Page 2: SMEs
The European Commission divided SMEs into three sectors:
- micro enterprises: those with between one and nine employees
- small enterprises: those with ten to 99 employees
- medium enterprises: those with 100-499 employees.
The European Commission argued that the significant difference between SMEs and large organisations is that they operate in a business environment of greater uncertainty. A further difference is their role in innovation. SMEs play a vital role in the way they innovate quickly in niche markets - such as technology - and supply alternatives to the standardised products and services provided by large organisations. As a result, they are a breeding ground for new industries and, as the ‘seedbed’ for tomorrow’s companies, they provide key investment opportunities.
Many would claim that the key role and contribution of small and medium sized enterprises to the economy in the UK is undervalued. For example, if a number of people on the street were asked to name any ten businesses, the chances are they would identify the well-known corporate giants whose names appear constantly across the media. Yet there are more than 3.4 million self-employed people in the United Kingdom and over half the people in commercial and industrial employment in the UK work for small or medium-sized businesses.
Nowhere is the difference between large and small businesses more distinct than on the London Stock Exchange, the UK’s stock market for securities. Like Tokyo and New York, this is one of the biggest markets in the world with an annual turnover of over one thousand billion pounds. It plays a unique role in providing opportunities for business organisations to raise the funds they require for investment.
Market capitalisation is the term used to describe the value placed upon a company by the stock market - it is the number of shares issued by each company multiplied by its market price. On the London Stock Exchange more than 95% of market capitalisation is in the top 100 companies. This means 5% of the worth of the corporate sector remaining contains 95% of the remaining companies listed on the stock market.