How many businesses do we REALLY have in Britain?

5 years ago

According to Start-Up Britain, 2012 was another record-breaking year for British start-ups, with the number of new businesses registered at Companies House up by 10% (484,224 in 2012 compared to 440,600 in 2011).

Emma Jones, co-founder of StartUp Britain said: “These figures are hot off the press, they are unaudited at the moment, but what it’s telling us is that there was a clear increase in start-up rates in 2012. Small and start-up business are the driving force of the British economy and at StartUp Britain we have seen plenty to celebrate over 2012.  Times are hard yes, but it never ceases to amaze us when we see resourceful Britons making business ideas come to life in difficult times. We have seen this at Colleges and Universities as part of our national 2012 Tour, at industry weeks, and on the High Street as we’ve filled empty shops with budding StartUps as part of PopUp Britain.”

Having spent the first 11 months of 2012 at Shell LiveWIRE, ‘the UK’s biggest online community for young entrepreneurs’ (and the previous 3yrs before that), I’ve seen first-hand that there’s an abundance of great business ideas, passion, talent and enthusiasm to become self-employed right across the UK (see a snapshot on the Google Map of Shell LiveWIRE Award Winners).

Many people are already deciding to take matters (and their destiny) into their own hands by giving it a go and starting their own mini-enterprise instead of taking a job with someone else, or as a second income on top of their day job (the so-called ‘5 to 9ers’). The recession and shortage of jobs in certain parts of the UK is also almost certainly exacerbating this as some people simply don’t have a choice or are covering their backs and hedging their bets for fear of losing their job.

UK has more businesses than you think

Personally, I think that the number of new businesses created in 2012 is far higher than the 484,224 reported by Start-Up Britain as this figure only includes Limited companies (you don’t need to register with Companies House if you are a Sole Trader). This is a common problem with news reports on the state of British business but it’s understandable as the reality is too messy and chaotic for some journalists and politicians to get a true grasp of.

A more accurate figure would be to include the number of people who registered as self-employed with HMRC in 2012 (although there are many who fall under the radar by making a little bit of extra money in an ad hoc way by selling things on sites like eBay, at farmers markets and art/craft fairs both offline and online at sites like Etsy and NEVER get around the registering). These people will often still have a day job and are simply ‘testing the water’ in their spare time. They may genuinely want to go full-time self-employed but haven’t yet built up enough income or confidence to take the plunge. Some may do it for a little while and then give up whilst others may be quite happy with just a little bit of extra cash and not wish to develop the business further.

If we go back to my experience at Shell LiveWIRE, we had between 1500-2000 new members registering on the site each month. However, registration was only required if they wanted to apply for one of the monthly £1,000 Shell LiveWIRE Grand Ideas Awards or comment on the discussion forum so I would consider these people (24,000 max) to be the ones who were ‘really serious’ about starting a business or at least taking steps to start.

On top of this you have the ‘lurkers’ and general website visitors who are just reading information on the website and forum about starting a business without actively participating or making themselves known (roughly 250,000 per annum). These people may or may not actually start. On top of this you have all the other people who attended business start-up events across the UK, bought or read books on running a business (Amazon shows that 5,527 books on self-employment were published in 2012 alone) or who spoke to a professional business advisor in 2012 (the National Enterprise Network estimates that they helped create 17,500 businesses in 12 months).

This informal economy may be frowned upon by HMRC but it is happening and so needs proper recognition, not in a negative way but for the potential positive outcome it may have for the people who are doing it if they are to succeed. The secrecy is stifling people’s potential and I’d personally love to see more open discussions about how enterprise professionals, organisations, local authorities and the Government can genuinely help these aspiring entrepreneurs move out of the shadows and into the light of a brighter future for themselves and Britain!

What do you think of the blog above? Please share your ideas with us in the Comments box below or get involved with a deeper conversation on our Google+ Page.

Try Sage One for FREE

Take a closer look at our Sage One Cashbook, Accounts and Payroll software and sign up for a FREE 30 day trial by clicking on the buttons below.


15 responses to “How many businesses do we REALLY have in Britain?”

  1. You are right about the informal economy.  It is enormous. However my main worry is with the fixation we have over the number of start-ups.  What we should be concerned about is the the number of businesses that are surviving and thriving.  I personally think we should be looking for fewer but better start-ups – with more robust management teams and more thorough planning and preparation.

