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The economic impact of the pandemic is believed by some to have come at a greater cost to businesses than consumers. This is particularly the case for small-to-medium (SME) businesses, whose reduced financial resilience increases their vulnerability to indebtedness and, in turn, has an impact on the local/regional communities in which they employ people and provide services.

Registry Trust firmly believes that data has an important influence on the efficiency of economic and societal recovery. We maintain the Register of Judgments, Orders, and Fines for the UK and Ireland and have first-hand access to commercial monetary judgment data for SMEs. We thought it would prove interesting to investigate a few additional sources of SME data alongside our own to uncover how SMEs have been impacted on a regional level and what can be done to support them.

Our key findings were:

-The number of SMEs is increasing regionally.

-The number of SME employees across the UK is increasing.

-There was a positive correlation between the number of SMEs and the number of monetary judgments against SMEs in 2020.

-As the number of SME judgments rose during the first national lockdown, fewer were being satisfied or cancelled.

-SME judgments rose while consumer judgments declined during the first national lockdown Regions with high proportion of employees working for SMEs also tend to have higher SME judgment rates.

1) The number of SMEs in England is increasing – but at different rates in different regions

The graph below shows the regional trends for the increase in the number of SMEs operating in England. Focusing on the period 2016 to 2019, the greatest increase in the number of SMEs was found in the West Midlands at an increase of 16%, followed by the North West at an increase of 11%. The only region to have a decrease in the number of SMEs is the East Midlands at -4%.

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Data source: Business Population Estimates 2019, Detailed Tables

2) The number of SME employees is increasing

In line with the increase in the number of SMEs in recent years, the number of SME employees (at the start of each year) is also increasing. From 2018 to 2019 the increase was 2%, from 16,284 to 16,630, an additional 346 individuals.

After the 2008 financial crash, the UK’s better-than-expected economic recovery was attributed to SMEs and the value that they add. Considering this and their increased prevalence in society, it is possible that the UK economy is set to recover at a favourable speed from Covid-19. It is therefore important to protect these businesses, many of which have been hardest hit by the pandemic.

RT blog SMEs graph 2.png

Data source: Business Population Estimates 2019, Detailed Tables.

The graph and statistics below highlight the proportion of employee sizes per region, categorised by no employees, less than 250, and more than 250.

The highest proportion of SMEs (<250 employees) in 2019 was found in Scotland (28.9%), followed by Northern Ireland (28.2%) and the North East (26.8%). The lowest proportion of SMEs was found in the South West (22.1%), followed by London (22.2%) and South East (22.2%). These regions have a lower proportion of SMEs than England as a whole (23.4%). A low proportion of SMEs appears characteristic of Southern regions, as opposed to Northern regions which tend to have more SMEs as a proportion of total employees.

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Source: https://www.merchantsavvy.co.uk/uk-sme-data-stats-charts/#:~:text=99.9%25%20of%20all%20UK%20businesses,businesses%20(0%2D9%20employees)

3) Positive correlation between number of SMEs and number of monetary judgments against SMEs in 2020

However, an opposing narrative appears when focusing on the number of SMEs per 10,000 of the population. The graph and chart below show a positive correlation between the number of SMEs in a region and the number of SME judgments in a region. Each indicator was taken as per 10,000 of the population to prevent skewing of results due to population density.

In this case, Southern regions of the UK have a higher number of SMEs when taking into account population density than their Northern counterparts. This could be attributed to the larger number of businesses registered in these Southern regions.

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4) As the number of SME judgments rose during the first national lockdown, fewer were being satisfied or cancelled

The graph below details the monthly percentage of transactions on our Register that were judgments, satisfactions, and cancellations, for SMEs in 2020. Transactions in March 2020 show an increase in judgments, coupled with a decrease in satisfactions and cancellations. Judgments then decline to their lowest level in June 2020. Meanwhile cancellations reach their highest level in June.

This shows SMEs were negatively affected by the first lockdown, causing an increase in judgments, and a decrease in satisfactions/cancellations.

To put the graph into context, judgments increased 3.54% from March to April 2020, from 74.75% to 77.40%. Alternatively, satisfactions decreased by 5.53% over the same time frame, from 10.85% in March 2020 to 10.25% in April 2020. Similarly, cancellations decreased from 14.40% in March 2020 to 12.35% in April 2020 (14.24% decrease).

RT blog SMEs graph 5.png

JG = judgment. SS = satisfaction. SA = cancellation

5) SME judgments rose while consumer judgments declined during the first national lockdown

Several high-profile charities and think tanks suggest the pandemic has negatively affected SMEs more than consumers. This is supported by the graph below, which shows judgments as a percentage of all monthly transactions rising for SMEs in March, April and May 2020 from 2.43% in March 2020 to 8.07% in May 2020. Meanwhile, consumer judgments (as a percentage of all monthly transactions) decreased significantly (91.52% in March 2020 to 71.62% in May 2020).

SMEs failed to reach pre-pandemic levels of judgments until November 2020 (2.21%), (March was 2.43%). Consumers reached pre-pandemic levels in October 2020 (92.20% compared to 91.52 % in March)

RT blog SMEs graph 6.png

Consumer on primary axis, Corporate and SME on secondary axis

While the proportion of all satisfactions and cancellations increased for consumers following the first national lockdown (from 85.83% in March 2020 to 89.27% in April 2020), the proportion decreased for corporate businesses and SMEs (from 3.13% in March 2020 to 2.47% in April 2020). In fact, SMEs failed to reach pre-pandemic levels of cancellations and satisfactions until November 2020 (3.66%), after which the rate began to decline again (2.89% in December).

Again, this signifies how SMEs have been impacted more negatively from the pandemic than consumers, whose satisfaction and cancellation rates did not fall below March 2020 rates (or January 2020 rates which were the highest pre-pandemic at 86.90%) for the remained of 2020.

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Consumer on primary axis, Corporate and SME on secondary axis

6) Regions with high proportion of employees working for SMEs also tend to have higher SME judgment rates

The maps below show the density of SME judgments in Local Authorities of England and Wales for 2019 and 2020. 2019 represents SME judgments in a more typical year, whereas 2020 judgments have been disrupted by the pandemic.

In 2019, the North East had particularly high levels of SME judgments, such as County Durham at 244. The high level of SME judgments continued in 2020 in County Durham, which still had high levels at 163.

Other regions with high SME judgment rates in England and Wales include the West Midlands and Yorkshire & Humber. Prior analysis shows both of these regions to have higher than the England average for the proportion of employees who work for SMEs.

The South West is characterised by both a high proportion of employees who are SMEs and a high number of SMEs per 10,000 of the population; this could explain the high number of SME judgments in Cornwall.

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We are very interested in how this develops and believe that our data could help shape policy and support services for SMEs in different UK regions as a key driver of economic recovery post-Covid19. We are planning a roundtable event to discuss this with key stakeholders – more information coming soon.

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