BIS Small Business Survey 2010: a user guide for analysts · BIS Small Business Survey 2010: a user...

BIS Small Business Survey 2010: a user guide for analysts

Contents 1 Survey background and methodology……………………………………… 1

2 General analysis considerations…………………………………………… 2

3 Data linking considerations……...…………………………………………. 4

4 Links to relevant documents…………………………………………………. 5

5 Contacts for further information……………………………………………… 5

Annex A Match rates by key characteristics………………………………… 6

1 Survey background and methodology 1.1 Purpose and uses of the survey The Small Business Survey 2010 was commissioned by the Enterprise Directorate of the Department for Business Innovation and Skills. The survey was conducted by IFF Research Ltd.

The purpose was primarily to monitor the characteristics and perceptions of small business owners and managers, and how these have changed in comparison to previous surveys1. Some of the main uses of the survey are:

• Measuring the characteristics of Small and Medium-sized Enterprises (SMEs2) such as the proportions which are women and MEG (minority-ethnic group) led, and the proportions applying for and obtaining external finance.

• Gauging SME intentions, needs, concerns and the obstacles to achieving success.

• For those respondents who agreed for their data to be linked, the SBS 10 provides a powerful tool for linking enterprise characteristics to other sources of enterprise information (e.g. performance, innovation).

1.2 Timing of fieldwork

The survey was conducted between 2nd July and 7th September 2010.

1 Small Business Surveys have been conducted by BIS for the years 2003, 2004/5, 2005/6, 2006/7 and 2007/8. 2 SMEs are defined as having less than 250 employees.

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UK Data Archive Study Number 6856 - Small Business Survey, 2010: Secure Data Service Acccess

1.3 Sample selection and collection method BIS commissioned 4,000 CATI3 interviews for SBS 2010 which were selected to be in proportion to UK region. In addition to these the Welsh Assembly Government (WAG) commissioned a further 580 interviews as a boost, making a total of 4,580 interviews.

Within each of the four UK countries (England, Wales, Scotland and Northern Ireland) strata targets were set according to size of business. Approximately one sixth of interviews in each country were conducted with enterprises with no employees; one third with micro businesses (one to nine employees); one third with small businesses (10-49 employees); and one sixth with medium-sized businesses (50-249 employees). No other targets were set, e.g. by sector.

The sample was then randomly drawn across all commercial sectors and legal structures of the UK economy, from the Dun & Bradstreet database.

1.4 Data linking with IDBR reference numbers Respondents to the Small Business Survey 2010 were asked the following question (Q202a):

Would it be possible for BIS to link your responses to other information that you have provided previously to the Government? By this data linkage, we can reduce the burden of our surveys on your business and can improve the evidence that we use.

Data will only be used to inform research on businesses in aggregate - we will never release information that identifies any individual business - and your survey responses remain strictly confidential. Do you give your consent for us to do this?

4,006 respondents (87 per cent) said they would be willing to have their responses linked to other data. In instances where individuals indicated they would allow data linking ONS attempted to find matches between the enterprise information held by IFF for SBS 2010 respondents and the enterprise information held by ONS on the Inter Departmental Business Register (IDBR). Where matches were found ONS appended IDBR reference numbers to the SBS 10 database. ONS were able to match 2,884 records (a match rate of 72 per cent).

Taking into account the proportion who did not wish to be matched, 63 per cent of records on SBS 10 have appended IDBR reference numbers.

2 General analysis considerations These considerations mainly refer to stand-alone analysis of the core data set – i.e. analysis conducted on the 4,580 records in SBS 2010. Considerations for data linking are considered in section 3, although some of the considerations for stand-alone analysis should be taken into account.

3 Computer Assisted Telephone Interviews.

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2.1 Weighting and grossing of estimates The weight variable on SBS 2010 is called ‘weight’. This variable should be applied to all analysis.

The survey weighting variable reflects the number of enterprises published by BIS in Small and Medium Enterprise Statistics for the UK and Regions 2009. Weights were calculated for each broad sector, within the 12 UK regions, within the four size categories (0, 1-9, 10-49, 50-249).

Survey collection targets were not set for each of the 12 UK regions and each sector and there are instances where data was not collected for each combination of size, sector and region. To solve this problem where it occurs, weights have been applied across combined sector categories.

Any weighted analysis will produce figures that have correct relative weightings by size, so that they are representative of the whole UK SME population at the start of 2009.

The weighting matrix was developed using estimates of the number of enterprises at the start of 2009 as this was the latest official data available at the time. However analysts may wish to ‘gross-up’ estimates from SBS 2010 to agree with later enterprise population estimates.4 Users should take care to use the enterprise population statistics produced by BIS (rather than the ONS publications UK Business and Business Demography) as these are the most comprehensive, and the only source which includes an estimate of the very smallest enterprises.

2.2 Known bias Due to survey size restrictions the SBS 2010 sampling and weighting methodology is not perfect. The main issues to be aware of are:

• Over-representation of companies. No targets were set by legal status of enterprise. Companies are over-represented on the sample frame and in the survey responses. Survey size restrictions mean that it is not possible to weight by legal status as well as by region, sector and size. Weighted survey results are therefore based on relatively too many companies.

• Under-representation of some SMEs without employees (‘zeros’) and new businesses. The Dun and Bradstreet sample frame does not capture as many zeros as we would expect given their prevalence in the wider enterprise population. It seems likely that there is a substantial time-lag between an enterprise being created and it’s appearance on Dun and Bradstreet. So very small zero employee enterprises, especially newer ones, are likely to be under-sampled and weighting for zeros as a whole does not rectify this. Evidence for this is that there are approximately half a million start-ups each year in the UK, out of a stock of 4.4 million (Start 2009) – over 10 per cent of the enterprise stock at any time is less than a year old. However in SBS 10 enterprises less than a year old represent

4 For instance Business Population Estimates for the UK and Regions 2010, published 24th May 2011

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only one per cent of the un-weighted count and two per cent of the weighted count.

• Construction enterprises are under-represented and production enterprises over-represented in the SBS 10 weighted results. As mentioned above some weights could not be calculated for each size, sector and region combination, and so IFF conducted some smoothing of weights across sectors. This has lead to imperfect weighting by sector.

2.3 SME employers only or all SMEs? The Small Business Survey 2010 reports only on SMEs with employees, as these were the enterprises of most interest from a policy development perspective. However, the survey, and therefore the micro-data, covers SMEs of all sizes, including those with no employees.

Zero employee enterprises are under-represented in the sample, making up 17 per cent of the un-weighted sample. However, once weighted up to represent the true relative levels in the enterprise population, zero employee enterprises represent 75 per cent of responses (see Table 1 below).

Including zeros in a piece of analysis means that the results are more representative of the business population as a whole. However as the population of zeros is large, and their fraction of the overall SBS sample relatively small, including zero employee enterprises can lead to a certain volatility of results.

By excluding zero employee enterprises results are less volatile year on year. In addition aspects of the survey such as growth, obstacles to success and regulation may be more pertinent to SMEs with employees.

2.4 Checking results against the SBS 2010 report Output can be verified by comparing against the SBS 2010 report or associated annex tables. The SBS 2010 report is based on SME employers only. The associated data tables include information on all SMEs.

3 Data linking considerations As pointed out in section 1, only 2,884 (63 per cent) of SBS 10 records have IDBR numbers appended and are therefore available for conducting data linking in the VML/SDS environment.

Data users should be aware that there has been selection in two stages: self-selection at the survey stage, and selection at the matching stage.

Particularly at the stage where SBS 2010 records were matched to the IDBR there is reason to believe that larger and more established enterprises were more likely to be matched. This is because the very smallest enterprises are less likely to be on the IDBR, where enterprises appear if they are registered for VAT and/or PAYE.

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Therefore the enterprises on the SBS 2010 that are available for conducting data-linking analysis are not representative of those in the wider business population.

Furthermore the weight variable on the SBS 10 will not work correctly when applied only to the records available for linked analysis. To produce representative UK average results for analysis of the matched data only, new weights will need to be calculated.

Table 1. Distribution of matched and unmatched records by number of employeesin the enterprise, SBS 2010

Unmatched Column per cent

Matched Column per cent

Total Unmatched Column per cent

Matched Column per cent

Total1

No employees 26% 11% 17% 84% 65% 72%Micros (1-9) 32% 34% 33% 14% 29% 23%Small (10-49) 28% 37% 33% 2% 5% 4%Medium (50-249) 14% 18% 17% 0% 1% 1%Total 100% 100% 100% 100% 100% 100%

Base 1,696 2,884 4,580 1,696 2,884 4,5801. Total weighted data are the same proportions as in the 2009 business population

Un-weighted Weighted

Table 1 above shows that zeros are under-represented in the matched records, and weighting does not fully correct for this.

The tables in Annex A show the match rates across size, sector, legal status and age of enterprises.

4 Links to relevant documents BIS Small Business Survey 2010 report, questionnaire and detailed data tables, along with older reports, are available from the BIS web site:

http://www.berr.gov.uk/policies/enterprise-and-business-support/analytical-unit/research-and-evaluation/cross-cutting-research

Estimates of the number of enterprises at the start of 2009 as used in the SBS 2010 weighting are available in Small and Medium Enterprise Statistics for the UK and Regions 2009. This is available at:

http://stats.bis.gov.uk/ed/sme/

Estimates of the number of enterprises at the start of 2010 will be available in Business Population Estimates for the UK and Regions 2010. This will be available from 24th May 2011 at:

http://stats.bis.gov.uk/ed/bpe/

5 Contacts for further information For further information on the BIS Small Business Survey please contact Ian Drummond, Principle Research Officer, BIS Enterprise Directorate [email protected] 0114 2075065

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http://stats.bis.gov.uk/ed/sme/

http://stats.bis.gov.uk/ed/bpe/

mailto:[email protected]

Annex A: Match rates by key characteristics from the Small Business Survey 2010 To assist analysts in understanding the bias created by the matching process, the tables below show the match rate between SBS 2010 records and the IDBR, for weighted and un-weighted counts. Each table shows these rates by a key characteristic taken from the SBS 2010 data – size, sector, legal status and age. Match rates by number of employees in the enterprise

Unmatched Matched Base Unmatched Matched Base

No employees 58% 42% 763 43% 57% 3,302Micros (1-9) 35% 65% 1,528 21% 79% 1,069Small (10-49) 31% 69% 1,530 18% 82% 180Medium (50-249) 32% 68% 759 20% 80% 29Total 37% 63% 4,580 37% 63% 4,580

Match rates by enterprise sector (SIC 2003)

Unmatched Matched Base Unmatched Matched Base

Primary 39% 61% 128 30% 70% 254Production 30% 70% 597 29% 71% 554Construction 37% 63% 388 40% 60% 557Transport, Retail & Distribution

38% 62% 1,407 36% 64% 1,056

Business Services

34% 66% 981 28% 72% 1,413

Other Services 43% 57% 1,079 61% 39% 746Total 37% 63% 4,580 37% 63% 4,580

Match rates by enterprise legal status*

Unmatched Matched Base Unmatched Matched BaseSole Proprietorship

56% 44% 847 56% 44% 1,808

Partnership 41% 59% 528 26% 74% 499Company/other 31% 69% 3,131 24% 76% 2,222Don’t know 49% 51% 41 42% 58% 18Total 37% 63% 4,547 37% 63% 4,547*note some missing observations for legal status variables

Weighted



Un-weighted

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Match rates by enterprise age

Unmatched Matched Base Unmatched Matched BaseLess than one 52% 48% 56 42% 58% 951 year 63% 37% 43 84% 16% 632 years 47% 53% 73 37% 63% 983 years 49% 51% 91 41% 59% 1404 years 53% 47% 116 51% 49% 1415 years 45% 55% 165 49% 51% 2516-10 years 39% 61% 707 38% 62% 1,06411-20 years 36% 64% 1,116 37% 63% 1,068More than 20 years

34% 66% 2,192 31% 69% 1,639

Don’t know 67% 33% 21 40% 60% 21Total 37% 63% 4,580 37% 63% 4,580


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BIS SMALL BUSINESS SURVEY 2010

APRIL 2011

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Published in 2011 by BIS

URN 11/P74 © Crown Copyright 2011

This document can be accessed online at:

Postal enquiries should be addressed to:

Analytical Unit BIS Enterprise Directorate 2 St. Paul’s Place 125 Norfolk Street Sheffield S2 4FJ

Email enquiries should be addressed to: [email protected]

The views expressed in this report are the authors’ and do not necessarily reflect those of the BIS Enterprise Directorate or the Government.

mailto:[email protected]�

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Acknowledgements The authors would like to thank the BIS Enterprise Directorate Analysis Unit for their diligence in checking the figures and data contained in the tables and for general proof reading.

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Table of Contents

Acknowledgements ........................................................................................................................................ ii

1 Summary ................................................................................................................................................. 1

Profile of businesses .................................................................................................................................... 1

Business Performance ................................................................................................................................. 1

Growth .......................................................................................................................................................... 1

Business capability ....................................................................................................................................... 1

Access to finance ......................................................................................................................................... 2

Obstacles to the success of the business .................................................................................................... 3

Usage of business support and Government services ................................................................................. 3

2 Background and aims ............................................................................................................................ 4

Aims of the survey ........................................................................................................................................ 4

Survey method.............................................................................................................................................. 4

Note on the report ......................................................................................................................................... 5

Statistical confidence .................................................................................................................................... 5

3 Profile of businesses ............................................................................................................................. 6

Size (Based on 2009 ‘SME Stats’) ............................................................................................................... 6

Sector ........................................................................................................................................................... 6

Number of sites............................................................................................................................................. 8

Legal status .................................................................................................................................................. 9

VAT registration .......................................................................................................................................... 11

Age of business .......................................................................................................................................... 12

Number of partners/directors ...................................................................................................................... 13

Family businesses ...................................................................................................................................... 13

Women led businesses .............................................................................................................................. 14

Social enterprises ....................................................................................................................................... 15

4 Business Performance ......................................................................................................................... 17

Numbers employed compared to 12 months ago ...................................................................................... 17

Number of people SME employers expect to employ in 12 months time .................................................. 20

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Turnover ..................................................................................................................................................... 22

Turnover now compared to 12 months previously ..................................................................................... 23

Expectations of turnover in 12 months time ............................................................................................... 25

Profit ........................................................................................................................................................... 27

Plans for closure or transfer of business .................................................................................................... 28

5 Growth ................................................................................................................................................... 30

Plans for growth .......................................................................................................................................... 30

Extent of plans for achieving future business growth ................................................................................. 32

6 Business capability .............................................................................................................................. 34

Perceptions of Business Capability ............................................................................................................ 34

Business Capability: Innovation .................................................................................................................. 36

Business Capability: Exporting ................................................................................................................... 38

Business Capability: Training ..................................................................................................................... 40

Business Capability: Technology................................................................................................................ 41

7 Access to finance ................................................................................................................................. 42

Whether sought finance in the last 12 months ........................................................................................... 42

Reasons for applying/not applying for finance ........................................................................................... 44

Type of finance sought ............................................................................................................................... 45

Amount of finance sought ........................................................................................................................... 46

Difficulties obtaining finance ....................................................................................................................... 47

Understanding of the way in which banks assess business credit risk ...................................................... 51

Relationship with bank ................................................................................................................................ 52

Credit and Payment .................................................................................................................................... 54

Legal Action ................................................................................................................................................ 56

Payment protection products ...................................................................................................................... 56

8 Obstacles to the success of the business ......................................................................................... 58

Biggest obstacle to success of business .................................................................................................... 58

Overall incidence of obstacles to success of business .............................................................................. 59

Regulations as an obstacle to success of business ................................................................................... 59

Taxation/VAT/PAYE as an obstacle to success of business ..................................................................... 61

Cash flow as an obstacle to success of business ...................................................................................... 62

9 Usage of business support and Government services ......................................................................... 63

Sources of business advice sought ............................................................................................................ 63

Business Mentors ....................................................................................................................................... 65

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Awareness and usage of Business Link ..................................................................................................... 66

Experience of accessing government business support services .............................................................. 67

Working for the public sector ...................................................................................................................... 68

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1 Summary Profile of businesses

1.1 There are some changes in the characteristics of SME employers since the survey was last conducted in 2007/08. There were more private limited companies (up from 51 to 59 per cent), and fewer sole proprietors (down from 29 to 19 per cent) and partnerships (down from 16 to 10 per cent). Sixty-two per cent were family businesses, down from 69 per cent in 07/08.

