SMALL BUSINESS UPDATE Matthew James Thursday, 19 th May 2005

SMALL BUSINESSUPDATE

Matthew James

Thursday, 19th May 2005

Objectives for the Presentation

> Small Business Trends

> Small Business Performance

> Entrepreneurship in the UK

> Spotlight on Female Entrepreneurs

> Population Growth & Ethnic Groups

SMALL BUSINESS

TRENDS

Recent Trends: Starts

During 2004, London & South East continue

to lead the way in business starts

Source: Barclays ‘Starts & Closures’, 2004(000’s - estimates based on business accounts)

2004 Per 1,000 of working age

London 92.8 19

South East 71.4 15

North West 52.8 13

South West 49.0 17

East 44.0 13

West Midlands 36.8 11

Yorkshire 35.6 12

East Midlands 33.8 13

Wales 21.1 12

North East 15.7 10

Recent Trends: Starts (2)

Rise in starts across the Capital during 2004,

Though down slightly across the South East

Source: Barclays ‘Starts & Closures’, 2004(estimates based on business accounts)

2003 2004 % Change

London 79,700 92,800 +16%

South East 73,000 71,400 -2%

Total 400,000 453,000 +13%

Recent Trends: Closures

Source: Barclays ‘Starts & Closures’, 2003/4(estimates based on business accounts)

Half Year 1 Half Year 2

2003 138,900 151,800

2004 162,000 163,600

Change +17% +8%

At a UK level, mainstream business closures are on the rise…

…BUT, still outnumbered by starts

2004 Q1

2004 Q2

2004 Q3

2004 Q4

2005 Q1

Liquidations 3,131 3,151 2,969 2,938 2,900

Bankruptcies 10,343 11,214 12,032 13,020 13,229

Total 13,474 14,365 15,001 15,958 16,129

Bankruptcies form a small part of registered stock;

Typically less than 10% of all business closures

Source: Depart of Trade and Industry, 2005

Bankruptcies & Closures

London has highest business start and closure rate in the UK

Source: LDA ‘Economic Development Strategy’

Starts & Closures in the UK

Effect on UK Business Stock

2003 – APPROACHING 4.0m BUSINESS ENTERPRISES IN THE UK

First significant rise in business stock for some time

Source: SBS, ‘Small Business Statistics’ 2003

2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

4

1980 1983 1986 1988 1990 1992 1994 1996 1998 2000 2002 2003

Business Population (m)

2003= 3.945m

Employee Growth

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

1999 2000 2001 2002 2003

No employees

1-20 employees

Growth in business stock, BUT not in businesses with employees

No. with no employees up on previous year (240,000)

No. with employees down slightly on previous year (10,000)

SMALL BUSINESSPERFORMANCE

Business Survival Rates

London South East UK

1993 61.4 63.5 62.1

1994 60.8 64.3 62.5

1995 62.6 68.3 65.3

1996 63.3 69.5 66.0

1997 64.2 70.7 67.4

1998 62.5 69.6 66.3

1999 62.8 69.7 66.5

About two thirds still trading 3 years after registration

London lower than South East & UK average

BUT more starts and more closures = CHURNSource: SBS SME Statistics, 2003

SME Performance: Current

Change Q4 03/Q4 04 Up Down Same Balance

Sales Turnover 47% 28% 23% +19

Average Employment 18% 12% 67% +6

Investment 23% 15% 59% +8

Selling Prices 37% 10% 50% +27

Sales performance of Britain’s small firms

= Performance of the Workspace Group market place

Source: SERT, ‘Quarterly Survey of Small Businesses in Britain’, Q1 2005

SME Performance: London & SE

…BUT London only area in UK to where moresmall firms cut the numbers they employ

London and SE show good sales performance…

Sales

Turnover Average

Employment Investment

Selling Prices

London +12% -4% +4% +20%

South East +17% +7% +2% +13%


SME Performance: Sectors

43

29

19

18

18

13

11

6

4

0 10 20 30 40 50

Hotels & Restaurants

Construction

Business Services

Personal Services

Manufacturing

Retail

Agriculture, Forestry & Fisheries

Wholesale

Transport, Travel

Sector

Balance reporting an increase in sales over last 12 months


SME Performance: Prospects

Anticipated change over Q1 2005

Change Q4 04/Q1 05 Up Down Same Balance

Sales Turnover 42% 25% 32% +16

Average Employment 15% 8% 75% +7

Investment 18% 15% 65% +3

Selling Prices 29% 7% 60% +22

Confidence about sales translated into overallincreases in selling prices


SME Problems & Issues

Government regulations & paperwork seen as biggest concern- as it has been for last 18 months


ENTREPRENEURSHIP

IN THE UK

How Entrepreneurial is the UK?