  2. Paul – totally agree with you on this. The StartUp Britain Tracker is powered by Companies Made Simple which sources data from Companies House and therefore, as you rightly state, only counts Limited Companies. What I’d love to see is much better measurement on the number of micro enterprises/ small businesses and their contribution to the UK economy – I’ve written about this quite a bit and aim to turn words into action this year. 

    In the meantime, let’s add together StartUp Tracker figure plus the number of sole traders and this nation looks ‘even more’ entrepreneurial! 

    Here’s to a Happy 2013. Thanks for your support. 

    Emma  

  3. Hi Emma, thanks for taking the time to read and comment on my blog. The StartUp Britain Tracker is a useful tool but it would be great if you can somehow get all the main enterprise orgs to share their data so decision-makers could have a much more accurate understanding of how many businesses (or potential businesses there were), Paul

  4. I think you’re right Mike. There is a danger with overly-promoting the message that ‘starting a business is easy…and anyone can do it’. Self-employment isn’t for everyone. It’s rewarding but also hard work so enterprise professionals have a responsibility to give people all the information they need to make a decision and go into things with their eyes open. (Paul)

  5. I also agree with you Paul but I’d like to think that not all us journalists are confused by the ‘chaos’ and ‘mess’ 🙂

    It is clear that thousands or possibly millions of small businesses are not counted in the official statistics but I know it is something the government is working on. I attended a meeting at 10 Downing Street last October which focused on that subject. More details at http://ow.ly/gtBXm 
    Another attendee of the meeting wrote this excellent piece summarising the main points: http://ow.ly/gtC0e

    Dan MartinEditor, BusinessZone.co.uk

  6. Thanks Dan, as I said on Twitter you’re definitely an exception. It’s not really a criticism of journalists or politicians, more really of people regurgitating topline stats without digging deeper because it’s easier and the real data isn’t easy to get hold of.Good to hear that the meeting at No.10 was so positive and thanks for the links. I look forward to reading more about how things progress on BusinessZone.co.uk.

    Paul
    Sage One UK
    http://uk.sageone.com
    http://www.facebook.com/sageoneuk

  7. I would like to second Mike’s comments about fixation with
    ‘Starts’.  Yes it is a measurement of some form, but it is not
    longitudinal. Really, you need a variety of linked data to tell you anything
    before you know what the picture is. A ‘Start’ is simply a point in time. I
    used to get so frustrated with Business Link being obsessed by ‘Starts’ but
    rarely ever mentioned what happened to the business afterwards- almost like
    someone has signed on the dotted line and now we can walk away as it’s been
    counted

    I often used to think we should count how many people we had
    persuaded NOT to start- as they were risking losing everything with a poor
    business idea and poor quality structure. We get so obsessed telling everyone
    how great it is to start a business and wanting people to start- that it
    actually becomes dangerous. Many support organisation in the past have been
    measured (and paid) on how many people ‘started’ a businesses- in my opinion
    that is a disaster, as you end up forcing people to do it when they are not
    ready, or worse still- not suited to it. If you couple that with the historical
    high failure rate (often because support organisations are focused on the ‘start’
    -not the help afterwards, help afterwards does not pay!), you are setting
    people up to be in serious trouble a year or two down the line.  A failed business, debts, CCJs, strained
    relationships etc .  How many times do we
    hear ‘ah, but you learn from failure!’ – tell that to a wife and family
    depending on your income when you have a raft of debts

    Mike is right- Quality not quantity here is paramount if you
    want any of these businesses to be around in the future. My feeling for some
    time has been that we need a paradigm shift from all out promotion of entrepreneurship to
    the masses as a ‘career choice’, and move to intensly supporting those in micro businesses
    flourish and survive, helping them grow and support employment. Often a great route into starting your own small business, is to have worked in one. Yes, we need
    more entrepreneurs- but the simple fact is, it’s not for everyone.

  8. I’m also baffled by this obsession with start up numbers. How does it help and what is it trying to draw attention to?

    Not only are the figures misleading, they are also meaningless and academic. The concern for practitioners and policy makers should be on viability of existing firms and quality of new start ups – not on the volume. It is trading receipts which are the key measure.

    I personally know of many ‘start ups’ who have no income whatsoever, and professionally work with many hundreds of practitioners and funders who have witnessed a surge in reluctant and unsustainable entrepreneurship over the last year.

    Hence, I completely agree with Mike that the focus should be on less, more viable start ups – and in some cases discouragement – especially for the most vulnerable and gullible.