1.2 The number of social enterprises has increased since the original ASBS survey in 06/07. Seven per cent of SME employers now correspond with the BIS definition of a social enterprise, up from four per cent in 06/07.

1.3 The proportion of SME employers that are women-led (14 per cent) or minority ethnic group led (8 per cent) has not changed since 07/08.

Business Performance

1.4 In terms of employment levels compared with 12 months ago, 17 per cent of SME employers stated they were employing more staff, 21 per cent were employing fewer and 61 per cent were employing about the same number.

1.5 Around a quarter (23 per cent) of SME employers thought they would employ more staff in the next 12 months than they currently did, 14 per cent believed they would employ fewer, and 62 per cent believed they would employ about the same number.

1.6 Turnover levels compared to 12 months ago were evenly split between the 28 per cent of SME employers stating their turnover was now greater, 34 per cent stating it was now lower and 34 per cent stating it had stayed level.

1.7 Two-fifths (41 per cent) of SME employers expect their turnover to increase in the next 12 months, 40 per cent believe it will remain at the same level and 14 per cent believe it will decrease.

1.8 Whilst the performance on these measures in the past 12 months was not as positive as that seen in the ASBS 07/08, they are much improved on figures seen from the Business Barometers that have occurred between December 2008 and February 2010.

Growth

1.9 Seventy-four per cent stated that they aim to grow their business over the next two to three years, an increase on the 67 per cent seen in 07/08.

1.10 In terms of realising this ambition, 66 per cent aim to upskill their workforce, 63 per cent aim to exploit new markets, 61 per cent aim to increase worker productivity thereby reducing costs, 51 per cent aim to increase the leadership skills of their management team, 50 per cent aim to employ more staff and 44 per cent develop new products.

Business capability

1.11 When SME employers were asked to rate the strengths and weaknesses of their business, they were more likely to rate their strengths as being in taking decisions on regulations and

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tax issues (63 per cent), people management (59 per cent) and developing and implementing business plans and strategy (56 per cent); businesses were, however, less likely to feel their strengths lay in entering new markets (26 per cent) or ability to access external finance (25 per cent).

1.12 Regarding the implementation of measures to improve the performance of their business, 47 per cent of SME employers had implemented new or significantly new products or services over the past 12 months and 33 per cent had introduced new or significantly new processes. These proportions were similar to those seen in previous ASBS.

1.13 Twenty-three per cent of SME employers sold goods, services or licensed products outside the UK, a similar proportion to that seen in previous ASBS.

1.14 Among the 74 per cent of SME businesses who did not export and had no plans to do so the most common reasons given for this were lack of product (39 per cent), exporting not forming part of their business plan (34 per cent), and feeling they have sufficient business opportunities in the UK (16 per cent).

1.15 Sixty per cent of SME employers had arranged or funded training or development for staff in the past 12 months, a similar proportion to previous ASBS.

Access to finance

1.16 In the SBS 2010 a quarter (26 per cent) of SME employers had sought finance within the preceding 12 months, a small but statistically significant increase on the 23 per cent seen in 2007/08 ASBS.

1.17 Among those who had sought finance 56 per cent did so in order to gain working capital or cashflow, 21 per cent did so with the aim of investing in capital equipment or vehicles, 10 per cent aimed to invest the finance in land or buildings, and nine per cent to improve buildings. Compared to previous ASBS there was a greater demand for working capital/cashflow, and less demand for capital equipment or vehicles.

1.18 For those that did not seek finance, the over-riding reason was that they did not need it (82 per cent).

1.19 Bank loans were the most frequently sought type of finance (applied for by 40 per cent of those seeking finance); thirty five per cent of SME employers applied for a bank overdraft, nine per cent sought a grant or leasing or HP and six per cent applied for a mortgage for property purchase or improvements. Compared to previous ASBS the demand for overdrafts appears to have increased (up from 26 per cent ASBS 07/08).

1.20 The amount of finance sought was roughly the same as that sought in previous ASBS, although there was a greater proportion seeking very small loans of under £10,000.

1.21 Among those seeking finance over the past 12 months, 51 per cent of SME employers experienced difficulties in accessing this finance from the first source approached. Thirty-five per cent of those that tried to obtain finance were unable to obtain any from the first source they approached, a further seven per cent obtained some but not all of the money they required, whilst nine per cent obtained all they needed but with some problems..

1.22 This compares with 25 per cent of SMEs seeking finance reporting any difficulties from the first source approached in ASBS 07/08, with 14 per cent being unable to obtain any finance from this first source.

1.23 Some of those rejected for finance by the first source were able to get finance elsewhere. Overall therefore, 68 per cent of those that sought finance (18 per cent of all SME

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employers) obtained all they needed, whilst 21 per cent of those that applied (5 per cent of all SME employers) obtained none. The remainder of those that applied (11 per cent) obtained some of what they needed, or were not sure of the final outcome.

1.24 The most common reasons for finance applications being rejected included lack of security (mentioned by 20 per cent of those who applications were rejected), the particular business sector being too risky (nine per cent), the recession/current credit climate and a poor business/credit history (both six per cent). An additional 24 per cent said they had not been given a reason for their application being rejected.

Obstacles to the success of the business

1.25 When prompted with possible obstacles to the success of their business the main difficulty most frequently mentioned was the economy in general (33 per cent); Cash flow was felt to be the main obstacle by 11 per cent of SMEs, and ten per cent felt competition from other businesses to be their biggest obstacle. Compared to ASBS 07/08 the proportion citing the economy has risen by 17 percentage points.

1.26 Among those mentioning regulations as an obstacle, health and safety was the most frequently cited (mentioned by 35 per cent). Tax related regulations were mentioned by 20 per cent and employment regulations by 16 per cent.

1.27 Among those citing taxation issues as an obstacle to their business VAT was the most frequently mentioned (mentioned by 47 per cent).

Usage of business support and Government services

1.28 Within the previous 12 months 49 per cent of SME employers had sought business support or advice, with accountants (used by 37 per cent of those seeking advice) and consultants (20 per cent) being the most frequently used sources. One in ten SMEs (11 per cent) had used a business mentor over the past 12 months.

1.29 Twelve per cent of SME employers that had sought advice did so through Business Link local services, and six per cent had used the Business Link website to access support and advice.

1.30 In terms of their opinion on the accessibility of government services 37 per cent of SME employers agreed that government services were easily accessible. However, 45 per cent agreed that they would like government support but struggled to find out what is available.

1.31 Thirty per cent of SME employers had worked with the public sector in the past 12 months (only 12 per cent had bid for future public sector contracts). Over half (53 per cent) who had worked for the public sector had done so on behalf of a local authority, with 19 per cent having worked for the Health Service, 12 per cent for further or higher education institutions, and ten per cent directly for Departments of State.

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2 Background and aims Aims of the survey

2.1 This report sets out the key findings from the 2010 Small Business Survey (SBS), a large scale telephone survey commissioned by the Department for Business, Innovation and Skills (BIS) as a follow up to the 2007/8 Annual Survey of Small Businesses (ASBS). The survey was conducted between 2nd July and 7th September 2010 by IFF Research Ltd.

2.2 The main aims of the survey were:

• To monitor key enterprise indicators and how these have changed in comparison to previous surveys. In particular the survey will measure characteristics of Small and Medium-sized Enterprises (SMEs1) such as the proportions which are women and MEG (minority-ethnic) led, and the proportions applying for and obtaining external finance

• To gauge SME intentions, needs, concerns and the obstacles to fulfilling their potential

• To act as a sounding board for possible Government interventions to assist SMEs

• To create a database which can be used for follow-up studies among the general SME population, or sub-groups within it

Survey method

2.3 BIS commissioned 4,000 CATI2 interviews for the SBS 2010 mainstage in proportion to UK region. In addition to these the Welsh Assembly Government (WAG) commissioned a further 580 interviews as a boost, making a total of 4,580 interviews.

2.4 In addition to this an additional 1,726 interviews were conducted with a boost of women and MEG businesses. These interviews, which resulted in a 1,000 sample size for both women and MEG-led businesses form the basis of a separate report.

2.5 Within each of the four UK countries (England, Wales, Scotland and Northern Ireland) strata targets were set according to size of business. Approximately one sixth of interviews in each country were conducted with enterprises with no employees; one third with micro businesses (one to nine employees); one third with small businesses (10-49 employees); and one sixth with medium-sized businesses (50-249 employees). No other targets were set, e.g. by sector.

2.6 The sample was then randomly drawn across all commercial sectors of the UK economy, from the Dun & Bradstreet database.

2.7 The survey findings have been weighted to the 2009 SME stats, published by BIS and based mainly upon the Inter Department Business Register and Labour Force Survey (LFS). Targets were devised for broad sector within the 12 UK regions, within the four size categories.

1 SMEs are defined as having less than 250 employees. 2 Computer Assisted Telephone Interviews.

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Note on the report

2.8 Please note that the findings presented in this report relate to SME employers only. That is to say, those with no employees have been excluded within the dataset reported on. This is consistent with the ASBS 07/08 reporting and reduces the overall sample size of the dataset to 3817.

Statistical confidence

2.9 The overall sample size is still sufficiently large to mean that overall findings for the UK can be reported upon with a relatively high degree of statistical reliability. At the overall level, the statistical error for a finding of 50 per cent (the most statistically sensitive or unreliable level of finding) is +/- 1.6 per cent. Sample sizes and standard errors for sub-groups are shown below. Unless stated otherwise, all findings reported are statistically significant.

Table 2.1: Statistical confidence in survey findings3 Base = all SME employers Sample Size Standard Error All UK 3817 +/- 1.6% East Midlands 281 +/- 5.8% East of England 332 +/- 5.4% London 375 +/- 5.1% North East 115 +/- 9.1% North West 338 +/- 5.3% South East 511 +/- 4.3% South West 379 +/- 5.0% West Midlands 277 +/- 5.9% Yorkshire and Humberside 271 +/- 6.0% Scotland 230 +/- 6.5% Wales 623 +/- 3.9% Northern Ireland 85 +/ -10.6% Micro (1-9 employees) 1528 +/- 2.5% Small (10-49 employees) 1530 +/- 2.5% Medium (50-249 employees) 759 +/- 3.6% Primary (AB) 64 +/- 12.3% Production (CDE) 527 +/- 4.3% Construction (F) 315 +/- 5.5% Transport, retail and distribution (GHI) 1157 +/- 2.9% Business services (JK) 793 +/- 3.5% Other services (LMNO) 961 +/- 3.2%

3 The table presents the standard error, at the 95% confidence level, associated with findings of 50 per cent.

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3 Profile of businesses Size (Based on 2009 ‘SME Stats’)

3.1 Based on the SME Statistics for the UK and Regions 20094 published by BIS there are 4.8 million enterprises in the UK, an increase of 51,000 on the 2008 figures. This increase has come about because of the rise in number of those with no employees.

3.2 Seventy-five per cent of these enterprises have no employees and therefore fall out of the scope of this report. Of the remaining 1.2 million employers, 84 per cent have between one and nine employees and are classified as micro businesses; 14 per cent have between 10 and 49 employees and are classified as small businesses; 2.2 per cent have between 50 and 249 employees and are classified as medium sized businesses; and 0.5 per cent have more than 250 employees and are classified as large businesses. This latter group also falls outside of the scope of this report as SMEs are defined as enterprises with fewer than 250 employees.

3.3 The micro businesses therefore dominate the overall findings in terms of all enterprises. In terms of employment, however, the micro businesses employ 39 per cent of all that work for SME employers, the small businesses 34 per cent, and the medium sized businesses 27 per cent. Hence although comparatively low in numbers against the micros, the small and mediums are significant in terms of the employment and turnover that they generate.

Sector5

3.4 From this point forward, all results shown are based upon the Small Business Survey 2010, with comparisons against previous Annual Small Business Surveys (ASBS) and waves of the Business Barometer.

3.5 Thirty-three per cent of all SME employers fall in the transport, retail & distribution (TRAD) sector which combines wholesale and retail trade, motor repair, hotels and restaurants, and transport, storage and communication. The service sector makes up 41 per cent of all SME employers, with 27 per cent in business services (financial intermediation, real estate, renting and business service activity) and 13 per cent in other services (public administration, education, health and social work, other community, social and personal activities). Business services employers are more likely to be micro employers (29 per cent) than small or medium sized employers (22 per cent and 23 per cent respectively).

4 http://stats.bis.gov.uk/ed/sme. The figures are drawn from a combination of the Inter Departmental Business Register which contains all businesses operating VAT or PAYE schemes, and the survey‐based Labour Force Survey (LFS) which is the main source for estimating the number of the self‐employed. LFS data is based on the last quarter of 2008 and the first quarter of 2009. 5 The dataset is weighted according to size, broad sector and region. See technical appendix.

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3.6 Eleven per cent of SME employers fall in the production sector (manufacturing, mining and utilities). Small employers (15 per cent) and medium employers (24 per cent) have higher than average proportions in the production sector. The construction sector makes up 12 per cent of all SME employers, whilst the primary sector (agriculture, hunting, forestry and fishing) accounts for just three per cent of all SME employers.

