by Billy MacInnes
The UK’s much-vaunted credentials as an entreprenuerial economy have come under fire from research that claims the growth prospects for small businesses are diminishing and that estimates on the numbers of SMEs are wrong.
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Claims by the Government that there are a record number of small businesses in the UK has been rejected by the Forum of Private Business (FPB).
The PFB has pointed to a study carried out by the European School of Management for Shadow Chancellor George Osborne, which revealed the proportion of small businesses achieving annual turnover in excess of £1m in their first five years dropped from 29 per cent in 1998 to 16 per cent in 2006.
It found only 6.8 per cent of UK small businesses reached turnover of more than £7m in their first five years compared to an EU average of 16.3 per cent.
Competitiveness Minister Stephen Timms had previously said that 180,000 small businesses had been created every year since 1997 based on its research which found the number of registered small businesses had increased from 3.8m in 2001 to 4.4m in 2006. But Len Collinson, national chairman of the FPB, claimed the increase was due to existing small companies and one-man bands officially registering as businesses.
"The fact of the matter is that there are no more employers than there were in 1997," he said. "This increase in the number of small firms is all about more companies without employees."
FPB member Tracy Hoather, at courier firm Sameday, agreed. "I would be interested to know how many of those ‘new’ firms are micro businesses and one man bands that have now officially registered."
Hoather believed the rise could be attributable to large companies encouraging staff to become self-employed and form limited companies by using dividend tax breaks to stimulate registration of small businesses.
"This allowed these large businesses to avoid much of the social legislation that has been introduced by the government, including the national minimum wage, working time directive, severance packages, lay off pay during quiet times, holiday pay and sick and maternity benefits," she added.