and homeowners alike. There is some help available for SMEs, though. The government’s Energy Bill Relief Scheme started on 1st October 2022 and runs to 31 March 2022. Anyone on a non-domestic contract (including businesses and charities) is entitled to discounted gas and electricity prices.

Read our guide on how to cut energy costs. As well as explaining how the Energy Bill Relief Scheme works, you’ll find top tips on how to save energy.

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Small and medium enterprise examples

You’ll find SMEs in all kinds of industries and with varied business structures. You could be a freelance photographer, a building contractor, or a limited company operating a fleet of trucks. In the UK, if your annual turnover is £100 million or less and you have fewer than 500 employees, you’re an SME.  

Below are some SME examples. They’re all different, but they have one thing in common: they all need business insurance.

Some policies are essential:

- Public liability insurance is a must if clients visit you, or you visit them

- If you employ anyone, employer’s liability insurance is a legal requirement

- Professional indemnity insurance is vital if clients pay you for your advice or services.

And depending on the way you operate your business, there may be other policies you’ll want too.  

At Towergate, we understand that every business is unique and insurance requirements vary. We can provide cover that’s tailored to your industry as well as your individual business needs.

Follow the link to see what policies are available for different company structures and examples of SMEs listed alphabetically by occupation. It’s by no means an exhaustive list. So if you don’t the profession or industry you’re looking for, don’t worry. You’ll find many more on our business insurance page.



Limited Companies


Sole Traders

Care and medical

Commercial Vehicle

HR and Training Consultants




Professional Consultants

Public Liability



Trade specific


Travel Agents

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About the author

Alison Wild Bcom Hons MAAT MATT Taxation Technician Commercial Tax Pensions Insurance And Marketing Specialist AuthorAlison Wild BCom (Hons), MAAT, MATT, Taxation Technician is a highly respected industry professional who has been working with and advising SMEs in areas including tax, pensions, insurance and marketing for over 25 years. She is a member of the Association of Accounting Technicians (AAT) and Association of Tax Technicians (ATT) and also has over 20 years' experience as a residential landlord.