3.7 The table below provides a more detailed breakdown of SME employers in the 2010 SBS by sector.

Table 3.1: Sector Base = all SME employers All SME

EmployersMicro (1-

9) Small (10-49)

Medium (50-249)

SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

Primary (AB) 3 3 1 1

Production (CDE) 11 10 15 24

Construction (F) 12 13 10 8

Wholesale and retail trade, repair of motor vehicles and motorcycles (G) 23 24 20 18

Hotels and restaurants (H) 5 5 8 5

Transport, storage and communication (I) 4 4 6 7

Financial intermediation (J) 2 2 2 4

Real estate, renting and business service activities (K) 25 26 20 19

Public administration and defence, compulsory social security/Education (LM) 2 2 2 4

Health and social work (N) 4 3 11 8

Other community, social and personal activities (O) 7 8 5 3

Figures in bold are statistically significant at the 95% confidence level against the overall finding

3.8 Certain sectors are more likely than average to be in certain regions. London has a higher than average proportion of business services (40 per cent compared to 27 per cent average), and a lower proportion of production (six per cent) and construction (8 per cent) businesses. The South East also has a high proportion of business services (33 per cent), and has a lower than average proportion of transport, retail and distribution businesses (29 per cent). The South West has a relatively high proportion of production businesses (15 per cent), and Northern Ireland has a high proportion in the primary sector (17 per cent).

8

Number of sites

3.9 Eighty-six per cent of SME employers operate from one site only. Eleven per cent from between two and three sites, and only three per cent operate from four or more sites. These figures are consistent with the 2006/07 and 2007/08 ASBS.

3.10 Eighty-six per cent of micro employers operate from one site only compared to 73 per cent of small employers, and 44 per cent of medium sized employers.

3.11 Those in the production sector are the most likely to operate from one site (90 per cent), whilst those in other services are the least likely (82 per cent).

Table 3.2: Number of sitesi Base = all SME employers SBS 2010

2007/08

2006/07

Un-weighted (n) = 3817 7783 8949

% % %

1 86 86 86

2-3 11 12 12

4+ 3 2 2 Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS

9

Legal status

3.12 Fifty-nine per cent of SME employers are private limited companies, limited by shares. Larger SME employers are more likely than average to be private limited companies.

Table 3.3: Legal status - Trendsii Base = all SME employers All SME

Employers Micro (1-9) Small (10-49)

Medium (50-249)

SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

Private limited company, limited by shares (LTD) 59 56 73 72

Sole Proprietorship 19 22 5 1

Partnership 10 11 8 5

Private company limited by guarantee 3 2 5 6

Charity/Not-for-profit organisation 1 1 2 3

Public Ltd Company (PLC) 2 2 3 4

Limited liability partnership 2 1 2 5

A trust * * * 1

Community Interest Company (CIC, limited by guarantee or shares) * * * 1

Other (e.g. unincorporated associations/ Friendly Society/ Private Unlimited Company)

1 * * *

Figures in bold are statistically significant at the 95% confidence level against the overall finding * = a figure of less than 0.5% but higher than zero

3.13 Private limited companies are more likely than average to occur in the production (73 per cent), construction (76 per cent) and business services (69 per cent) sectors. London has a high proportion of private limited companies among its SME employers at 65 per cent, whilst Scotland (45 per cent), Wales (51 per cent) and Northern Ireland (40 per cent) have the lowest proportions. This is in spite of the fact that the size of business profiles between the UK regions are very similar.

3.14 Nineteen per cent of SME employers are sole proprietorships, and 10 per cent are partnerships (excluding limited liability partnerships). The TRAD sector is made up of a higher proportion of sole proprietorships (27 per cent) and partnerships (14 per cent) than is the case elsewhere. Conversely, there are fewer sole proprietorships and partnerships in the production sector (13 per cent and eight per cent respectively), and in the business service sector (13 per cent and seven per cent respectively)

3.15 The table below illustrates the change in the legal status since ASBS 06/07. Private limited companies have risen significantly from 51 per cent in ASBS 07/08 to 59 per cent in SBS 2010. Conversely, sole proprietorships (29 per cent to 19 per cent) and partnerships (16 per cent to 10 per cent) have fallen significantly over the same time period.

10

Table 3.4: Legal statusiii Base = all SME employers SBS 2010 2007/08 2006/07 Un-weighted (n) = 3817 7783 8949

% % %

Private limited company, limited by shares (LTD) 59 51 53

Sole Proprietorship 19 29 26

Partnership 10 16 17

Private company limited by guarantee 3 2 1

Charity/Not-for-profit organisation 1 0 0

Public Ltd Company (PLC) 2 1 0

Limited liability partnership 2 1 1

A trust * 0 0

Community Interest Company (CIC, limited by guarantee or shares) * * 0

Other (e.g. unincorporated associations/ Friendly Society/ Private Unlimited Company) 1 * 1

Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS * = a figure of less than 0.5% but higher than zero

3.16 There is also a statistically significant increase in the proportion of organisations under ‘other’ legal statuses, rising from four per cent in ASBS 07/08 to 10 per cent in SBS 2010. Within this grouping there has been a significant increase in private companies limited by guarantee (one per cent to three per cent), public limited companies (one per cent to two per cent) and limited liability partnerships (one per cent to three per cent).

3.17 Eleven per cent of the ‘other’ services are companies limited by guarantee (CLG’s), with a further nine per cent describing themselves as charities or not for profit organisations (although this is not strictly a legal status).

11

VAT registration

3.18 Eighty-three per cent of SME employers are VAT registered, a decrease from the 85 per cent in ASBS 2007/08 and 89 per cent in ASBS 2006/07.

Table 3.5: VAT registrationiv – Trends by size Base = all SME employers All SME

Employers Micro (1-9) Small (10-49) Medium (50-249)

SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

Business is VAT registered 83 82 88 90

Business is not VAT registered 17 18 11 10

ASBS 2007/08. Un-weighted (n) = 7783 3529 2950 1304






Figures in bold are statistically significant at the 95% confidence level against the overall finding for the wave of research

3.19 The likelihood of employers being VAT registered was higher in the production (94 per cent), construction (92 per cent), transport, retail and distribution (89 per cent) and business services (86 per cent) sectors, and lower in the other services sector (45 per cent).

3.20 Older businesses were more likely to be VAT registered than average (85 per cent of those 10 years or older), while only 73 per cent of SME employers that had been trading for less than four years were VAT registered.

3.21 Sixty-three per cent of SME employers registered for VAT did so at the time of start up (53 per cent), or prior to start up (10 per cent). This was more likely to be the case in the transport, retail and distribution sector (71 per cent), and least likely in the ‘other services’ sector (40 per cent).

12

Age of business

3.22 The number of years that businesses have been trading has remained consistent with the previous ASBS, though the proportion of SMEs that have been trading for more than 20 years has fallen significantly from 42 per cent to 40 per cent.

3.23 The Survey defines start-ups as those trading for less than four years or those which have changed ownership in the last three years. Based on this definition, fourteen per cent of SME employers were new businesses in 2010, an insignificant decrease on the 15 per cent identified in ASBS 2007/08.

3.24 Out of these start-ups, 54 per cent had started from scratch in the last three years, and 46 per cent had changed ownership in the last three years.

3.25 Start-ups were more likely to exist in the TRAD sector (17 per cent), and were less likely in the business services and production sectors (both 11 per cent). There was a lower proportion of start-ups in London (nine per cent) and Northern Ireland (five per cent), and a higher proportion in the North East (34 per cent). Only 10 per cent of medium sized employers were start-ups, lower than the average of 14 per cent.

Table 3.6: Age of businessv Base = all SME employers

SBS 2010 2007/08 2006/07

Un-weighted (n) = 3817 7783 8949

% % %

Less than one 1 1 1

1 year 1 1 1

2 years 2 2 2

3 years 3 2 4

4 years 4 4 3

5 years 4 4 3

6-10 years 18 17 16

11-20 years 26 26 26

More than 20 years 40 42 43 Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS

13

Number of partners/directors

3.26 Forty-one per cent of SME employers have only one partner/director, down four percentage points on ASBS 07/08, but a similar proportion to that seen in 06/07. Six per cent have five or more directors or partners, which is a significant rise on both previous ASBS. Businesses with five or more directors/partners are commonly within the ‘other services’ sector, where they account for 24 per cent.

Family businesses

3.27 Sixty-two per cent of SME employers are family owned businesses (a business which is majority owned by members of the same family), compared to 69 per cent in ASBS 2007/08 and 68 per cent in ASBS 2006/07.

Table 3.8: Family businessesvii – Trends by Sector Base = all SME employers

All SME Employer

s Primary Produc-

tion Constr-uction TRAD

Business services Other

services

SBS 2010. n= 3817 64 527 315 1157 793 961

% % % % % %

Family owned business 62 90 66 74 73 56 32

ASBS 2007/08. n= 7783 159 1339 742 2989 1724 830


ASBS 2006/07. n= 8949 232 1932 888 3827 1554 516


Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

Table 3.7 : Number of partners/directorsvi Base = all SME employers SBS 2010

2007/08

2006/07

Un-weighted (n) = 3817 7783 7676

% % %

1 41 45 42

2 39 38 41

3 11 9 10

4 4 4 4

5 to 8 4 2 2

9 to 12 1 1 *

13+ 1 * *

Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS * = a figure of less than 0.5% but higher than zero

14

3.28 Consistent with ASBS 2007/08, family owned businesses were most prevalent in the primary, construction and transport, retail and distribution sectors, and less common in the service sectors. Small and medium employers were significantly less likely to be family owned at 53 per cent of small businesses and 47 per cent of medium sized businesses, compared to 64 per cent of micro businesses.

3.29 Family owned businesses were most common in Yorkshire/Humberside (71 per cent) and the East Midlands (69 per cent), and were least common in London (54 per cent).

3.30 Compared to ASBS 07/08 the decrease in family owned businesses is significant in the production, transport, retail and distribution and ‘other service’ sectors.

Women led businesses

3.31 Fourteen per cent of SME employers are women-led (defined as led by a woman or having a management team made up mostly of women). A further 25 per cent were equally led by men and women. This makes a total of 39 per cent of SME employers equally or majority led by women.

3.32 Overall, the proportion of women-led businesses among SME employers has remained constant since ASBS 06/07.

Table 3.9viii: Leadership by gender – Trends Base = all SME employers SBS 2010 ASBS 2007/08 ASBS 2006/07 Un-weighted (n) = 3817 7783 8949

% % %

Majority-led by women 14 14 14

Equally-led 25 24 26

At least 50 per cent female leadership (majority-led by women & equally led)

39 39 40

Women in a minority 9 8 7

Entirely male-led 52 53 52

Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS

3.33 There was a higher proportion of women led employers in the ‘other services’ sector (32 per cent), and a lower proportion in production (six per cent) and construction (four per cent). Only eight per cent of medium-sized employers were women-led, with no significant differences between the overall average and micro (15 per cent) or small employers (13 per cent).

3.34 Women-led businesses were more common among micro and small businesses (15 and 13 per cent respectively) than medium-sized businesses (10 per cent). By region there was a higher proportion of women led businesses in the North West (19 per cent), and a lower proportion in London (10 per cent). Twenty-one per cent of those classified as start-ups were women-led, higher than the overall average, and the same as that in ASBS 07/08.

15

3.35 Seventeen per cent of SME employers were majority owned by women, which is different from being women-led. Nine per cent were both women-led and women-owned; five per cent were women-led but not women-owned; and eight per cent were women-owned but not women-led.

Minority Ethnic Group (MEG) led businesses

3.36 Eight per cent of SME employers were minority ethnic group (MEG) led, defined as being led by a member of a minority ethnic group or a management team with at least half of its members from minority ethnic groups. This proportion was highest in London, where 28 per cent of SME employers are MEG led, and lowest in Northern Ireland (0 per cent). For other regions the proportion was between four and 10 per cent.

3.37 Thirteen per cent of employers in the transport, retail and distribution sector were MEG led, higher than the overall average of nine per cent, whilst only three per cent of employers in the construction and production sectors were MEG-led. There was also a lower proportion of MEG led businesses amongst small (seven per cent) and medium-sized SMEs (four per cent), than was the case for micro businesses (nine per cent). Eleven per cent of start-ups are MEG-led, which is significantly higher than the average.

3.38 The proportion of SME employers in the UK that are MEG-led is the same as that seen in ASBS 07/08, and only one percent higher than in ASBS 06/07.

Social enterprises

3.39 Twenty-six per cent of all SME employers thought of their business as a social enterprise: a business that has mainly social or environmental aims6. This is significantly less than the 29 per cent claiming this in ASBS 07/08, but the same figure as in 06/07.

Table 3.10: Social Enterprisesix – Trends Base = all SME employers SBS 2010 ASBS 2007/08 ASBS 2006/07 Un-weighted (n) = 3817 7783 8949

% % %

Perceive themselves as a social enterprise 26 29 26

Conform to BIS definition of a social enterprise 7 6 4


3.40 These self-defined social enterprises were more likely than average to be found in the North East of England (37 per cent), Scotland (34 per cent) and Wales (32 per cent).

3.41 Thirty-four per cent of businesses founded in the last three years defined themselves as social enterprises, compared to 25 per cent of those founded 10 years ago or before.

6 This question was not asked to those businesses that pay more than 50% of profits to shareholders. 19 per cent (weighted) were not asked this question but are still included in the base population.

16

3.42 Nearly a third of those agreeing with this statement were found in the ‘other services’ sector. Indeed, 55 per cent of all in ‘other services’ thought of their business as one with mainly social or environmental aims.

3.43 The Department for Business Innovation and Skills has a further defined definition of a social enterprise. This requires the enterprise to consider itself a social enterprise as above, but not pay more than 50% of profit or surplus to owners or shareholders, generate more than 25% of income from trading, and therefore having less than 75% of turnover from grants or donation. In addition, they have to think themselves a very good fit with the statement ‘a business with primarily social or environmental objectives, whose surpluses are principally reinvested for that purpose in the business or community, rather than mainly being paid to shareholders and owners.’

3.44 Under this definition seven per cent of SME employers could be considered to be social enterprises. This is one percentage point higher than in ASBS 07/08, and three percentage point more than that seen in ASBS 06/07.7

3.45 Under this definition 22 per cent of ‘other services’ are classified as social enterprises, six per cent of transport, retail and distribution, four per cent of construction, four per cent of business services, three per cent of production, and two per cent of primary SME employers. There were no significant differences according to the size or age of the enterprise.

7 BIS produces an estimate of the total number of social enterprise employers separately using a three survey point estimate. This will be published on the BIS website alongside the SBS 2010 report.

