UK businesses are increasingly ‘micro’ in size while the proportion of high-growth companies has fallen considerably in recent years, research finds.
The study by RSA, which examines the shape of the UK business economy and the biggest barriers to achieving growth, is based on in-depth analysis of the latest economic data and opinion research among small business owners and managers.
While the high proportion of small and medium-sized enterprises (SMEs) in the UK is well documented, the research finds that micro-sized businesses are the only size category to have grown their proportion of the UK business stock since 2000, compared with small, medium and large-sized businesses – rising sharply by 1.4 million or 43 per cent.
The number of zero-employee firms has increased by 21.4 per cent since the recession, making this the fastest-growing business size category analysed.
According to the study, turnover per worker climbs steadily in line with employee numbers, with companies employing 250-499 people yielding the highest turnover per employee (£186,100 on average).
David Swigciski, SME trading director at RSA says, ‘The UK has long been regarded as a great place to start a business, but the recent recession has had a significant impact on the business economy, with companies becoming smaller in size. Unfortunately, continuing along this road isn’t an option if we want a sustained recovery from the economic downturn.
‘Getting back on track and strengthening the economic recovery is a case of redressing the balance between start-ups and growth. This can be done by encouraging investment in growth and helping, as well as ensuring, SMEs reach their full growth potential.’
Since 2005, the share of firms that were classified as high-growth plummeted across all geographical regions except London, with the decline greatest in Wales, where the proportion of high-growth businesses fell by more than half, and Scotland, where it was down by more than a third.
High-growth companies are defined as those achieving on average 20 per cent annual growth in employment for three consecutive years.
Almost two thirds (64 per cent) of small business owners describe themselves as ambitious, with large differences throughout the country. The most ambitious businesses are found in Wales (80 per cent) while the least ambitious are based in Scotland (45 per cent).
Despite this general optimism, a third (34 per cent) of respondents admit that it is getting harder, not easier, to grow against a backdrop of uncertainty around interest rates, and in the lead up to the 2015 general election.
Some 66 per cent say the government must do more to de-risk business growth, rising to 80 per cent in London and the South East.
A further three quarters (73 per cent) say the government must make it easier for SMEs to access the right information and support for growth, rising to 84 per cent in the Midlands and 80 per cent in London and the South East.
Swigciski says, ‘Despite the government’s recent efforts, small businesses are still crying out for more support and better access to information. For instance, clear direction on where to turn to for advice and extending the current apprenticeship scheme could both have a significant impact.’