SMEs create 400,000 new jobs in the last year

New figures from the Office of National Statistics (ONS) show that British SMEs are now responsible for 15.6 million jobs – an increase of 400,000 in the last 12 months.

Trends using historical data suggest that they could create almost two-thirds (65 per cent) of all new jobs in the UK during the next decade.

Small firms operating in the UK have a collective turnover of £1,753,900, generating 47.2 per cent of private sector turnover; rising from 46.8 per cent, suggesting that SMEs have indeed been driving UK wealth creation in the last year.

Interestingly, the number of unregistered businesses without any employees has soared to more than three million, making up 56 per cent of the UK business population.

This is an issue for the national economy given that non-employers tend to be less productive than employers overall; with a turnover per person of £53,000 compared to an SME employer figure of £135,900.

However, turnover per head of a VAT-registered non-employer was £118,000 compared to £108,000 for businesses with less than 10 employees.

The Forum of Private Business (FPB) believes the figures demonstrate the need to improve the business environment for UK’s 1.3 million micro, small and medium employers, creating sustainable business growth, as the current data suggests it simply does not pay to take on staff if you are a micro employer.

Ian Cass, managing director, The Forum of Private Business, said: “An increased number of businesses, particularly those that have reached the VAT threshold, is great news as it shows the strengths of the UK economy – individuals can set up and do relatively well in self-employment which fits in with other lifestyle priorities such as looking after children or elderly relatives or spending more time on other non-work related interests.

“However, the lack of growth of businesses at each step of the economic cycle is poor with government bodies imposing cost and barriers on businesses rather than looking to solve them.”

Micro employers currently spend 10 times more on regulation per person than the average medium-sized firm. The lack of reward for micro employers taking on new staff means many micro businesses simply turn to freelancers rather than train and employ local talent.

“We need a business infrastructure that rewards business owners who employ and support their local community, not one that demotivates them with new ways to shuffle paper or methods to punish them for running their business as effectively as possible,” added Cass.

“Getting more businesses to employ, export and grow quickly when the opportunities arise are crucial to creating a better living standard for all, not simply the business owners or their employees.

“Successive governments have failed to answer the small employer’s question of why can’t it be simpler to employ and grow my business? We need a competitive and consistent marketplace to do business in.”

Date published 16 Oct 2015 | Last updated 16 Oct 2015