17

4 Business Performance Numbers employed compared to 12 months ago

4.1 Seventeen per cent of SME employers employed more people than was the case 12 months ago. Twenty-one per cent were employing fewer than before, and 61 per cent approximately the same number.

Figure 4.1: Numbers Employed Now Compared to 12 Months Previously (Employers in Firms trading at least one year)

19% 19%

12% 12%13%13% 15% 14%16% 17%

65%

66%

52%

58%56% 54% 52%

49%

57%61%

16% 15%

35%

30% 31% 33% 32%

38%

27%21%

0%

10%

20%

30%

40%

50%

60%

70%

Feb‐07

Apr‐07

Jun‐07

Aug‐07

Oct‐07

Dec‐07

Feb‐08

Apr‐08

Jun‐08

Aug‐08

Oct‐08

Dec‐08

Feb‐09

Apr‐09

Jun‐09

Aug‐09

Oct‐09

Dec‐09

Feb‐10

Apr‐10

Jun‐10

Aug‐10

More than 12m Ago The Same Less than 12m Ago

Base: All SME Employers trading 1 year + (8856/7783/500/503/501/500/501/500/501/3736)

4.2 Figure 4.1 above shows the trends in this measure from the two previous ASBSs, but also for the Business Barometer8 series between December 2008 and February 2010.

8 A regular BIS survey, each wave of which consists of interviews with 500 SME employers

18

4.3 Between the ASBS 07/089 and the December 08 Barometer the proportion claiming fewer employees rose sharply from 15 to 35 per cent, due to the onset of the credit crunch and recession. This high proportion continued at similar levels until December 09, after which there was a decline in the proportion in February 10. SBS 2010 continues this trend, and the figures here are similar to those seen in the two ASBSs.

4.4 By sector, those in production were more likely to be employing more people than 12 months ago than was the case in other sectors (22 per cent). However, they were also more likely than average to be employing fewer workers (28 per cent), as was also the case in the construction sector.

4.5 In comparison with the 2007/08 ASBS all sectors except primary and ‘other services’ were likely to be employing fewer people than 12 months ago. This is particularly the case with the construction and production sectors.

Table 4.1: Numbers Employed Compared to 12 Months Agox – Trends by Sector Base = all SME employers trading for at least 1 year

All SME Employers Primary Prod-

uction Constr-uction TRAD Business

Services Other

Services

SBS 2010. n= 3779 64 522 312 1136 824 921

% % % % % % %

More than 12m Ago 17 11 22 19 16 18 16

Same as 12m Ago 61 82 50 47 64 61 71

Fewer than 12m Ago 21 7 28 34 19 20 13 ASBS 2007/08. n= 7700 158 1325 737 2936 1719 825

More than 12m Ago 19 17 21 21 16 22 18

Same as 12m Ago 66 74 64 65 69 64 61

Fewer than 12m Ago 15 9 16 15 15 14 21 ASBS 2006/07. n= 8856 232 1927 883 3752 1552 510

More than 12m Ago 19 9 20 19 16 24 26

Same as 12m Ago 65 76 60 58 68 63 64

Fewer than 12m Ago 16 15 19 23 15 13 10 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

9 Fieldwork dates 5th November 2007 to 20th February 2008.

19

4.6 It was the largest SMEs that were the most likely to employ more compared to a year ago: this being the case for 29 per cent of medium-sized businesses, compared to 26 per cent of small businesses and 16 per cent of micro businesses. One of the reasons for this is that the size of business changes over time, and it could be that some of the now micro businesses used to be classified as small businesses.

Table 4.2: Numbers Employed Compared to 12 Months Agoxi – Trends by Size Base = all SME employers trading for at least 1 year

All SME Employers Micro (1-9) Small (10-49) Medium (50-249)

SBS 2010. Un-weighted (n) = 3779 1502 1520 757

% % % % More than 12m Ago 17 16 26 29

Same as 12m Ago 61 64 48 45

Fewer than 12m Ago 21 20 26 26 ASBS 2007/08. Un-weighted (n) = 7700 3477 2925 1298

More than 12m Ago 19 16 30 38

Same as 12m Ago 66 68 55 49

Fewer than 12m Ago 15 15 16 13 ASBS 2006/07. Un-weighted (n) = 8856 3660 3635 1561


Same as 12m Ago 65 67 55 45

Fewer than 12m Ago 16 16 16 13 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

4.7 By region, those in Northern Ireland were the most likely to be now employing fewer people (30 per cent), and those in the South West were the most likely to be employing more (21 per cent).

4.8 There was also a correlation with employment levels and whether the SME was seeking finance. Twenty-eight per cent of those who sought finance in the last 12 months were employing fewer people than a year ago, seven percentage points above the average.

20

4.9 Compared with 07/08 the credit crunch and recession has affected SME employers of all sizes. All sizes of SME employers were more likely to be employing fewer people, and less likely to be employing more people. However, as noted in Figure 4.1 the long term trend in this respect is getting more positive.

Number of people SME employers expect to employ in 12 months time

4.10 Twenty-three per cent of SME employers expected to be employing more staff in 12 months time. Sixty-two per cent expected to employ roughly the same numbers, and 14 per cent expected to employ fewer.

Figure 4.2: Number of People Expecting to Employ in 12 Months

Base: All SME Employers (8949/7783/500/503/501/500/501/500/501/3817)

25% 24%

14% 16%

21%21%

28%26%

22% 23%

61%59% 59% 61%

58%

67%

59%

57%

65%62%

13%16%

24%22%

20%

12% 13%

17%

12% 14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Feb‐07

Apr‐07

Jun‐07

Aug‐07

Oct‐07

Dec‐07

Feb‐08

Apr‐08

Jun‐08

Aug‐08

Oct‐08

Dec‐08

Feb‐09

Apr‐09

Jun‐09

Aug‐09

Oct‐09

Dec‐09

Feb‐10

Apr‐10

Jun‐10

Aug‐10

More than Now The Same Less than Now

4.11 The long term trends in this measure are fairly static. The proportion expecting to employ fewer staff dipped to its lowest level in December 2008, but since April 2009 there has been little change in this proportion. The SBS 2010 figures were similar to those seen in the two previous ASBSs.

21

4.12 The primary sector was the most positive with regards to increasing employment levels, with 34 per cent saying they would employ more in 12 months time. The ‘other services’ were the least likely to say this (18 per cent), and were more likely than average to say they would employ the same numbers (64 per cent) or fewer (17 per cent).

4.13 Compared to the ASBS 07/08 those in the primary sector were more likely to think employment levels will increase, and those in business and other services were less likely to think this.

Table 4.3: Number of people expecting to employ in 12 months timexii – trends by sector Base = all SME employers



Services Other

Services

SBS 2010. n= 3817 64 527 315 1157 827 927

% % % % % % %

More in 12m Time 23 34 26 19 23 24 18

Same in 12m Time 62 50 57 62 62 62 64

Fewer in 12m Time 14 14 14 16 13 13 17

ASBS 2007/08. n= 7783 159 1339 742 2989 1724 830

More in 12m Time 24 12 25 24 21 29 29

Same in 12m Time 59 65 60 58 61 55 57

Fewer in 12m Time 16 22 15 18 17 16 14

ASBS 2006/07. n= 8949 232 1932 888 3827 1554 516

More in 12m Time 25 12 30 26 21 30 32

Same in 12m Time 61 66 56 61 64 58 56

Fewer in 12m Time 13 23 13 12 14 11 10 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

4.14 The larger SMEs were most likely to think they will employ more in a year’s time. Thirty-four per cent of medium-sized businesses thought this, compared to 29 per cent of the small ones, and 22 per cent of the micros.

4.15 Compared to the ASBS 07/08 it is the medium sized businesses that were less likely to think they would employ more – the proportion decreasing by four percentage points.

4.16 By region, those in the East Midlands were the ones most likely to think they would employ more in 12 months time (29 per cent). Those in the North West were the ones most likely to think they would employ fewer (17 per cent).

4.17 Start-ups were generally positive about employing more – 40 per cent said they would have more staff in 12 months time. This was a higher figure for this group than that seen in the ASBS 07/08 (34 per cent). Those that sought finance in the last 12 months were also more likely than average to think employment levels would rise (31 per cent).

22

Table 4.4: Numbers Expect to Employ in 12 Months Time Compared to Now – Trends by Sizexiii Base = all SME employers All SME


SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

More in 12m Time 23 22 29 34

Same in 12m Time 62 64 54 50

Fewer in 12m Time 14 13 16 14 ASBS 2007/08. Un-weighted (n) = 7783 3529 2950 1304

More in 12m Time 24 22 31 38

Same in 12m Time 59 60 52 47

Fewer in 12m Time 16 17 16 14 ASBS 2006/07. Un-weighted (n) = 8949 3721 3666 1562

More in 12m Time 25 23 33 41

Same in 12m Time 61 62 54 45

Fewer in 12m Time 13 13 12 14 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

Turnover

4.18 The mean average turnover of an SME employer in the SBS 2010 was £1,156,000. This varied greatly according to size of SME with the mean average for micro businesses being £606,000, £2,848,000 for a small business, and £10,629,000 for a medium sized business.

4.19 Because mean averages are often inflated by a few high numbers we have also looked at median averages. The overall median turnover for SME employers was £442,000, £253,000 for micros businesses, £1,424,000 for small businesses, and £7,500,000 for medium-sized businesses.

4.20 Although it is not possible to do a mean average comparison because the scale differs on this question between ASBS 07/08 and SBS 2010, the median overall average for SME employers in ASBS 07/08 was £322,000, more than £100,000 lower than the 2010 figure.

23

Turnover now compared to 12 months previously

4.21 Twenty-eight per cent of SME employers in the 2010 SBS said that turnover was greater than it was a year ago. Thirty-four per cent said it was about the same, and a further 34 per cent said it was less.

Figure 4.3: Turnover Now Compared to 12 Months Previously

Base: All SME Employers trading 1 year + (8856/7783/500/503/501/500/501/500/501/3779)

40% 42%

27% 28%

24% 24% 23% 24% 20%28%

35% 35%

26%

31%

28%

32%27% 29%

21% 20%

44% 43%43%46% 44% 45%

50%

34%

0%

10%

20%

30%

40%

50%

60%

Feb‐07

Apr‐07

Jun‐07

Aug‐07

Oct‐07

Dec‐07

Feb‐08

Apr‐08

Jun‐08

Aug‐08

Oct‐08

Dec‐08

Feb‐09

Apr‐09

Jun‐09

Aug‐09

Oct‐09

Dec‐09

Feb‐10

Apr‐10

Jun‐10

Aug‐10

More than 12m Ago The Same Less than 12m Ago

4.22 Although overall there were more SME employers claiming lower than higher turnover in the SBS 2010, the proportion saying that turnover was less has declined since the February 2010 Business Barometer – down from 50 per cent to 34 per cent.

4.23 Conversely, the overall proportion saying that turnover had increased was up to 28 per cent, from 20 per cent in the February 2010 Business Barometer, a statistically significant increase.

4.24 ‘Other’ (31 per cent) and business services (30 per cent) are the sectors that were more likely than average to report higher turnover than a year ago. The construction industry was the sector most likely to report lower turnover (45 per cent).

4.25 Compared to ASBS 07/08 all sectors with the exception of the ‘other services’ were less likely to report increased turnover, and were more likely to report lower turnover.

24

Table 4.5: Turnover Now Compared to 12 Months Previouslyxiv – Trends by Sector Base = all SME employers trading for at least 1 year



Services Other

Services

SBS 2010. n= 3779 64 522 312 1136 824 921

% % % % % % %

Turnover Greater Now 28 36 24 24 26 30 31

Same as 12m Ago 34 38 35 26 32 33 43

Turnover Lower Now 34 24 38 45 36 34 22 ASBS 2007/08. n= 7700 158 1325 737 2936 1719 825


Same as 12m Ago 35 35 33 39 35 31 40

Turnover Lower Now 20 18 19 17 23 17 22 ASBS 2006/07. n= 8856 232 1927 883 3752 1552 510


Same as 12m Ago 35 41 34 33 35 33 43

Turnover Lower Now 21 23 23 22 23 16 15 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

4.26 By size, micro businesses were the least likely to report greater turnover (26 per cent), and medium-sized SMEs the most likely (44 per cent). Even so, compared to ASBS 07/08 all sizes of SME employers were less likely to report greater turnover, and were more likely to report lower turnover.

4.27 Those in Yorkshire/Humberside were more likely to report decreased turnover than any other region (43 per cent).

4.28 Thirty-seven per cent of start-ups were able to report increased turnover, with only 22 per cent reporting lower turnover. By contrast only 25 per cent of those trading for ten years or more had increased turnover, with 37 per cent having lower turnover.

Table 4.6: Turnover Now Compared to 12 Months Previouslyxv – Trends by Size Base = all SME employers trading for at least 1 year

All SME Employers Micro (1-9) Small (10-49) Medium (50-

249) SBS 2010. Un-weighted (n) = 3779 1502 1520 757 % % % %

Turnover Greater Now 28 26 33 44

Same as 12m Ago 34 34 30 30

Turnover Lower Now 33 35 33 24 ASBS 2007/08. Un-weighted (n) = 7700 3477 2925 1298


Same as 12m Ago 35 36 32 26

Turnover Lower Now 20 22 16 11 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave

25

Expectations of turnover in 12 months time

4.29 Forty-one per cent of SME employers expected to have higher turnover in 12 months time, 40 per cent thought it would be the same and 14 per cent thought it would be lower.

4.30 Although expectations for higher turnover were not as high as those seen in the 2006/07 and 2007/08 ASBSs, the overall trend is positive. The low point was in December 2008 when only 16 per cent thought they would have higher turnover in 12 months time. This proportion has steadily risen since, and but for a blip in the February 2010 Barometer, continues to increase.

4.31 The proportion expecting lower turnover in 12 months time has remained steady since September 2009.

Figure 4.4: Expectations of Turnover in 12 Months Time

Base: All SME Employers (8949/7783/500/503/501/500/501/500/501/3817)

49% 49%

16%

25%24%

28%

39%39%

34%

41%

36% 35% 36%

39%42%

46%44% 42%

44%

40%

10%12%

41%

33%28%

21%

12%15% 15% 14%

0%

10%

20%

30%

40%

50%

60%

Feb‐07

Apr‐07

Jun‐07

Aug

‐07

Oct‐07

Dec‐07

Feb‐08

Apr‐08

Jun‐08

Aug

‐08

Oct‐08

Dec‐08

Feb‐09

Apr‐09

Jun‐09

Aug

‐09

Oct‐09

Dec‐09

Feb‐10

Apr‐10

Jun‐10

Aug

‐10

More than Now The Same Less than Now

4.32 SME employers in the primary (61 per cent) and production (47 per cent) sectors were most likely to think turnover would increase; whilst the construction sector was the most likely to think it would decrease (22 per cent). Compared with the ASBS 07/08 all sectors with the exception of primary were statistically significantly less likely to say that their turnover would rise in the next year.

