According to government figures, out of the 6.0 million businesses currently operating in the U.K., 5.936 million fall into the category of small companies, employing between zero and 49 people. Break the figures down further and you find the vast majority of small companies – 4.567 million, to be precise – are run solely by their founders.
So what does that tell us? Well first and foremost, a lot of people work for themselves or in very small ventures and the sheer numbers doing just that suggest micro-businesses are – collectively speaking – making a significant contribution to the British economy and to society as a whole.
But just how much of a contribution exactly? Well, a new report by website creation tools company, GoDaddy argues that micro-businesses – defined by the study as companies of up to ten people – are not only an important component of the economy but could also play a major role in the process of “leveling up” disadvantaged regions of the United Kingdom.
Prepared in collaboration with George Saridakis – Professor of Entrepreneurship and Small Business at Kent Business School – Godaddy’s VentureForward report identifies around 2.0 million companies operating with ten or fewer people on their books.
And in the wake of the pandemic, it finds that ownership of these companies is becoming younger and more diverse.
For instance, the proportion of micro-businesses started and run by under 35s has doubled since 2020, rising from 16.4 to 34 percent of the total. Across the same period, female ownership has risen from 32 to 39 percent. Ethnic minority-owned businesses now account for 15.1 per cent of the total compared with 13.2 per cent in 2020.
All this has encouraged GoDaddy to contend that a “new breed of entrepreneurship” is emerging in the U.K. in wake of the Covid crisis.
To some extent, that’s probably true but it does raise questions around the definition of entrepreneurship. Many micro-businesses – and I’m one of them – are essentially self-employed freelancers who don’t necessarily consider their careers in entrepreneurial terms. At the other end of the spectrum, at least some of today’s micro-businesses employ staff and may grow to be the SMEs or mid-sized companies of tomorrow. In that respect, this is a segment of the business community that might be described as a very mixed bag in entrepreneurial terms.
So can you gather them together in a report and draw conclusions about entrepreneurship? Ben Law – Head of GoDaddy in the U.K. – says there is a common factor. “Owners of micro-businesses tend to have a passion,” he says. “They have a passion for what they do and that’s what drives them.”
Perhaps more important, Britain’s micro-business owners are creating viable ventures, albeit often on a small scale. “What’s really encouraging is that over half the businesses started in 2020 are now averaging £25,000 in turnover. Around three-quarters of microbusinesses employ more than one employee,” says Law.
Now, in an entrepreneurial world that tends reserve its plaudits for companies that report stellar turnover, ramp up employment into the hundreds and secure millions from VC financers, those figures probably don’t sound that impressive. But as Law points out, Britain’s micro-businesses, collectively and individually, benefit their communities. They employ local people, shop in local shops and tend to look close to home for suppliers.
And as Law sees it, micro-businesses should be contributing to the regional leveling up agenda that is (supposedly) central to U.K. policymaking. Put simply, the growth of the very small business sector – comprised of companies that can often be started with very little capital while also having the capacity to begin generating sales in weeks or months, rather than years – can contribute to economic prosperity in disadvantaged regions.
The Great Divide
But here’s the problem. The U.K. economy is characterised by a North/South divide, with the areas around London and the South East remaining stubbornly more prosperous than many of the regions across the country as a whole. Perhaps unsurprisingly, this is reflected in the figures for micro-businesses.
If you want to find a micro-business owner, the highest densities are in London, the South East and the South West.
In that respect, the potential for micro-businesses to assist in leveling up in disadvantaged U.K. regions is not yet being matched by activity on the ground. And according to Law, the government is not doing enough to encourage the creation of very small companies. “We are making decisions at policy level to encourage small and medium-sized businesses, but not enough is being done to support the smallest companies,” he says.
That support is not necessarily financial – although access to capital clearly helps. Law says businesses need assistance in areas such as marketing themselves, getting online and technical expertise. “We need to work out how we get educational material to micro-businesses,” he says.
It has to be said that boom in micro businesses is probably, in part, related to job losses during the pandemic and the report notes that an increasing number of owners have cited unemployment as a trigger for action. Nevertheless, it’s probably also true to say that many people saw the pandemic as an opportunity to reassess their lives and try something new. And as the numbers of self employed and small scale owners grow, their future economic contribution might be important.