Your assertion that Britain is too small for hunting with guns is entirely incorrect. The BASC (The national association for those who use firearms for hunting) has more than 148,000 members. You may verify this figure in the "Shooting - The Facts for Journalists" section on their website. I live in the county of Hampshire and our county police force alone has more than 97,000 registered Firearms Certificate (FAC) holders. These are all people who own rifles or the classes of pistol which are still permitted. The ownership of a shotgun requires a different piece of paper, a Shotgun Certificate (SGC). I hold both.
Your further assertion that the only reasons to own a gun are to hunt or kill people are also incorrect. Firstly, it is illegal to use a legally held gun in self defense. Secondly, you omit the sport of target shooting. The NRA (The British one which exists to promote the safe sport of target shooting, not the American one which is a gun rights organisation) almost certainly has more members than the BASC. I can't surface a number quickly but I'm sure if you contact the membership department they could provide one. The NRA deals with rifle shooring of "fullbore" (basically anything that's not .22 rimfire). There is also the NSRA (National Smallbore Rifle Association) which is the parent body of .22 rimfire target shooting.
Part of the perception that hardly anyone owns guns is down to owners and potential owners are educated that an important part of gun security, preventing theft of legally held weapons, is it not being widely known that you have them in your home to steal. In fact, if it is widely known in your neighbourhood that you have guns, your application to get or keep your certificates may be denied. None of my neighbours know I have guns and ammunition.
The British firearms licensing regime is highly restrictive and, by and large IMHO, works very well. It seeks to make sure that ownership is limited to those who are mentally suitable and that certificate holders only own weapons and quantities of ammunition that are appropriate for the shooting they actually do. I required a criminal record check and references from two persons of good standing and my GP was contacted to make sure he had no concerns about my mental suitability to be a responsible owner. Should I ever commit any offence that casts doubt on my responsibility then my certificates would be revoked. For example, a drink driving conviction or two speeding tickets is enough to throw into question my regard for the well being of those my actions might affect and would make me unsuitable to own a gun.
Criminals tend to favour handguns, which are easy to transport and conceal and the vast majority of gun crime in the UK is committed with such weapons. These weapons are almost entirely illegally imported/held as they can't be possessed by a member of the general public on a certificate without special authority from the Home Secretary. This makes the theft of legally held rifles generally unattractive as they aren't what criminals want.
Posted AC as I don't wish to reveal to anyone who might know my name that I am a firearm owner.