4.33 By region those in the South West (35 per cent) and Wales (37 per cent) were significantly less likely than average to think turnover would rise. Those in Wales were also more likely than average to think turnover would decrease (20 per cent).

26

4.34 By size, medium-sized businesses were more likely to think turnover would rise (57 per cent) than the small (45 per cent) and micro businesses (40 per cent).

Table 4.7: Expectations of Turnover in 12 Months Timexvi – Trends by Sector Base = all SME employers



Services Other

Services SBS 2010. n= 3817 64 527 315 1157 827 927

% % % % % % %

More than now 41 61 47 34 40 44 39 Same as now 40 20 35 42 41 41 42 Less than now 14 11 13 22 13 13 14 ASBS 2007/08. n= 7783 159 1339 742 2989 1724 830

More than now 49 50 51 44 47 53 47 Same as now 35 40 34 40 34 32 36 Less than now 12 7 11 13 14 12 9 ASBS 2006/07. n= 8949 232 1932 888 3827 1554 516

More than now 49 38 51 43 48 56 54 Same as now 36 40 35 39 36 34 38 Less than now 10 12 10 13 12 6 6 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

Table 4.8: Expectations of Turnover in 12 Months Timexvii – Trends by Size Base = all SME employers All SME


SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % % More than now 41 40 45 57 Same as now 40 41 37 31 Less than now 14 15 13 11 ASBS 2007/08. Un-weighted (n) = 7783 3529 2950 1304

More than now 49 47 54 63 Same as now 35 35 32 26 Less than now 12 13 12 10 ASBS 2006/07. Un-weighted (n) = 8949 3721 3666 1562

More than now 49 48 58 67 Same as now 36 37 31 24 Less than now 10 10 7 6 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

27

Profit

4.35 Seventy-one per cent of SME employers generated a profit or surplus in their last financial year. Medium sized businesses were more likely to have done so (81 per cent).

Table 4.9: Whether generated a profit or surplus in the last financial yearxviii – Trends by Size Base = all SME employers All SME

employers Micro (1-9) Small (10-49) Medium (50-249)

SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

Yes 71 71 72 81

No 24 24 23 16

Don’t know 1 1 1 *

Unwilling to answer 4 4 4 * ASBS 2007/08. Un-weighted (n) = 7783 3529 2950 1304

Yes 78 78 82 85

No 17 17 14 13

Don’t know 4 4 3 2

Unwilling to answer 1 1 1 1 ASBS 2006/07. Un-weighted (n) = 8949 3721 3666 1562

Yes 78 77 82 85

No 17 17 14 12


Unwilling to answer 2 2 1 1 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research * = a figure of less than 0.5% but higher than zero

4.36 In comparison to the previous ASBSs fewer businesses made a profit – seven percentage points fewer overall. This was the case for all sizes of SME employers.

4.37 By sector, the ‘other services’ were the least likely to have made a profit (65 per cent). This sector includes a higher than average proportion of not-for-profit enterprises.

4.38 Social enterprises, however, were as likely to have made a profit as SME employers generally (74 per cent vs. 71 per cent for all, but not a statistically significant difference).

4.39 Those in the South West (76 per cent) and Northern Ireland (83 per cent) were the ones most likely to have made a profit. Those in the West Midlands were the least likely to have done so (66 per cent).

4.40 Only 56 per cent of SME employers trading for less than four years made a profit, compared to 72 per cent of those trading for 10 years or more.

4.41 Only 64 per cent of those that sought finance in the last year made a profit, compared to 74 per cent of those that did not.

28

4.42 Nineteen per cent of SME employers pay more than 50 per cent of profit or surplus to owners or shareholders, a proportion that is similar to that seen in the previous ASBS’s. This proportion varied by size of business. Twenty per cent of micro businesses paid more than 50 per cent profit to owners or shareholders, but only 16 per cent of small businesses and 15 per cent of medium sized ones did so.

Table 4.10: Whether pay more than 50% of profit or surplus to owners or shareholdersxix – Trends Base = all SME employers SBS 2010 ASBS 2007/08 ASBS 2006/07 Un-weighted (n) = 3817 7783 8949

% % %

Yes 19 18 20

No 72 75 72

Have never generated a profit or surplus 2 1 2

Don’t know 7 4 6

Unwilling to answer 1 1 * Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS * = a figure of less than 0.5% but higher than zero

4.43 This dividend was most likely to be paid in business services (31 per cent), and was less likely in production (15 per cent), construction (14 per cent), transport, retail and distribution (16 per cent) and other services (10 per cent).

Plans for closure or transfer of business

4.44 Six per cent of SME employers anticipated closing their business or transferring ownership in the next five years. Seventeen per cent anticipated the full transfer of ownership in this period. The figures were lower than in ASBS 07/08 when eight per cent anticipated closure, and 19 per cent transferral of ownership. Transferral of ownership was most likely to occur in transport, retail and distribution (19 per cent).

Table 4.11: Whether anticipate the closure or full transfer of their business in the next five yearsxx - by Size Base = all SME employers All SME


Medium (50-249)

SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

Yes, anticipate the closure of the business 6 6 3 1

Yes, anticipate the full transfer of ownership of the business 17 16 18 11

No 71 70 72 81

Don’t know 7 7 7 7 Figures in bold are statistically significant at the 95% confidence level against the overall finding

29

4.45 Those intending to close or transfer do appear to have fared worse in the previous 12 months in terms of employment. Twenty-seven per cent were employing fewer people than 12 months previously, compared to 19 per cent of those who do not anticipate closure or transfer; whilst 21 per cent think they will have fewer staff in 12 months time, compared to 11 per cent of those who will not close/transfer.

4.46 Similarly, forty-seven per cent of those who might close or transfer reported lower turnover compared with 12 months previously, with compares with 30 per cent of those not anticipating closure or transfer. Twenty-two per cent think turnover will decrease in the next 12 months, compared to 12 per cent of those not anticipating closure or transfer.

4.47 Of those anticipating closure or transfer, 73 per cent were businesses aged 10 years or more, which compares with 64 per cent of those not anticipating transfer/closure.

30

5 Growth Plans for growth

5.1 Seventy four per cent of SME employers aim to grow their business over the next two to three years. Medium sized SMEs were more likely to want to do this than small and micro ones.

Table 5.1: Whether aim to grow business over the next two or three yearsxxi – Trends by Size Base = all SME employers All SME


SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

Yes 74 72 80 89

No 26 28 20 11 ASBS 2007/08. Un-weighted (n) = 7783 3529 2950 1304

Yes 67 65 77 88


Yes 65 62 76 88

No 35 38 24 12 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

5.2 Compared to previous years the ambition to grow in SBS 2010 is greater. In ASBS 07/08 about two-thirds of SME employers aimed to grow their business: the proportion now being just under three-quarters.

5.3 Both those who have more employees than they had 12 months ago, and those that have fewer, are more likely than average to want to grow. Eighty-seven per cent of the former group aim to grow, and 77 per cent of the latter (indicating that they want to grow back at least to their previous levels). It is those with consistent employment levels that are less likely than average to want to grow (69 per cent).

5.4 The increase in growth ambition comes mainly from micro businesses. Medium-sized businesses were as likely to want to grow in SBS 2010 as was the case a few years ago.

5.5 The sectors most likely to want to grow are production (81 per cent) and business services (78 per cent). Less likely than average to want to grow are transport, retail and distribution (69 per cent), ‘other services’ (69 per cent) and primary (62 per cent).

5.6 The East Midlands was the region with the highest proportion of SME employers wanting to grow (80 per cent). The lowest proportions were in the South West (68 per cent) and Scotland (65 per cent).

5.7 Ninety-one per cent of businesses founded in the last three years aimed to grow, compared to 69 per cent of those aged 10 years or more.

31

5.8 Eighty-five per cent of those who sought finance in the last 12 months aimed to grow, compared to just 69 per cent of those that did not.

5.9 Sixty-three per cent of those anticipating closure or transfer in the next five years intend to grow their business over the next two to three, compared to 77 per cent of those not anticipating closure or transfer.

5.10 Of those intending to grow, 66 per cent intended to do so through internal finance only, 12 per cent through external finance only, and 20 per cent through a combination of both. Therefore, 32 per cent of this group want to grow using external finance. The increase in this proportion on ASBS 07/08 is significant, but the proportion only returns to the level seen in ASBS 06/07.

5.11 Whereas the proportion that would only use external finance was similar according to company size, the proportion that would use both internal and external finance increases accordingly. Thus, 41 per cent of medium sized businesses would use any external finance, compared to 38 per cent of small businesses, and 30 per cent of micro businesses.

Table 5.2: Whether SMEs aim to grow their business through internal or external financexxii – Trends Base = all SME employers that aim to grow their business over the next two to three years SBS 2010 ASBS 2007/08 ASBS 2006/07

Un-weighted (n) = 2922 5678 6476

% % %

Internal finance 66 69 64

External finance 12 11 13

Both 20 17 20

Don’t know 2 2 3

ANY INTERNAL 86 86 84

ANY EXTERNAL 32 28 33 Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS

5.12 By sector it is the ‘other services’ that were most likely to want to make use of external finance (45 per cent), and those in the construction sector that want to grow were the least likely to want to use external finance (23 per cent).

32

Extent of plans for achieving future business growth

5.13 Sixty-six per cent of all SME employers intended to increase the skills of their workforce in the next two to three years, 61 per cent intended to reduce costs by increasing the productivity of their workers, and 51 per cent intended to increase the leadership capability of their managers. Sixty-three per cent of SME employers intended to increase their turnover by exploiting new markets, and 44 per cent intended to develop new products.

Table 5.3: Extent of plans for achieving future growthxxiii – Trends10 Base = all SME employers SBS 2010 ASBS 07/08

All Aim to Grow Do not Aim to Grow Aim to Grow

Un-weighted (n) = 3817 2922 895 5678

% % % %

Increase the skills of the workforce 66 75 43 61

Increase turnover by exploiting new markets 63 75 31 68

Reduce costs by increasing the productivity of workers 61 67 44 57

Increase the leadership capability of managers 51 60 28 52

Employ more staff 50 64 11 N/A

Develop new products 44 52 25 47

None of these 8 3 25 N/A Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS, based on those aiming to grow

5.14 In the 07/08 ASBS this question was only asked of those aiming to grow. For comparative purposes therefore we need to compare the ASBS results with those in the 2010 survey aiming to grow. From this we can see increases in every category, most notably in ‘increasing the skills of the workplace’ which has risen by 14 percentage points.

5.15 Of those not aiming to grow, reducing costs is the action most likely to be taken (44 per cent).

5.16 For all these measures medium-sized businesses are much more likely to intend to do them than small ones, and small ones are much more likely to do them than micro businesses. Start-ups were more likely to want to do all of these actions than those aged 10 years or more.

10 Please note that in the ASBS 07/08 this question was only asked of those intending to grow.

33

Table 5.4: Extent of plans for achieving future growthxxiv – by Sector Base = all SME employers

All SMEs Primary Product

ion Constr-uction TRAD

Business

services

Other service

s

SBS 2010. Un-weighted (n) = 3817 64 527 315 1157 793 961

% % % % % % %

Increase skills of the workforce 66 56 72 68 61 66 77

Increase turnover by exploiting new markets 63 61 74 65 62 67 50

Reduce costs by increasing the productivity of workers 61 68 70 71 59 60 48

Increase the leadership capability of managers 51 32 50 52 49 49 64

Employ more staff 50 47 61 53 45 52 45

Develop new products 44 42 65 32 44 45 38

None of these 8 12 3 7 10 8 10 Figures in bold are statistically significant at the 95% confidence level against the overall finding

5.17 There are some key differences by sector, however. The production sector was more likely than average to be planning to do all of these actions, with the exception of increasing the leadership capability of its management. The construction industry was keen to cut costs by increasing productivity, but not to develop new products. Both business services and production were the sectors most likely to want to exploit new markets, whilst ‘other services’ were the most keen to increase workforce skills and increase leadership capability (perhaps because the education sector falls within this category).

34

6 Business capability Perceptions of Business Capability

6.1 Respondents were asked how capable they felt their business was at a number of tasks which have been linked to running a successful business. Respondents answered on a five point numeric scale, with a score of one to two indicating they were poor at the task, and a score of four to five indicating they thought they were strong.

6.2 For most tasks medium sized businesses considered themselves more capable than the small and micros.

6.3 Overall, SME employers were most likely to consider themselves capable of taking decisions on regulation and tax issues. Sixty-three considered themselves strong at this, and only nine per cent thought they were poor. Most likely to consider themselves poor at this were those in the North East (19 per cent poor), West Midlands (16 per cent) and Yorkshire (14 per cent).

6.4 Seven per cent of those that considered themselves strong at taking decisions on regulation and tax issues considered regulations their main obstacle to success, and eight per cent considered tax their main obstacle. This compares with nine per cent and fourteen per cent respectively among those considering themselves as poor at these aspects

6.5 Fifty-nine per cent considered themselves strong at people management, and 10 per cent considered themselves poor. Micro businesses were much more likely to think of themselves as poor than medium sized ones, as were those in transport, retail and distribution (14 per cent), the North East (22 per cent) and West Midlands (14 per cent).

6.6 Fifty-six per cent considered themselves strong at developing and implementing a business plan and strategy, with 14 per cent thinking themselves poor. This was most likely to be the case for those in production (17 per cent), construction (19 per cent), transport, retail and distribution (17 per cent) and the West Midlands (21 per cent).

35

Table 6.1: Perception of whether the business is strong or poor at business activitiesxxv – by Size Base = all SME employers All SME

Employers Micro (1-9)

Small (10-49)

Medium (50-249)

SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

Taking decisions on regulation and tax issues

Strong 63 61 69 74

Poor 9 10 7 5

People management, such as recruitment and delegation

Strong 59 58 66 69

Poor 10 11 5 3

Developing and implementing a business plan and strategy

Strong 56 54 62 73

Poor 14 15 12 6

Operational improvement Strong 53 52 61 69

Poor 11 12 8 5

Developing and introducing new products or services

Strong 42 41 45 45

Poor 21 22 19 19

Using formalised business systems such as customer information records

Strong 41 40 50 54

Poor 26 27 20 15

Entering new markets Strong 26 26 29 33

Poor 34 35 29 23

Accessing external finance Strong 25 22 36 45

Poor 38 40 29 23 Figures in bold are statistically significant at the 95% confidence level against the overall finding

6.7 Fifty-three per cent considered themselves strong at operational improvement e.g. adopting industry best practice, while 11 per cent considered themselves poor at this. This was most likely to be the case for production (15 per cent), transport, retail and distribution (15 per cent), and those in the North East (27 per cent)

6.8 Fifty-eight per cent of those who have introduced or significantly improved processes in the last 12 months consider themselves strong at this aspect, compared to 54 per cent of those that have not.