Based on ‘Total Entrepreneurial Activity’,

UK is ahead of Germany & France but behind the USA

0

2

4

6

8

10

12

14

UK US Germany France

2002 2003 2004

2004 GLOBALAVERAGE = 9.3

Source: GEM, 2004

0

1

2

3

4

5

6

7

8

East M

idlands

East o

f Eng

Lond

on

North E

ast

North W

est

South

East

South

Wes

t

West

Mid

UK Ave

rage

2002

2004

TEA in the UK: A regional Picture

Source: GEM, 2004

London & SE lead the UK in TEA…… and both have seen significant increases over last 2 years

Expect to start a business

0

2

4

6

8

10

12

14

16

18

US France Italy UK Germany Japan Canada

2003

2004

UK: 9.5% of working age population expect to start a business innext 3 years – US, Germany, Japan all down

Source: GEM, 2004

SPOTLIGHT ON

FEMALE

ENTREPRENEURS

Women: The Facts

25% of the UKs 3.2m self-employed workers are now women

30% of business owners are women

The highest number of female startups are based in London, where 8.4% of the female workforce are self-employed

Source: Labour Force Survey, 2003

BUT… Men are still twice as likely to start a business as women Source: GEM, 2004

Characteristics of Female Entrepreneurship

Businesses started by women use less capital than those started by men

Women tend to have slower early growth trajectories – stronger ties and egalitarian coalitions

Women tend to start businesses with known technology and in established markets – less innovative?

Women’s businesses tend to be smaller and less expensive than those of men

Source: GEM, ‘Report on Women & Entrepreneurship’ 2004

Attitudes to Entrepreneurship

Women showing improvement but still behind men

on key start-up indicators

Men Women

2003 2004 2003 2004

I expect to start a business in the next 3 years 10.3 11.8 5.1 7.2

Personally know an entrepreneur 33.6 35.5 23.9 26.0

There are good start-up opportunities where I live 44.0 44.1 33.1 35.9

I have the skills to start a business 63.2 65.0 42.9 46.6

Fear of failure would prevent start-up 29.8 28.7 33.9 34.5

Entrepreneurship is a good career choice 51.3 54.3 51.1 55.8

Entrepreneurs have a high status 71.2 71.0 70.7 72.0

Good media coverage of entrepreneurs 57.7 57.4 54.4 55.8


Women: Trends

Lower expectations – expect growth of two-fifths over 3 year period compared to men who expect to double

Over 5 year period from start-up, women expect to create 2 new jobs; men expect to create at least 5

“Women have lower expectations of what they can achieve and this translates into lower expectations of job creation and turnover

growth”


POPULATION GROWTH &

ETHNIC GROUPS

Growth in London outpacing the UK…


UK Annual Population Growth

…GLA forecasts a rise of 711,000 by 2016

Strong increase in London population growth between 1991-2001


Population Growth by UK Region

Net international migration in London accountsfor growth of about 100,000 pa

Source: ONS ‘London: Region in Figures’

Accounting for Growth

Source: Dept for Work & Pensions ‘Migrants in the UK’

Americas11%

East Europe3%

West Europe5%

Rest of Asia10%

Australasia4%

Middle East3%

Indian Sub-continent

20%

Africa19%

Other1%

EU24%

Stock of working age foreign-born population, by country of birth= c3.6m, about 10% of total working age population

Who are the Immigrants?

• Of current UK working population, 3.6m are foreign born (10%) • Tend to be ‘…very heavily concentrated in London and the South East’

• And ‘…of working age, concentrated between 25 and 49’ (table below).

Source: Dept for Work & Pensions ‘Migrants in the UK’

Effect on Working Population

Ethnic Groups


TEA by Ethnicity

Almost without exception, ethnic groups are moreentrepreneurial than the white population

TEA Amongst Ethnic Groups

Expect

Start Up Know

Entrepren Good Opps

Have Skills

Fear of failure

White 8.1 30.6 40.3 56.3 31.2

Mixed 21.4 35.8 45.3 51.9 36.4

Indian 20.4 32.8 45.1 62.4 36.6

Pakistani 31.4 40.5 41.7 55.2 19.3

Bangladeshi 29.4 38.3 58.1 58.7 14.9

Other Asian 17.4 38.1 36.1 58.9 35.8

Black Caribbean 25.7 37.5 25.0 59.0 31.7

Black African 27.1 34.7 41.2 65.8 28.7

Black Other 27.6 33.3 55.6 69.6 37.5

Ethnic Groups are characterised by expectation of starting business and belief in their skills to do so


“Ethnic minority people tend to have more positive attitudes towards entrepreneurship and better self perception of their

capacity to establish a business”

Types of business

Whites or mixed race are most likely to be involved in start-up activity involving a technology not available a year ago

Black Caribbean most likely to be starting up a business that provides a good or service that is new to all customers

Indian businesses are least likely of all ethnic groups to be export oriented – 87.5% said that they have no overseas

customers

Source: GEM, 2004

Conclusions

> Starts outnumber closures = increase in population

> Improving performance & confident forecast

> Entrepreneurship in the UK at good level

> Impact of rising female starts & optimism?

> Impact of growth in population & net migration?

Documents

SMALL BUSINESS UPDATE Matthew James Thursday, 19 th May 2005