The state of the UK’s small businesses

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60 years ago the British Prime Minister Harold Macmillan declared Britons had never had it so good.

In 2017, when we asked small business owners if they shared a similar optimism about their prospects, we got a very different response.

What are the reasons for the pessimistic outlook? Well, Brexit hasn’t helped. As we woke to the earth shattering referendum results on 24 June 2016, it was very clear that stability and continuity, hallmarks of British life, were to be replaced by upheaval and uncertainty.

Whatever your views, generally instability does not lend well to business. One look at the stock markets will tell you this. The widely held narrative is that the next few years will be a bumpy ride. While no one’s truly sure what’s around the corner, nightmarish talk of trade tariffs, price rises and labour shortages paint a gloomy outlook.

With all that going on, amidst our third trip to the ballot box in as many years, it’s easy to see why businesses aren’t hedging their bets on an easy few years. But running a business is never plain sailing and Brexit doesn’t change this. Small business owners will still face the challenges they’ve always faced. These challenges are often local and personal in their nature – rather than the global, geopolitical ramifications of Brexit.

Are the Article 50 negotiations really keeping the hairdresser on the high street awake at night?


These are the questions that keep SMEs awake at night.

Four in five MPs (79%) believe that people thinking about starting a new business, and even those who have been operating a business for a number of years, need more information advice and guidance – on exactly these types of questions.

We set up Informi to do just that. And that’s definitely something to be cheerful about.

Today, small business owners have access to a world of free information, available online. This empowers them to make better decisions and, importantly, feel more confident.

  • Need to write a business plan? Download a ready-made template.
  • Need funding? Put together a Kickstarter campaign.
  • Need to find new suppliers? Network on social media.
  • Want to spread the word of your business? Set up a Google AdWords campaign.

You can, in theory, run a business from home without moving from your computer screen.

Technology has empowered business owners, while the internet has levelled the playing field.

Access to support, funding and influence, is no longer the preserve of a small few. Anyone can set up a website, grow their users, reach out and engage with big hitting businesses and entrepreneurs – and crowdfund their venture. Where once the process of launching a business was expensive and risk-laden, marketplace websites like Etsy, provide an accessible and cost-effective entry point into business. Whatever you think of Google, Ebay, or Etsy, these sites reward the quality of your listing, product and service.

Indeed, this is one of the great opportunities that the internet presents to SMEs. And also the challenge for those who do not embrace it.

Customer centricity is more important than ever before.

Just look at the big-name companies like Blockbuster or the taxi industry who were challenged by this new order of things. If you are savvy, have a good product, a good message and service, you can outflank the big players. If you overlook it, you lose customers, you go out of business.

Away from e-commerce

So, clearly, technology and the internet have shaken up everything. But, as was demonstrated by the furore around business rates, bricks and mortar will always have a role to play in business. Newsagents, hairdressers, shops, butchers, restaurants, bars, cafes and takeaways are all still very much part of our daily lives.

The success of these businesses can come down to many things but location is an important factor, especially in a country of contrasting fortunes.

Our Top 20 places to start a business looked at a number of factors in cities around the UK including SME density, rent and infrastructure. As you can see the South of England is well represented but you may be surprised to see London languishing in 8th place.

Whilst London has the highest number of start-ups and solid infrastructure, it also has the highest fail-rate – perhaps due to the towering rent costs and business rates.

Indeed, while the Business Rates re-evaluation benefitted some parts of the country, London and the South East based-businesses have seen punishing rate increases, threatening their very existence. This poses a fundamental question about the High Street, put forward in this quote from author Jeanette Winterson.

“Do we want corner shops?” Do we want bookshops? Do we want dry cleaners? Do we want somewhere you can get a pint of milk? If the answer is yes… we have to look at how this becomes affordable.”

But that shouldn’t put you off starting a business.

In the last few years, there’s been a significant shift towards a new way of working.

“There are many, many more small businesses than there were in the Eighties, but our cities and our buildings just haven’t evolved to keep pace with that,” Rohan Silva, founder of Second Home said to the London Evening Standard in 2014.

He and others like him have made it their mission to change this. Co-working spaces worldwide have tripled in the last five years with companies such as Second Home and Central Working offering a cheap base for startups, freelancers and small businesses.

For some, co-working represents a kind of working utopia; an exciting, dynamic environment that breaks down traditional workspace conventions. Everything is transparent so companies can see what one another are doing. This openness breeds a culture of collaboration and enhanced creativity. And, often, investment opportunities.

They’re often people working within co-working spaces who can fund small businesses, who can recruit for small businesses. It is a broad ecosystem of sorts.

Clearly, the world of work is changing.

Over 5 million people are now self-employed in the UK, almost one in six people. Whatever the outlook, this number looks set to rise, especially with the advent of the so-called gig economy.

Equipping Britain for a future outside the EU is clearly important but we also need to think about how we tie this in with this growing number of business owners and self-employed workers.

Much was made of the Chancellor’s recent Budget announcements, particularly his attempted tax-hike on self-employed workers. This in part was a recognition of the shift towards self-employment in recent years and the shortfall in tax revenue.

“Historically, the differences in NICs between those in employment and the self-employed reflected differences in state pensions and contributory welfare benefits,” he said.

“But with the introduction of the new state pension, these differences have been very substantially reduced.”

There’s much contention around this and we won’t weigh in with our two cents, other than to say we welcomed the U-turn. But there’s no doubt, that the government, whichever party that is, needs to do more to foster and support Britain’s entrepreneurs.

One of the first things would be to simplify the tax system and tackle the disparities between what small businesses and large corporations pay.

More needs to be done to improve infrastructure around the UK. The rail and road network are still problematic in large parts of the country, while rural broadband connectivity is woefully inadequate.

As we’ve highlighted today, business rates threaten the very existence of many small businesses. While some measures were taken to soften the impact of the revaluation, the government needs to tackle what some are calling the ‘destruction of Britain’s high streets.’

As much as there is uncertainty ahead, we have a chance to reshape Britain for the better and fuel our undying entrepreneurial spirit.

We’ve always been a nation of creative thinkers; often at our best in the face of adversity.

As Winston Churchill once said: A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.

So what can you do?

  • Have a robust business plan, but be prepared for it to evolve as the business evolves
  • Monitor and try to forecast your cashflow on a regular basis – make sure you reconcile your bank account, with your accounts regularly, to ensure nothing is missed.
  • Chase your debtors regularly – enforce your credit terms
  • Always be aware of your liabilities and when they are due
  • Don’t ignore official letters and reminders
  • Work closely with your advisers – keep in touch with them – act on their advice and if you are not sure, ask.

This article was first published on Informi.

Informi is your essential destination for everything you need for running your own business from tips on your health and wellbeing to marketing and finance support.

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