According to the Federation of Small Businesses, there were 5.5 million private sector businesses at the start of 2016 (compared to 2 million in 2000). Small businesses accounted for 99.3% of these, with almost all classified as SMEs. Total SME employment reached 15.7 million in 2016 and turnover reached £1.8 trillion (47% of all private sector turnover).
Any growth in the SME market is closely linked with the state of the economy. Global Data estimate the UK SME market will be worth £9.04bn in GWP by 2020 – therefore their success will drive much of the potential for growth in liability and other commercial insurances.
The impending Brexit negotiations are going to cause months of economic instability and could have a big impact on the expected growth. However, there are mixed signals from this market. When the vote happened, the SME sector was fairly evenly split on whether the UK should remain or leave, according to several surveys.
The latest research from the Federation of Small Businesses, the Small Business Index 2017, showed that confidence is strengthening across most regions and sectors. And their report, “What small firms want from Brexit” from January of this year showed that 72% trade both inside and outside the EU single market, therefore many are taking Brexit into account when assessing their confidence.
Should this confidence remain, then insurers will have a growing market to target. This could be a significant size market, given the penetration of commercial insurance products is relatively low compared to other sectors.
As with many areas, the next two years are going to be interesting to monitor.
Don Clarke
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