The latest figures from the Office for National Statistics (ONS) have revealed that small firms are continuing to drive the UK economy but, while they are creating wealth (generating 47.2% of private sector turnover), they are not creating jobs.
The number of unregistered businesses without any employees has risen to over three million which means that three-quarters of all businesses are now one-man (or woman) shows.
The Forum of Private Business (FPB) has pointed out the economic problems of this trend: the turnover per person of “non-employers” is £53,000 compared to an SME employer figure of £135,900.
According to FPB Managing Director Ian Cass, one reason is that it simply does not pay for a micro-employer to take on staff.
“A disproportionate regulatory system (micro-employers spend 10 times more on regulation per person than a medium-sized firm) and lack of reward for the nation’s small business owners is seen by the Forum as inhibiting the UK’s economic growth as firms use freelancers rather than train and employ local individuals,” he went on.
Mr Cass also noted that the turnover argument does not apply to the more successful sole traders as the turnover per head of a VAT registered non-employer, at £118,000, is greater than that of businesses with fewer than 10 employees (£108,000).
The rise of VAT-registered non-employers shows how great the market has become for flexible labour, he concluded, and how traditional employment practices do not fully meet this need.