Forum of Private Business - Importance of Protecting the UK's Small Businesses

THE IMPORTANCE OF PR TECTING THE UK’S SMALL BUSINESSES Forum fact file

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WHY PROTECT SME’S? Their importance for the economy SMEs make up

99%

of businesses in the UK

They create

15.6 million jobs 65% of all jobs were created by SMEs in the last decade of sustained growth (1997-2007) They have a collective turnover of

£1.753 trillion 2

Exporting A quarter of UK SME business revenue comes from exports, far more than that of other Western economies, such as the US and Canada

Innovation 8% of SME revenue comes from market innovation compared to 5% from larger businesses

Growth SMEs plan to grow by: Better management

44%

33% Technological improvements 33% Increasing workforce 31% Upskilling current workforce

Sources BIS, Western Union, Forum

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WHY PROTECT SME’S? They create valuable jobs 47% of the self-employed are in highly skilled positions compared to 43% of employees

Between 1998 and 2010 Existing small businesses created

880,000 jobs Start ups created

860,000 jobs 4

Jobs are sustainable Employees of small businesses take about 3.9 days off sick per year compared with businesses with over 250 employees, whose staff take around 7.7 days off per year

Percentage of employees satisfied with: Pay 48.9%

40.6%

Under 50 employees

Over 250

80.9%

72.5%

Under 50 employees

Over 250

Work

Sources RSA, BIS, NESTA,CIPD

5

WHY PROTECT SMALL EMPLOYERS? They are good for society Buying local 63p in the pound remains in the local community from a small business; 40p from any large business 46% of small businesses support local businesses whenever possible

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“Micro employers are more likely to employ individuals on the economic margins including migrants, disabled people and the recently unemployed.“ The Second Age of Small, RSA

Customer service 80% of British consumers report feelings of happiness and contentment when they purchase goods or services from small and independent businesses, compared to just who buy from large chains

53%

80%

53%

Giving back 52% make company donations to charities 46% support local charitable events 12% mentor a small business or charity Sources RSA, FSB, Avery WePrint, Forum

7

BUT SMALL BUSINESSES ARE VULNERABLE Three brutal facts about SME survival: A decade later over 70% of hatchling businesses are gone Each year new businesses hatch with around 1 million jobs but a decade later the surviving businesses employ only around 500,000 employees Of those businesses that survive to age 10, around 75% that start with less than five employees will still have less than five employees

8

Significant barriers to growth (% SME employers) 15 10

13%

13% 10%

10%

Recruiting/ retaining staff

Cash flow/ late payment

5

Current economic climate

Legislation and regulation

9%

Political uncertainty

Limiting constraints on businesses: 67% internal capacity issues

45% external capacity issues

72% vision of the owner

“Owners lose their vision when they focus on the red tape, that is why it is so damaging and why we work to help our members minimise this.”

Ian Cass, Forum of Private Business

Sources BIS, BDRC, University of Durham

9

THE ISSUES Employment law Complying with legislation costs business

£5.9 billion

,

with small businesses paying ten times more than larger businesses.

Staff costs are mainly responsible for small business inflation rising to 5.7%

£9,000

is the official cost of an employment tribunal Time spent to resolve a simple case

33 weeks 10

AS A RESULT 76% of businesses have no employees 55% of the self-employed prefer to work with freelancers for short periods rather than hire them outright Growth in employers –

2%

Growth in VAT registered business –

8%

Forum members spend 15% less on dealing with employment law issues Sources Forum, MoJ, RSA, BIS

11

THE ISSUES Health and safety is the best in Europe The UK has the most risk averse workplaces in Europe with the UK comparing favourably to other EU nations 97.6% of small and medium-sized employers have documented policy or management procedure for health and safety, the highest in Europe Over 60% provide explicit health and safety training to staff during their induction into the business

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But how are businesses treated?

£4.2 billion

It costs businesses in compliance costs

Over 90% of prosecutions are successful Average fine from HSE

£18,944

Forum members save 41% compared to other businesses using our step by step guide and local health and safety specialists We have successfully lobbied for deregulation through Underhill and Lofstedt reviews

Sources HSE, Forum

13

TAX IS TAXING FOR SMALL BUSINESSES Tax compliance costs SME employers

£5.7 billion Tolley’s Tax Guide is now 11,520 pages since 1997, making it one of the longest in the world Since 2001, corporation tax for larger businesses has dropped 3.8bn. In the same time period it has risen by 9bn for SMEs Tax investigations cost around

£4,000 to £5,000

for small employers

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Enforcement is getting more aggressive: HMRC secured compliance revenue of

£23.9 billion in 2013-14 HMRC raked in 30% more from tax investigations into SME’s

£750m

HMRC was given an additional in the Summer Budget to strengthen its tax gathering capacity

BUT Forum members pay an average of 50% less for tax compliance than other businesses The Forum has introduced improved insurance and support to help members to deal with the pressures of a tax investigation Sources Forum, TPA, HMT, HMRC

15

CASH-FLOW ISSUES 37% of businesses stated that the high cost of doing business was the greatest strain on their cash flow Cost of business rose

5.7% in 2015.

1 in 4 businesses go into

administration because of late payment.

30% of UK businesses have had to make redundancies because of late payment

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Cash-flow issues prevent growth 39% of businesses were not able to take opportunities because of cash-flow issues That is why:

Forum members have access to: Hall of Shame where companies can confidentially expose late or poor payment practices Free membership of the Buying Support Agency to cut expenditure Access to finance finder and alternative finance solutions Sources Forum, BIS Tungsten Corporation, Intrum Justitia

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BUSINESS CONTINUITY One in five businesses suffers a major disruption every year.

80% of businesses affected by a major incident close down within 18 months, and 90% of those who lose their data are forced to close down within two years

24% of British businesses are showing at least one sign of distress

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80% of Forum members are confident they could withstand a traumatic event

20% of SMEs have not planned for any disasters

The Forum’s comprehensive range of insurance and risk management solutions are designed to protect small employers and help them to survive traumatic events

Sources BIS, R3, Axa Insurance Forum

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This fact file has been brought to you by the Forum of Private Business The Forum is a not-for-profit business support organisation whose membership is spread throughout the UK and is made up primarily of private companies that employ between 1 and 25 people.

01565 626001 www.fpb.org

the_fpb For our members, not for profit.

forumofprivatebusiness Forum of Private Business

Ruskin 20 Chambers, Drury Lane, Knutsford, Cheshire WA16 6HA Book10/Nov2015