The Effect of Macroeconomic Variables on Profitability of Small & Medium-Sized Enterprises in the UK - Dissertation Example

The paper “The Effect of Macroeconomic Variables on Profitability of Small & Medium-Sized Enterprises in the UK” is the right example macro & microeconomics dissertation. The aim of this thesis is to study the effects of macroeconomic variables on the profitability of small and medium-sized enterprises in the United Kingdom. SMEs create employment for a large part of a country’s population and eliminate social problems. Therefore, studying how various macroeconomic variables affect their profitability is important.

Methodology: A descriptive design was assumed by measuring the profitability of 100 SME firms in London against a number of macroeconomic variables (GDP, inflation, interest rates, and exchange rates) over a period of 5 years. Data were analyzed using descriptive statistics with the help of STATA software.Findings: Some of the major findings of the study were: (1) interest rates significantly affect SME profitability in London, (2) inflation and exchange rates negatively influence SME profitability, but the effect is not statistically significant, (3) GDP growth positively influences SME profitability and (4) all macroeconomic variables, put together, strongly influence SMEs profitability.

Conclusion: Since the macroeconomic variables prove to have a significant relationship with the profitability of SMEs, this research recommends that the Bank of England formulates effective policies that can easily stabilize the studied macroeconomic variables to enable their smooth running.CHAPTER ONE: INTRODUCTIONStatement of ProblemSmall and medium-sized enterprises are viewed as one of the main contributors to a country’s economy because they play a big role in providing income and employment to a large section of a country’s population.

The Office of National Statistics, in the United Kingdom, reported that, in 2014 alone, the SME sector contributed to 49.8% of the country’s economy. Furthermore, out of the 30.98 million people who were employed by 2015, in the United Kingdom, the SME sector had contributed to over 60% of this figure. Thus, improved profitability of SMEs leads to more jobs, as well as enhanced economic growth.