6.9 Forty-two per cent considered themselves strong at developing and introducing new products and services, 21 per cent poor. More likely to be poor were those in Northern Ireland (35 per cent) and older businesses (23 per cent of those aged 10 years plus).

6.10 Fifty-four per cent of those who have introduced or significantly improved products or services in the past 12 months consider themselves strong at this aspect, compared to 36 per cent of those that have not.

36

6.11 Forty-one per cent considered themselves strong at using formalised business systems such as customer information records, and 26 per cent thought of themselves as poor. This was most likely to be the case in transport, retail and distribution (30 per cent), the North East (39 per cent), West Midlands (34 per cent) and Scotland (33 per cent). Businesses formed in the last three years were also more likely than average to think this (32 per cent).

6.12 Twenty-six per cent thought themselves strong at entering new markets, 34 per cent poor. This was most likely to be the case in the South West (39 per cent), and for businesses aged 10 years or more (36 per cent).

6.13 Twenty-three per cent considered themselves strong at accessing external finance, 38 per cent poor. Most likely to think of themselves as poor were those in transport, retail and distribution (40 per cent) and newer businesses trading for less than four years (45 per cent).

Business Capability: Innovation

6.14 Forty-seven per cent of SME employers had introduced new or significantly improved products or services in the past twelve months. This proportion was not significantly different from those seen in both the previous ASBS’s. Small and medium sized businesses were more likely to have done this than micro businesses.

Table 6.2: Whether SMEs have introduced new or significantly improved products or services in the past twelve monthsxxvi - Trends by Size Base = all SME employers11 All SME


SBS 2010. Un-weighted (n) = 1904 781 740 383

% % % % Yes 47 46 53 57


Yes 46 45 51 60


Yes 48 47 53 59


6.15 There was no broad sector where innovative products or services were more likely to have been introduced.

6.16 By region this innovation was most likely to have occurred in the South East (57 per cent) and West Midlands (57 per cent), and was least likely to have occurred in Wales (40 per cent), the North East (32 per cent) and North West (33 per cent). Seventy-one per cent of businesses aged less than four years had introduced innovative products, compared to 43 per cent of those age 10 years or more.

11 In the 2010 SBS because of constraints on the overall interview length, approximately half of respondents were selected (at random) for this question

37

6.17 Those that had sought finance in the last 12 months were also more likely than average to have introduced innovative products (52 per cent).

6.18 Of those introducing new products or services, 72 per cent said these were new to the business, and 26 per cent that the products/services were completely new. This was most likely to have been the case in production (38 per cent of those who had introduced new products/services).

6.19 A third of all SME employers had introduced new or significantly improved processes in the past 12 months. Again, this proportion was very similar to that seen in the previous ASBS’s, and larger employers were more likely to have done this.

Table 6.3 : Whether SMEs have introduced new or significantly improved processes in the past twelve monthsxxvii - Trends by Size Base = all SME employers12 All SME


SBS 2010. Un-weighted (n) = 1904 781 740 383

% % % %

Yes 33 30 48 52


Yes 33 30 43 55


Yes 33 31 43 55


6.20 New or improved processes were more likely to have occurred in business services (41 per cent) and other services (39 per cent) than in transport, retail and distribution (26 per cent). By region these were more likely to have occurred in the East of England (43 per cent). Those who had sought finance were more likely to have new or improved processes (39 per cent).

6.21 Of those introducing new or significantly improved processes, 81 per cent were new to the business, and 18 per cent were completely new (i.e. not introduced by anybody else).

12 In the 2010 SBS because of constraints on the overall interview length, only approximately half of respondents were selected (at random) for this question

38

Business Capability: Exporting

6.22 Twenty-three per cent of SME employers sold goods or services or licence products outside of the UK. This proportion has not changed since the previous ASBSs. The larger the business, the more likely they were to export.

Table 6.4: Whether sell goods or services or licence products outside the UKxxviii - Trends by Size Base = all SME employers All SME


SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

Yes 23 21 29 40


Yes 24 22 33 43

No 76 78 67 57 ASBS 2006/07. Un-weighted (n) =n= 8949 3721 3666 1562

Yes 24 22 33 46


6.23 Production was the sector most likely to export (42 per cent), with business services second (29 per cent). Transport, retail and distribution (18 per cent), other services (14 per cent), construction (13 per cent) and primary (eight per cent) were less likely to export.

6.24 Exporters are more likely to be based in London (30 per cent of SMEs in London), the South East (28 per cent) and Northern Ireland (37 per cent). They were less common in Wales (16 per cent) and the North West (17 per cent).

6.25 Older businesses (aged 10 years +) were more likely to export (24 per cent) than those which were less than four years old (16 per cent).

6.26 Four per cent of those not currently exporting planned to do so in the next 12 months. This was a similar proportion to the three per cent seen in ASBS 07/08, and five per cent in ASBS 06/07.

6.27 For those exporting, the major markets were the EU (74 per cent), North America (27 per cent), the Middle East and Africa (25 per cent), Asia Pacific (25 per cent) non-EU Europe (22 per cent) and the South/Latin America (eight per cent).

6.28 Exporters in the transport, retail and distribution sector had a higher than average propensity to export to the EU (80 per cent), but were less likely than average to export to North America (21 per cent) or Asia Pacific (17 per cent).

39

6.29 Business services (30 per cent) and ‘other services’ (40 per cent) exporters had a higher than average propensity to export to Asia Pacific. ‘Other services’ were also more likely to export to North America (44 per cent) and South/Latin America (19 per cent).

Table 6.5: Barriers to exportingxxix – by Size Base = all SME employers not currently exporting All SME

Employers Micro (1-

9) Small

(10-49) Medium (50-249)

SBS 2010. Un-weighted (n) = 2766 1182 1096 488

% % % %

Do not have a product 39 39 43 41

Not part of business plan 34 34 36 32

Have sufficient business in the UK already 16 16 16 16

Financial issues 4 5 3 7

Choose to be local business only 3 4 3 2

Difficulty finding overseas customers 3 3 4 2

Business too small/new 2 3 1 *


6.30 Of those not exporting and with no plans to do so (74 per cent of all SME employers), 39 per cent said that this was because they did not have a product, 34 per cent that it was not part of their business plan, and 16 per cent that they had sufficient business in the UK already.

6.31 SME employers in the production sector were the most likely to export. Those SME employers within this sector that did not export were less likely than average to think they did not have an exportable product (17 per cent), and were more likely to encounter other barriers to export. Eleven per cent said they did not export because of financial issues (costs, tax, cashflow, exchange rates etc.), 10 per cent had difficulty finding overseas customers, and four per cent spontaneously claimed little knowledge of how to export. Five per cent cited too much competition in the EU, and four per cent said it was difficult to identify opportunities.

40

Business Capability: Training

6.32 Sixty per cent of SME employers had arranged or funded training or development for staff in the past 12 months. This was much more likely to be the case the larger the business. The overall proportions are not statistically significantly different to those seen in the previous ASBSs.

Table 6.6: Whether businesses have arranged or funded training or development for staff in the past 12 monthsxxx - Trends by Size Base = all SME employers13 All SME


SBS 2010. Un-weighted (n) = 1937 772 798 367

% % % % Yes 60 56 85 94 ASBS 2007/08. Un-weighted (n) = 7783 3529 2950 1304

Yes 57 52 86 96 ASBS 2006/07. Un-weighted (n) = 8949 3721 3666 1562

Yes 60 55 84 93 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

6.33 Training and development was most likely to occur for business services (69 per cent), ‘other services’ (68 per cent) and in the construction sector (68 per cent). It was least likely to occur in transport, retail and distribution (49 per cent). The East of England was most likely to provide training (71 per cent), Yorkshire/Humberside the least (48 per cent). Those trading for less than four years were less likely to have provided training (50 per cent) than those trading for longer.

6.34 Of those providing or funding training and development, 28 per cent said most of it was designed to lead to a formal qualification, 23 per cent that some of it was, and 48 per cent that none of it was.

6.35 Thirty-two per cent of SME employers had provided managers with some training or development to improve their leadership and management skills in the last 12 months. This proportion varied from 28 per cent of micro businesses, to 49 per cent of small businesses and 67 per cent of medium sized businesses. This type of training was most likely to occur in business services (40 per cent) and ‘other services’ (46 per cent).

13 In the 2010 SBS because of constraints on the overall interview length, only approximately half of respondents were selected (at random) for this question

41

Business Capability: Technology

6.36 Eight-seven per cent of SME employers had broadband for their business. This varied from 85 per cent of micro businesses, to 96 per cent of both small and medium sized businesses.

6.37 Least likely to have broadband were those in the transport, retail and distribution sector (20 per cent without) and ‘other services’ (18 per cent). Twenty-one per cent of SME employers in the West Midlands did not have broadband.

6.38 SME employers were asked whether they used the internet for a range of business purposes. The larger the business the greater the likelihood of the internet being used, the exception being for paying taxes online, where medium sized businesses were less likely to do this than smaller ones, possibly because they are more likely to use external accountants for this task.

Table 6.7: Uses for the internetxxxi - by Size Base = all SME employers selected for section

All SME employers Micro (1-9) Small

(10-49) Medium (50-

249) SBS 2010. Un-weighted (n) = 1901 750 763 388

% % % %

Paying taxes online 70 70 73 65

Seeking general business advice 51 49 60 63

Selling goods and services through a website 39 37 45 50

Promoting your goods and services through a website 67 64 81 88

Advice on regulation 57 55 67 76

None of these 8 9 4 1


6.39 Most likely to use the internet for business support were those in production (60 per cent). They were also more likely than average to use the internet for selling goods through a website (60 per cent) and promoting themselves through a website (80 per cent).

6.40 Construction businesses were less likely than average to engage in e-commerce (29 per cent).

6.41 Business services were the most likely to get advice on regulation through the internet (66 per cent). They were also above average for seeking general business advice (56 per cent), and promoting goods and services through a website (74 per cent).

42

7 Access to finance Whether sought finance in the last 12 months

7.1 Twenty-six per cent of SME employers tried to obtain finance for their business in the 12 months preceding interview. This is a small but statistically significant rise on the 23 per cent who sought finance in the ASBS 07/08 and 06/07.

Table 7.1: Whether Sought Finance in the Last 12 Monthsxxxii – Trends by Sector Base = all SME employers

All SME Employer

s Primary Prod-


Services Other

Services

SBS 2010. n= 3817 64 527 315 1157 827 927

% % % % % % %

YES – ANY 26 45 24 28 28 22 25

‐ Once 17 38 17 17 20 14 13

‐ More 9 7 7 11 8 8 12

NO 72 54 73 71 71 76 72 ASBS 2007/08. n= 7783 159 1339 742 2989 1724 830

YES – ANY 23 31 25 23 22 21 29

‐ Once 16 20 18 16 16 14 14

‐ More 7 11 7 7 6 7 15

NO 76 69 74 77 77 78 70 ASBS 2006/07. n= 8949 232 1932 888 3827 1554 516

YES – ANY 23 36 25 26 22 20 26

‐ Once 16 24 18 19 16 12 13

‐ More 7 12 7 8 6 8 13

NO 75 63 74 74 76 78 73 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research; * = a figure of less than 0.5% but more than zero

7.2 By sector, those in primary industries were most likely to have done this (45 per cent), and those in business services were the least likely (22 per cent).

7.3 Compared to ASBS 07/08 those in construction and transport, retail and distribution were significantly more likely to have sought finance.

43

Table 7.2: Whether Sought Finance in the Last 12 Monthsxxxiii – Trends by Size Base = all SME employers All SME


SBS 2010. Un-weighted (n) = 3817 1528 1530 759 % % % % YES – ANY 26 25 33 40

‐ Once 17 17 21 22

‐ More 9 8 13 17

NO 72 74 63 53

Don’t know/refused 2 1 4 6 ASBS 2007/08. Un-weighted (n) = 7783 3529 2950 1304

YES – ANY 23 21 32 40

‐ Once 16 15 19 23

‐ More 7 6 13 17

NO 76 78 66 56

Don’t know/refused 1 1 2 3 ASBS 2006/07. Un-weighted (n) = 8949 3721 3666 1562

YES – ANY 23 21 32 39

‐ Once 16 15 20 20

‐ More 7 6 13 18

NO 75 78 66 57

Don’t know/refused 1 1 2 5


.

7.4 By size, medium-sized businesses (40 per cent) were much more likely to seek finance than small (33 per cent) or micro businesses (25 per cent). However, in comparison with ASBS 07/08 the increase in demand for finance is only statistically significant for the micro businesses (up four percentage points).

7.5 By region, finance was most likely to have been sought by SME employers in Northern Ireland (37 per cent).

7.6 Thirty-two per cent of newer businesses sought finance, compared to 22 per cent of those trading for ten years or more.

44

Reasons for applying/not applying for finance

7.7 Fifty-six per cent of those SME employers that applied for finance did so to gain working capital or to alleviate cashflow difficulties. Twenty-one percent wished to invest in capital equipment or vehicles, 10 per cent wanted to buy land or buildings, and nine per cent to improve buildings

Table 7.3: Reasons for Applying for Financexxxiv - Trends Base = all SME employers who applied for finance in the last 12 months SBS 2010 ASBS 2007/08 ASBS 2006/07 Un-weighted (n) = 1193 2247 2625 % % % Working capital, cashflow 56 43 35

Capital equipment or vehicles 21 27 31

Buying land or buildings 10 10 14

Improving buildings 9 8 7

Research & Development 2 4 3

Buying another business 2 2 2

Marketing 2 1 1

Business expansion/growth 1 3 4

Training/Staff Development 1 2 2

Management buy out 1 2 2

Other 2 3 3

Don’t know/refused * 2 2 Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS; * = a figure of less than 0.5% but more than zero

7.8 Compared with the previous ASBSs there is a very real change in the reasons for wanting finance. More businesses in the SBS 2010 needed finance in order to smooth their cashflow, and fewer have sought to invest in equipment and vehicles.

7.9 Of those that sought finance, working capital was more likely to be required by micro businesses (58 per cent) than the small (48 per cent) and medium-sized ones (47 per cent). Working capital was most likely to be needed in the construction (66 per cent) and business services (62 per cent) sectors. Sixty-seven per cent of those seeking finance in both London and the South East sought it for working capital.

7.10 Acquisition of capital equipment was most likely to be a reason for wanting finance in the production sector (30 per cent of those seeking finance). Those seeking finance in the transport, retail and distribution sector were more likely than average to want to buy land or buildings (15 per cent).