    Colin  
    Cobweb Information
    http://www.cobwebinfo.com

  9. I Agree with Stu here that we need to be very careful to be already managing the increase in the failure rate of businesses a little way down the line. It is of course good that there is now so much support that people feel able to start up their own business whether they be a limited company or just a venture, but there may also be better support for failed businesses and individuals too, as even with the best support structure if you increase the volume of startups, you will conversely, be increasing the number of failures in 18months and two years time. Yes you can seek to mitigate that as much as possible with mentoring and other support, but there will still be a problem. In the US a failed first-time entrepreneur is still applauded, in the UK not many would have the ability to start again if they end up with negative aspects on a credit report. 

    I heard Lord Digby Jones say this exact point a few weeks ago that regardless of who the business minister is, and whatever party they are from, in two or three years time they will have to say that the failure rate has increased. The media will pick up on it as a huge negative. The volume of successes may well still be greater than in previous years, but that wont be the story!

    A slightly different, but still related point, is the position of mortgages for entrepreneurs also needs to be looked at as these numbers are rising so dramatically but anyone who owns more than 20% equity in their company is regarded as self employed and is required to provide the accounts, usually three years, for their business when getting a personal mortgage. If they are running a bootstrapped enterprise in it’s first year or so taking just enough to live on, but come against their current mortgage coming up for a renewal or need to move they may well be pushed down the route of having to revert to renting (which is normally 20% more than paying a mortgage) and is a) going to add financial pressures on them b) counterproductive to the governments fiscal policy of boosting the economy by housebuilding.

    I know that sub prime esq lending got us to where we are, and I am not bold enough to suggest an alternative, but if we are going to see these record figures increase then there needs to be a bit more of a holistic approach to support the entrepreneurs themselves as people not just as business drivers. 

    I probably sound negative, which is wrong, I have always owned my own company and am pleased and proud to help others do similar through StartUP Britain and elsewhere, but I am worried that we are creating a sort of Red Bull game here by taking all these businesses to the top of the platform with their wings on and whilst many will fly, some pretty well, some will fall to earth and i’m nit sure there is much cushioning to protect them.

  10. My first reaction to hearing this on the news was ‘but how many failed in the same period’. I know this appears to be negative but actually the net growth/reduction in  smaller business is much more indicative to me of the health of the economy.  If we were starting businesses at a large rate but most folded quickly, there is no sustainability in this and we should be looking at our support mechanisms to see why. If most of these startups grow and thrive, that is healthy and to be encouraged. Not sure I know which it is right now and these numbers (sorry, Emma) don’t really help me in that.

    Do we have have net numbers? And what is the trend they reveal?

    Andy

  11.  Your point re mortgages is very relevant, Richard. Seems that there are many more ways in which not being mainstream employed can be a problem, too. The taxman is still very suspicious of sole traders, despite the increase they are seeing.

    If this is the future of work (and it may be) with networks of connected businesses providing collaborative solutions, we need to rethink how we deal with small traders across the board.

    A

  12. Thanks for taking the time to read and reply to my blog Colin! I’m a big fan of Cobweb (and Marianne) so wonder if you could include a link to this blog in your next BAD News for more business start-up professionals to read & comment on? (Paul)

  13. Thanks for taking the time to read, comment and Tweet Stu. As usual you’re spot on here and talk a lot of sense based on years of practical experience working on the front line of enterprise support! (Paul)

  14. Self employment also isn’t a viable source of income per household in all cases – surely what is being counted, measured, and shouted about needs to be a relevant figure for a relevant reason. I agree with Mike that there’s a distinction between enterprise, almost for enterprise’ sake, and a sustainable enterprising economy.

    I run two businesses on a self employed basis alongside my normal, full time day job. I don’t do either of them to make money and I couldn’t survive on the income for more than an hour, even though one is three years old! Maybe ‘business’ is not the right word for these ventures, maybe those who just want to make a hobby break even should be considered differently to Tesco PLC.

  15. Hi Suzy, thanks for commenting. There is a huge gulf between small businesses like yours which are run in your spare time and huge PLCs. Typically, success has been judged by how many Limited Companies are set up and the sole traders are simply ignored as not being relevant. However, people have to start somewhere and I’ve seen first hand some great little businesses that have started off small but then grown quite rapidly in year 2 – they just need to survive beyond the first 12 months. (Paul)