Small businesses in the UK

Labour Market Trends, Nov 2004

Nearly 46 per cent of business employment was in small firms and 12 per cent in medium-sized enterprises at the start of 2003. UK businesses employed 21.7 million people, and had a combined annual turnover of 2,200 billion. These are among the National Statistics estimates released by the Department of Trade and Industry's Small Business Service.

Small and medium-sized enterprise statistics for the UK 2003 provides estimates of the number of enterprises in the private sector, public corporations and nationalised bodies, their employment and turnover. The figures exclude government and non-profit organisations. The estimates are based on the interdepartmental business register (IDBR), supplemented for the very small businesses that do not appear on the IDBR by the Labour Force Survey and Inland Revenue Survey of Personal Incomes.

There were an estimated 4.0 million businesses at the start of 2003, a slight increase (0.2 per cent) on 2002. This was the highest figure since the current series began in 1994. However, part of the increase is accounted for by revised estimates of self-employed jobs. Almost all enterprises (99 per cent) were small, with less than 50 employees. Only 26,000 were medium-sized (50 to 249 employees) and 6,000 (0.6 per cent) had 250 or more employees.

While the estimated number of enterprises without employees had risen by 240,000 (9 per cent), the number of firms with employees had fallen by 10,000 (-1 per cent). The number of sole proprietors increased by 200,000 (8 per cent). These are businesses comprised of sole proprietors, partnerships of self-- employed owner-managers or companies with only an employee director. The proportion of enterprises with no employees varied from 86 per cent in the construction industry to 17 per cent for hotels and restaurants.

Also recently published are the 2003 results of the Annual Small Business Survey. The research has been designed to record the opinions and experiences of owners of small and medium-sized businesses. The findings are based on a representative sample of 8,693 firms in the UK selected from Dun and Bradstreet's database of enterprises. Companies with between zero and 250 employees were surveyed in the fourth quarter of 2003. The sample was weighted to be representative of small businesses in the UK.

The survey found that small businesses in the UK are more likely to be family-owned, based in the service sector and employ no staff. Half are managed solely by men, and one in 10 by people from ethnic minority groups. The turnover of small businesses with employees is substantial, but employment growth is not widespread and frequently not sustained over two years.

Small businesses with employees often have high turnovers. Nearly three-quarters of those who provided financial information (twothirds of the total) had a turnover of between L56,000 and L1.5 million, and 14 per cent had turnovers exceeding L1.5 million. Around a fifth of small firms export, but only 4 per cent said that most of their business was conducted abroad.

A third of companies surveyed had been trading for less than 10 years, and 14 per cent for less than four years. About half of all small businesses (51 per cent) were managed solely by men, while 12 per cent were managed by a majority of women. The rest had women among their directors, but not in a majority. People from ethnic minority groups made up the majority of directors in 9 per cent of small firms.

New businesses were defined in the survey as those less than four years old. The most common rationale people gave for starting a new company was a wish to be independent and their own boss (29 per cent). This was followed by wanting to develop an idea, hobby or skill (15 per cent), make money (15 per cent) and improve their career and prospects (12 per cent). Some 62 per cent of new business

owners had previously been in fulltime employment. A quarter had been self-employed and 7 per cent had been unemployed. One-fifth mentioned raising finance as an obstacle to starting their new firm and one-tenth reported facing difficulties with their cash flow.

Further information

Small and Medium-sized Enterprise Statistics for the UK 2003 is available at www.sbs.gov. uk. For further information, contact the Small Business Service Statistics and Analysis Team, Level 1, St Mary's House, do Moorfoot, Sheffield, S1 4PQ, tel. 0114 279 4439, e-mail statistics(sbs.gov uk. Annual Small Business Survey for 2003 by John Atkinson and Jennifer Hurstfield was prepared by the Institute for Employment Studies. The executive summary, full report and questionnaire can be accessed online at www.sbs.gov.uk/analytical.