7.11 Of the majority of SME employers that did not seek finance, the predominant reason was that the finance was not needed. This was the main reason given by all sizes and sectors.

45

Table 7.4: Reasons For Not Applying for Finance in the Last 12 Monthsxxxv Base = all SME employers who did not apply for finance in the last 12 months

All Applied for Finance Micro (1-9) Small (10-

49) Medium (50-249)

SBS 2010. Un-weighted (n) = 2624 1146 1001 477 % % % % Not needed it 82 81 85 83

Did not want to take on additional risk 5 6 2 1

Thought would be rejected 4 4 4 1

Thought it would be too expensive 4 4 1 2

Other reason 3 3 4 3

Don’t know 2 2 4 11 Figures in bold are statistically significant at the 95% confidence level against the overall finding

7.12 The ‘other services’ were less likely to give this as a reason than other sectors (77 per cent), and they were more likely than average to say they did not want to take on additional risk (eight per cent).

7.13 Overall 4 per cent spontaneously said that they thought it would be too expensive. This proportion was higher among those aged less than four years (17 per cent).

Type of finance sought

7.14 Of those that applied for finance, 40 per cent applied for a bank loan and 35 per cent a bank overdraft. Nine per cent each sought a grant or leasing/HP, and six per cent a mortgage for property purchase or improvement.

7.15 Compared with the ASBS 07/08 there was a significant increase in the proportion seeking a bank overdraft, which is consistent with the increased demand for working capital.

7.16 Of those seeking finance, bank loans were the most preferred finance tool for those in production (48 per cent) and transport, retail and distribution (47 per cent).

Table 7.5: Type of Finance Soughtxxxvi Base = all SME employers who applied for finance in the last 12 months SBS 2010 ASBS 2007/08 ASBS 2006/07

46

Un-weighted (n) = 1193 2247 2625

% % %

Bank loan 40 44 46

Bank overdraft 35 26 22

Grant 9 7 6

Leasing or hire purchase 9 10 11

Mortgage 6 7 8

Loan from family/business 3 * 1

Factoring/invoice discounting 2 1 2

Government guaranteed loan 2 3 1

Equity finance 1 2 2

Other 10 11 12

Don’t know/refused 2 2 4 Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS * = a figure of less than 0.5% but more than zero

7.17 Bank overdrafts were significantly more likely to be sought in construction (58 per cent), whilst those in ‘other services’ were more likely than average to seek grants (35 per cent of those seeking finance).

7.18 Start-ups seeking finance were more likely than average to seek a bank loan (49 per cent).

7.19 Of those that sought bank finance, only four per cent had their bank discuss with them whether their loan was eligible for cheaper finance from the European Investment Bank. This was more likely to happen for the small (seven per cent) and medium sized (six per cent) businesses that sought bank finance.

Amount of finance sought

7.20 Seventeen per cent of those seeking finance sought less than £10,000, with only 5 per cent seeking more than £1 million. The mean average amount of finance sought was just under £250,000, with the median just above £41,000. The sums of money sought were very similar to those seen in the previous two ASBS’s.

Table 7.6: Amount of Finance Soughtxxxvii Base = all SME employers who applied for finance in the last 12 months SBS 2010 ASBS 2007/08 ASBS 2006/07 Un-weighted (n) = 1193 2247 2625 % % % Less than £10,000 18 12 12

47

£10,000-£24,999 23 24 20

£25,000-£49,000 14 14 14

£50,000-£99,999 11 12 13

£100,000-£249,999 11 14 14

£250,000-£499,999 6 6 6

£500,000-£999,999 4 3 4

£1 million or more 5 4 5

Don’t know/refused 9 11 13

Mean Average £240,450 £221,400 £237,150

Median Average £41,000 £40,250 £46,150 Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS

7.21 The mean average varied by the type of finance sought. For bank loans this was £306,000, for bank overdrafts £119,000 and for grants £137,000.

Difficulties obtaining finance

7.22 Thirty-five per cent of those that tried to obtain finance were unable to obtain any from the first source they approached. Seven per cent of SMEs seeking finance obtained some from the first source but not all of the money they required, whilst nine per cent obtained all they needed but with some problems. This equates to 51 per cent of SMEs seeking finance having difficulties obtaining finance from the first source approached in the last 12 months – 13 per cent of all SME employers.

7.23 This proportion is more than twice that seen in ASBS 07/08. Whilst medium sized businesses generally had fewer difficulties obtaining finance than the micros, the proportion of medium sized businesses applying for finance experiencing a difficulty has nearly trebled since 07/08, from 13 to 36 per cent.

7.24 Difficulties were most commonly encountered in construction (60 per cent) and the transport, retail and distribution (56 per cent) sectors. Sixty-four per cent of those who sought finance in London had difficulties, whilst 43 per cent of the start-ups that sought finance were unable to obtain any from the first source approached.

7.25 Difficulties were encountered for all types of finance sought. However, those who sought bank overdrafts were more likely to encounter difficulties than those who sought bank loans (56 per cent compared with 48 per cent).

Table 7.7: Any Difficulty Obtaining Finance from First Source Approachedxxxviii – Trends by Size Base = all SME employers who applied for finance in the last 12 months

All Applied for Finance Micro (1-9) Small

(10-49) Medium (50-

249) SBS 2010. Un-weighted (n) = 1193 383 529 282 % % % %

ANY DIFFICULTY 51 54 44 36 ‐ Unable to obtain any finance 35 37 27 23 ‐ Obtained some but not all the 7 6 7 6

48

finance required ‐ Obtained all the finance required

but with some problems 9 9 9 7

NO DIFFICULTY 47 45 52 59 Don’t know/refused 2 1 4 5 ASBS 2007/08. Un-weighted (n) = 2247 765 961 521

ANY DIFFICULTY 25 27 22 13 ‐ Unable to obtain any finance 14 16 9 5 ‐ Obtained some but not all the

finance required 4 4 6 3

‐ Obtained all the finance required but with some problems 7 7 7 4

NO DIFFICULTY 73 72 76 86 Don’t know/refused 2 2 1 2 ASBS 2006/07. Un-weighted (n) = 2625 814 1206 605

ANY DIFFICULTY 23 25 20 12 ‐ Unable to obtain any finance 13 15 9 4 ‐ Obtained some but not all the

finance required 4 5 4 3

‐ Obtained all the finance required but with some problems 6 6 8 5

NO DIFFICULTY 75 74 77 86 Don’t know/refused 2 2 3 2 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

7.26 Thirty-five per cent of all that applied for finance were unable to obtain any from the first source approached. This is equivalent to nine per cent of all SME employers. The equivalent proportion of all employers in both ASBS 07/08 and 06/07 was three per cent.

7.27 Thirty per cent of those that obtained some but not all of the finance required from the first source approached received less than 25%, 18 per cent received between 25% and 49%, 32 per cent received between 50% and 74%, whilst 12 per cent received 75% or more. The mean average was 45%.

7.28 Of those that had sought bank finance and had difficulties obtaining it, 14 per cent discussed with their bank whether a loan backed by a government guarantee was suitable for their business.

49

7.29 Of those that did not obtain any finance from the first source they approached, or who only got some of the money they needed, about a quarter (27 per cent) went on to get all the finance they needed from another source. Overall therefore, the proportion of SMEs seeking finance and the outcomes are as follows:

• 68 per cent (18 per cent of all SME employers) obtained all the finance they required

• 6 per cent (2 per cent of all SME employers) obtained some but not all

• 21 per cent (5 per cent of all SME employers) did not obtain any of the finance sought

Table 7.8: Eventual outcome of application for financexxxix – Trends by Size Base = all SME employers who applied for finance in the last 12 months

All Applied for Finance Micro (1-9) Small

(10-49) Medium (50-

249) SBS 2010. Un-weighted (n) = 1193 383 529 282

% % % %

OBTAINED ALL THEY NEEDED 68 67 68 76 ‐ From first source 56 55 61 66 ‐ From another source 11 12 6 10 OBTAINED SOME, BUT NOT ALL 6 6 6 7 OBTAINED NONE 21 22 19 11 Don’t know/refused 5 5 7 6 ASBS 2007/08. Un-weighted (n) = 2247 765 961 521

% % % %

OBTAINED ALL THEY NEEDED 89 88 89 94 ‐ From first source 80 79 84 90 ‐ From another source 8 9 6 4 OBTAINED SOME, BUT NOT ALL 2 1 3 1 OBTAINED NONE 8 9 6 3 Don’t know/refused 2 2 1 2 ASBS 2006/07. Un-weighted (n) = 2625 814 1206 605

% % % %

OBTAINED ALL THEY NEEDED 87 86 91 94 ‐ From first source 81 79 85 91 ‐ From another source 7 7 6 3 OBTAINED SOME, BUT NOT ALL 2 2 2 2 OBTAINED NONE 9 10 5 3 Don’t know/refused 2 2 3 2 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

7.30 The proportion obtaining all the finance they needed in SBS 2010 was significantly less than that seen in ASBS 07/08 (89 per cent), and 06/07 (87 per cent).

7.31 Of those that were unable to gain any finance from any source in 2010 (5 per cent of all SME employers) 18 per cent got into serious finance difficulties, 8 per cent had to put plans on hold, 9 per cent had to defer plans but eventually went ahead with them, and for 6 per cent there was no impact. Nearly half (47 per cent) have yet to find out the consequences of not being able to get any finance.

50

7.32 The table below shows the reasons given for the difficulties in obtaining finance from the first source approached. Most commonly respondents claimed no reason was given for this. Thereafter, insufficient security was cited as the most common reason, followed by the riskiness of the sector, the current credit climate and poor business credit history. A number of those encountering difficulties mentioned that they themselves rejected the terms of the finance offered, because they considered the terms too harsh.

Table 7.9: Reasons for Difficulties Arranging Financexl - Trends

Base = all SME employers who had difficulties arranging finance in the last 12 months

Small Business Survey 2010 ASBS 2007/08

Un-weighted (n) = 531 474 % % No reason given 24 12

Insufficient security 20 13

Business sector too risky 9 8

Recession/current credit climate 6 *

Poor business credit history 6 6

Didn’t meet criteria 5 5

Rejected terms of finance offered 5 2

No credit history/not been in business long enough 2 8

Applied for too much 2 4

Business too small/too new 2 2

No security 2 4

Other 14 36

Don’t know/refused 10 4 Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS * = a figure of less than 0.5% but more than zero

7.33 Insufficient security was more commonly a reason for having problems obtaining finance for micro businesses (22 per cent), whilst the riskiness of the sector was more commonly cited by medium sized companies (20 per cent).

51

Understanding of the way in which banks assess business credit risk

7.34 Of those that applied for finance in the last 12 months, fifty-six per cent said that they understand the way in which banks assess business credit risk well: 20 per cent very well, 35 per cent quite well. Forty-one per cent do not understand it well: 26 per cent not very well, and 16 per cent not at all well.

Table 7.10: Extent to which Understand the Way in Which Banks Assess Business Credit Riskxli – by Size Base = all SME employers who applied for finance in the last 12 months

All Applied for Finance Micro (1-9) Small (10-49)

Medium (50-249)

SBS 2010. Un-weighted (n) = 1193 383 529 282

% % % %

UNDERSTAND WELL 56 52 66 80

‐ Very well 20 18 27 32

‐ Quite well 35 34 39 48

DO NOT UNDERSTAND WELL 41 46 30 17

‐ Not very well 26 28 18 11

‐ Not at all well 16 18 12 6



7.35 As one might expect, the medium-sized businesses were more likely to understand it well than the small and micros. Those in ‘other’ services were the least likely to understand it very well (just 14 per cent).

52

Relationship with bank

7.36 Sixty-four per cent of all SME employers claimed that they had a good relationship with their bank: 36 per cent very good, and 28 per cent fairly good. Relationships with banks seem to improve the larger the SME.

Table 7.11: Relationship with Bankxlii – by Size

Base = all SME employers All SME Employers Micro (1-9) Small (10-49) Medium (50-

249) SBS 2010. Un-weighted (n) = 3817 1528 1530 759

% % % %

GOOD 64 63 69 74

‐ Very good 36 35 41 46

‐ Fairly good 28 27 28 28

Neither Good Nor Poor 21 22 17 12

POOR 14 14 12 8

‐ Fairly poor 9 9 7 5

‐ Very poor 5 5 4 3



7.37 By sector, those in transport, retail and distribution were the most likely to say they had a poor relationship with their bank (16 per cent), whilst by region it was those in London and the North West (17 per cent each). It was those in Wales that were most likely to claim a good relationship (68 per cent).

7.38 Those that have been trading for ten years or longer were more likely than average to claim a good relationship (68 per cent, compared to just 52 per cent of those trading for under four years). Only 50 per cent of those who applied for finance in the last 12 months had a good relationship.

53

7.39 Just under a quarter of SME employers made a complaint to their bank in the last three years. This was less likely to occur for medium-sized businesses (19 per cent). Those in business services were most likely to have made a complaint (28 per cent), and complaints were more forthcoming in the South East (30 per cent) and the North West (also 30 per cent) than in other regions. Least likely to complain were those in Scotland (17 per cent), Wales (20 per cent), the South West (19 per cent) and the North East (11 per cent).

Table 7.12: Any Complaint Made to Bank in the Last Three Yearsxliii – by Size Base = all SME employers All SME


SBS 2010. Un-weighted (n) = 380814 1522 1529 757

% % % %

ANY 24 25 23 19

‐ Poor service 10 10 10 9

‐ Excessive fees/penalties 9 9 7 4

‐ Mistakes on account 4 4 4 2

‐ Rejected for finance 1 1 2 2

‐ Other 3 3 3 4

NO COMPLAINTS 74 74 73 75

Don’t know/refused 2 1 4 6 Figures in bold are statistically significant at the 95% confidence level against the overall finding

7.40 There were no differences according to the age of the business or, perhaps surprisingly, whether finance had been sought in the last 12 months.

7.41 Poor service was given as the main reason for the complaint, followed by excessive fees or penalties. This particular complaint was more common among micro businesses than small or medium-sized ones.

14 This question was not included in the pilot, hence a slightly smaller base size from the total for all SME employers

54

Credit and Payment15

7.42 Ninety-three per cent of SME employers gave some form of credit to their customers, this being the same proportion seen in the 07/08 ASBS. By sector, those in the ‘other’ services and those in transport, retail and distribution were less likely to give credit. This is because they are less likely to sell to other businesses or the public sector than other industry groups.

7.43 Seventy-four per cent of SME employers got credit from those they buy from. This was less likely to be the case for service industries, a higher proportion of which do not buy from others.

