Dr Endrit Kromidha
VP (Policy and Practice) – ISBE, Associate Professor – University of Birmingham
Professor David Pickernell
VP (Research and Community) – ISBE, School of Management – Swansea University
Britain’s SMEs have been decreasing since 2020 amid a major economic transition. Remedies require reorientation away from traditional firm growth towards scaling sustainable business activity within entrepreneurial ecosystems.
According to the Department for Business and Trade,SMEs make up 99.8% of businesses, employ over 16 million people and generate over 52% of private-sector turnover.¹ Yet, SMEs are facing one of the biggest transitions in a century: to simultaneously operate sustainably, digitally and globally. Since 2020, the number of SMEs has been decreasing.
Entrepreneurial ecosystems-based solutions
To change this trend, Britain must learn to scale up business activity with SMEs in entrepreneurial ecosystems rather than focusing on individual firm growth. This reorientation matters because most SMEs are highly specialised, family-run or community-based enterprises that sustain local economies through relationships. Their value lies not just in headcount or turnover, but also in offering local products and services, developing niche expertise and connecting industries.
To unlock the potential of SMEs for sustainable development, we must understand that entrepreneurial ecosystems thrive not because someone controls them, but because entrepreneurs, universities, councils, investors and citizens learn to coordinate differences. This generative institutional discourse2 is how diverse actors negotiate meaning, align visions and turn tensions into productive governance.
Building a circular economy, for example, cannot be achieved by individual companies in isolation.
Coordinating for circular economy solutions
This lesson applies directly to Britain’s sustainability transition. Building a circular economy, for example, cannot be achieved by individual companies in isolation. It requires cooperative systems where designers create modular products, manufacturers share resources, and local authorities provide the regulatory backbone to repair and reuse.
SMEs see the potential of AI, digital twins and blockchain to help in this transition. To address resource constraints, shared digital data and infrastructure should support one-off grants to innovate sustainably and share best practices.
Ecosystems, not individual venture growth
The ‘entrepreneurial ecosystem over individual venture growth’ principle invites a balance that could also increase the international relevance of British SMEs while anchoring value locally by building collaborative models for circular entrepreneurship and sustainable innovation. Ultimately, sustainable growth will not come from a few headline-grabbing unicorns, but from thousands of small, connected firms co-creating the future together.
