It’s hard to put any positive spin on what’s happening with small business these days. We talk about small business being the backbone of the economy, but the statistics show that the government doesn’t truly “get” what this is about.
The focus on “jobs and growth” seems to be the purview of large business these days in terms of the benefits they provide to society. However, as Nigel Mills, of the Entrepreneurs’ Forum, often points out, all net new jobs come from businesses in their first five years.
Surely, I would suggest this statistic alone is enough to warrant greater emphasis upon small business, but I guess it’s understandable that the focus is on big employers, when one realises the overwhelming sources of revenue are from Income Tax, VAT and National Insurance. The £46bn or so of Corporation Tax receipts that contribute to the national total income are not insignificant, but are dwarfed by Income Tax.
It’s alarming that despite the debacle around tax avoidance/evasion of larger companies, the top 100 UK firms and their employees contribute £80bn of the £700bn tax take last year, with staff generating at least 14% of total Government tax receipts. Yet there were 2.45 million enterprises registered for VAT and PAYE in March 2015. Therefore, those 100 businesses provide around an eighth of a total, with approximately 24,500 times as many businesses contributing the rest, illustrating why big business is currently prioritised.
Smaller businesses get, de-prioritised and despite all of the bureaucratic initiatives to help, fundamental structural factors to support growth are absent. Many businesses compete in smaller local markets without the capability of pursuing, for example, large government procurement contracts and are either squeezed out or drop out of such processes because lack the time and resources to compete. Some local authorities see the acquisition of VAT status as an indicator of economic improvement, ignoring many smaller businesses that frankly do not see adding 20% to their charges attractive.
Self-employment is not for everyone, yet many attempt to make this jump rather than a life on benefits after falling out of work, for example. It is of note that Jeremy Corbyn has indicated that extending benefits to the self-employed is an important part of his more egalitarian policy platform.
Despite the 8% increase in corporate business activity between March 2014 and 2015, there was a 4.2% reduction in the number of sole providers and partnerships, making up only 20% of total enterprises in the UK. If these non-employing businesses were given the support they deserve, they can become the growth companies of the future, rather than shrinking away as they revert to the comfort blanket of direct employment.
There are many individuals and businesses that seek simply to maintain continuity, rather than grow. This may not be a particularly attractive concept, but reflects a business balancing risk against reward. Clearly, amongst that contingent are the pedestrian, the enlightened and the mature, balanced businesses that are happy with the returns on continuing to provide employment in small or large numbers. Equally amongst smaller enterprise, are many who aspire to great things but experience glass ceilings created by the competition and the very environment that government and others create for them to trade in.
Yes, I really crave a government that “gets” small business. Not the sub-249 employee SME, but the many more that are significantly smaller than that.
These are the legion unsung heroes in the economy too busy surviving to lobby and too small to attract government attention, whose presence offers hope and autonomy and have a social and economic value in our communities. They frankly deserve a bit more intelligent help.