Figure 7.1: Whether Give/Receive Credit

Base: All SME Employers selected to answer question (1934)

93%99% 100%

91%94%

86%

74%

90% 89%83%

63%

52%

0%

20%

40%

60%

80%

100%

All Production Construction TRAD Bus Services Other Services

Give credit

Receive Credit

7.44 Of those that received credit, just under half (47 per cent) considered this very important for their business’s growth, with a further 27 per cent considering it quite important. There were no significant differences in the answers given here according to the size of the SME, but those in construction (68 per cent) and transport, retail and distribution (51 per cent) were more likely than average to consider it very important.

15 Because of time constraints on the questionnaire, this section was only asked of approximately half of the respondents, selected at random.

55

Table 7.13: Whether have a problem with customers paying later than requiredxliv – Trends by Size Base = all SME employers All SME


Medium (50-249)

SBS 2010. Un-weighted (n) = 1934 767 759 408

% % % %

ANY PROBLEM 53 52 58 60

‐ Big problem 19 19 22 17

‐ Small problem 34 33 37 43

NO PROBLEM 40 41 36 33

Not relevant – do not give credit 7 7 5 4 ASBS 2007/08. Un-weighted (n) = 7783 159 1339 742





Not relevant – do not give credit 7 7 6 5 ASBS 2006/07. Un-weighted (n) = 8949 232 1932 888





Not relevant – do not give credit 11 12 7 8 Figures in bold are statistically significant at the 95% confidence level against the overall finding for that wave of research

7.45 Those in Wales (57 per cent) and Northern Ireland (68 per cent) were more likely to think that receiving credit was very important for business growth than those in Scotland (54 per cent) and England (45 per cent). Only 32 per cent of SME employers in London that receive credit considered it very important.

7.46 Nineteen per cent of all SME employers considered late payment a big problem, with a further 34 per cent considering it a small problem. Therefore, it was a problem for 53 per cent overall. Medium sized businesses were more likely to think it was a problem than small or micros, with 60 per cent saying it was a problem.

7.47 Compared to the previous surveys late payment was a greater problem. The increase in the overall proportion saying that late payment was a problem on ASBS 07/08 is four percentage points, which although seemingly only a slight increase is significant.

7.48 By sector late payment was much more of a problem in construction (78 per cent) and business services (66 per cent) than it was in transport, retail and distribution (38 per cent), production (43 per cent) or ‘other services’ (32 per cent).

7.49 London is more likely to have had a problem with late payment than anywhere else in the country (a problem for 62 per cent). Businesses aged four years or less were less likely to

56

experience late payment problems than older ones, but this was largely due to their being less likely to give credit in the first place.

Legal Action

7.50 Twenty-eight per cent of SME employers had ever taken a customer to court for not paying their debts. Five per cent had taken legal action against anyone under the late payment legislation in the last 12 months. The larger the size of the business, the more likely this is to have happened.

Table 7.14: Whether taken customers to court for non paymentxlv – trends by size Base = all SME employers that offer credit

All SME Employers Micro (1-9) Small (10-49) Medium

(50-249) SBS 2010. Un-weighted (n) = 1804 706 711 387

% % % %

Ever 28 26 40 49

In last 12 months under late payment legislation 5 4 11 16


Ever 31 28 46 55



Ever 34 31 47 56



7.51 Over the years the proportion that had ever taken a customer to court for non payment has actually declined, from 34 per cent in ASBS 06/07 to 28 per cent now. This has happened for all sizes of business. At the same time, the proportion taking legal action in the last 12 months has remained static.

7.52 By sector, those in production (39 per cent), construction (36 per cent) and business services (33 per cent) were the most likely to have ever taken a customer to court, and those in the ‘other services’ (12 per cent) and transport, retail and distribution (24 per cent) were the least likely to have done so.

7.53 Those in Northern Ireland (47 per cent) and the South West (35 per cent) were the most litigious, with those in London (22 per cent) and the East of England (21 per cent) the least.

7.54 Only 10 per cent of those trading for less than four years have ever taken anybody to court, compared to 33 per cent of those trading for ten years or longer.

Payment protection products

7.55 Eight per cent of SME employers used asset backed finance such as factoring or invoice discounting. This was most common in the production sector (15 per cent) and least common in ‘other services’ (two per cent).

57

7.56 Asset backed finance was used by 21 per cent of medium sized businesses, 13 per cent of small businesses and seven per cent of micros. It was most commonly used in the East Midlands (15 per cent) and those trading more than 10 years (nine per cent). Fifteen per cent of those who applied for finance in the last year used asset backed finance.

Figure 7.2: Whether Use Asset Backed Finance or Trade Credit Insurance

Base: All SME Employers selected to answer question (1934)

8%

15%

8%9%

7%

2%

9%

11%

9%

12%

6% 6%

0%

5%

10%

15%

20%

All Production Construction TRAD Bus Services Other Services

Asset Finance

Credit Insurance

7.57 Nine per cent of SME employers have used trade credit insurance in the past 12 months. This being most common in the transport, retail and distribution sectors (12 per cent), and least common in business and other services (six per cent). A further three per cent have had trade credit insurance in the last year, but not at the time of interview.

7.58 Twenty per cent of medium sized businesses have used trade credit insurance, 14 per cent of small ones and 8 per cent of micros. Micro businesses are more likely to have used it in the last year but given it up (four per cent) than the small and mediums.

7.59 Trade credit insurance was more commonly used in Scotland (15 per cent) than elsewhere.

58

8 Obstacles to the success of the business

Biggest obstacle to success of business

8.1 When prompted, a third (33 per cent) of SME employers said that the state of the economy was the main obstacle to the success of their business, marking a significant rise on the 2007/08 and 2006/2007 ASBSs (16 per cent and 10 per cent respectively). Economic conditions were most likely to be put forward as the main obstacle by those operating in the construction sector (39 per cent).

Table 8.1: Main Obstacle to the Success of the Businessxlvi - Trends Base = all SME employers SBS 2010 ASBS 2007/08 ASBS 2006/07 Un-weighted (n) = 3,817 7,783 8,949

% % %

The Economy 33 16 10

Cashflow 11 9 10

Competition 10 14 15

Obtaining finance 8 3 3

Taxation, VAT, PAYE, NI, rates 8 12 12

Regulations 7 12 14 Figures in bold are statistically significant changes between the 07/08 ASBS and the 2010 SBS

8.2 Difficulties associated with obtaining finance were also a more widespread issue than in 07/08 and 06/07, reported as the biggest obstacle by eight per cent, compared with three per cent in both in the two earlier surveys.

8.3 Competition, taxation and regulations were each less likely to be nominated as the biggest barrier to success than in previous years. Just seven per cent of SME employers cited regulations as the main obstacle to the success of their business; markedly lower than in previous surveys.

59

Overall incidence of obstacles to success of business

8.4 Many SME employers reported additional obstacles to success (either spontaneously or on a prompted basis). When results for all obstacles are combined, the most frequently reported ones in 2010 were:

• the economy (81 per cent of SME employers)

• competition (58 per cent)

• taxation, VAT, PAYE, national insurance, business rates (50 per cent)

• cash flow (49 per cent)

• regulations (47 per cent)

• obtaining finance (39 per cent).

8.5 As well as being the most commonly cited obstacle overall, the economy was also the most frequently mentioned barrier across all sectors and sizebands.

8.6 Taxation was more likely to be cited as an issue by micro and small employers (50 per cent and 51 per cent respectively) than by medium-sized employers (40 per cent), as was cash flow difficulties (50 per cent for micro employers and 45 per cent for small employers, compared with 32 per cent for medium-sized businesses).

8.7 Conversely, medium-sized employers are significantly more likely to report regulations as an obstacle to success (57 per cent, compared with 52 per cent of small employers and 45 per cent of micro employers).

Regulations as an obstacle to success of business

8.8 Where employers reported regulations as an obstacle to business success, they were asked which specific regulations they considered to be obstacles, and in what ways.

8.9 Health and safety regulations were the most commonly cited obstacles, reported by a third of all those citing regulations as a barrier to success (little changed from 2007/2008, and rising to 53 per cent among Construction sector SMEs).

8.10 These were followed by tax-related and sector-specific regulations (mentioned by 20 per cent and 16 per cent respectively). The proportions mentioning these have increased since the 07/08 survey by three and four percentage points respectively.

8.11 Employment regulations were more likely to be cited by medium-sized employers (26 per cent). The proportion mentioning these has declined by three percentage points since the 07/08 survey.

8.12 The proportions of businesses citing planning is higher (at seven per cent) than was the case in 07/08. Seven per cent also cited environmental regulations as an obstacle, a lower proportion than in 07/08.

60

Table 8.2: Regulations considered to be obstacles to business successxlvii - Trends Base = all SME employers considering regulations an obstacle to business success

SBS 2010 ASBS 2007/08 ASBS 2006/07

Un-weighted (n) = 1,917 4,907 5,701

% % %

Health and safety 35 32 37

Tax-related 20 17 15

Sector specific 16 13 12

Employment 14 17 16

Planning, development, etc. 7 5 7

Environmental 7 10 11

No specific regulations or all regulations 11 11 13


8.13 Employers were also asked about the ways in which specific regulations act as an obstacle to business success.

8.14 Most commonly, regulations impact in relation to:

• requiring time and effort in deciding how to comply (35 per cent of all SME employers citing regulations as an obstacle)

• costs of making changes to ensure compliance (28 per cent)

• paperwork and administrative procedures (24 per cent)

• uncertainty about whether or how regulations apply to the business (10 per cent).

61

Taxation/VAT/PAYE as an obstacle to success of business

8.15 Employers who reported taxation, VAT and PAYE as a barrier to business success were asked about the specific types they considered to be problematic.

8.16 Across all sizes and sectors (with the exception of primary), VAT was the most commonly cited taxation that acts as an obstacle to success.

8.17 Business rates were particularly problematic for SME employers operating in the production and transport and retail and distribution sectors (cited by 28 per cent and 23 per cent respectively of those regarding taxation as an obstacle). Corporation tax, PAYE and national insurance were all more likely to be causing particular difficulties to businesses in this sector than the general population of SME employers (26 per cent, 23 per cent and 20 per cent compared to 19, 18 and 15 per cent respectively).

Table 8.3: Types of taxation/VAT/PAYE considered to be obstacles to business successxlviii – By Sector Base = all SME employers considering tax etc. an obstacle

All SME Emps. Primary Prod-

uction Constr-uction TRAD

Business

Services Other

Services

SBS 2010. Un-weighted (n) = 1,812 23 238 176 634 377 364

% % % % % % %

VAT 47 21 45 54 48 43 51

Business rates 19 11 28 13 23 16 15

Corporation Tax 19 42 19 17 14 26 11

PAYE 18 5 17 19 15 23 18

National Insurance 15 12 15 12 13 20 18

Income Tax 10 8 13 10 12 10 7 Figures in bold are statistically significant at the 95% confidence level against the overall finding

62

Cash flow as an obstacle to success of business

8.18 Managing cash flow was perceived as an obstacle to business success by 47 per cent of SME employers (the same as the proportion in 2007/08).

8.19 Among those with cash flow difficulties, the most common causes mentioned were fluctuations in income whilst outgoings remaining steady, with 77 per cent citing this as a problem (with no variation by size of employer). Late payment from individuals was mentioned by three in five (60 per cent), with the same proportion mentioning late payment from businesses (60 per cent).

Table 8.4: Causes of cash flow difficultiesxlix Base = all SME employers who see cash flow as an obstacle All SME

Emps. Prod-uction

Constr-uction TRAD

Business

Services Other

Services

SBS 2010. Un-weighted (n) = 1,687 248 170 509 358 376

% % % % % % Income fluctuates while outgoings are steady 77 75 78 78 74 78

Late payment from individual customers 60 67 72 46 73 40

Late payment from other businesses 60 72 76 46 73 33

High levels of working capital required 49 52 56 57 39 40

Timing of tax payments 42 34 48 42 47 34 High levels of investment required 41 44 46 48 40 37

Early payment required by suppliers 39 41 43 66 55 39

Individual customers expect credit 39 49 40 39 41 21

Difficult/expensive to get credit from suppliers 26 27 17 38 16 21

Outgoings fluctuate while income is steady 24 19 21 26 21 26


8.20 Late payment is a particular issue for SMEs operating in construction, business services and production. Meanwhile, in the transport, retail and distribution sector, employers were particularly likely to report issues associated with suppliers requiring early payment (66 per cent, against an average of 39 per cent).

63

9 Usage of business support and Government services

Sources of business advice sought

9.1 Over the year prior to the survey, half (49 per cent) of all SME employers had sought external advice or information on matters affecting their business.

9.2 Of those seeking advice, 40 per cent went to more than one source. The average number of sources consulted was 1.56.

9.3 Forty-six per cent of micro-sized employers had sought such advice, though this rose to 59 per cent of small employers, and 68 per cent of medium-sized employers.

9.4 By sector, SME employers operating in business services and ‘other services’ were particularly likely to have sought advice (55 per cent in each case).

9.5 The most commonly used sources of advice were accountants (consulted by 37 per cent of those seeking advice), and consultants (20 per cent, rising to 31 per cent among medium-sizes organisations). Twelve per cent had sought advice through Business Link local services, with six per cent doing so via the Businesslink.gov.uk website (half of those using the website had also sought advice through Business Link local services). One in ten SME employers had sought advice from a solicitor or lawyer, though this rises to 26 per cent among medium-sized businesses.

9.6 Construction and transport, retail and distribution employers were particularly likely to have sought advice from an accountant (52 per cent and 42 per cent respectively), whilst those operating in business services were more likely than average to turn to a consultant (25 per cent), and those in ‘other services’ were particularly likely to consult a solicitor or lawyer for advice (17 per cent).

64

Table 9.1: Sources of external advice consulted in last 12 monthsl – by sector16 Base = all SME employers who have sought advice All SME

Emps. Prod-uction

Constr-uction TRAD

Bus. Service

s

Other Service

s SBS 2010. Un-weighted (n) = 2,129 298 178 539 476 604 % % % % % % Accountant 37 36 54 42 34 24 Consultant 20 20 22 14 25 21 Business Link local services 12 10 10 16 13 9 Solicitor/lawyer 10 9 9 11 8 17 Trade/business association 7 9 11 8 5 7 Bank 6 7 1 9 5 6 Other specialists, e.g. HR/Marketing 4 5 4 4 4 8 Businesslink.gov.uk website 6 6 5 6 6 4 Other businesses in industry 4 6 3 2 4 4 HMRC 3 * 5 3 4 1 Business networks 2 5 3 2 2 3 Chamber of Commerce 3 6 3 2 3 * BIS 3 3 3 4 4 1 An Enterprise Agency 3 * 4 2 1 1 Local Authority 3 2 * 5 * 9 A friend/family member 3 3 * 4 4 3 Websites (general) 3 2 * 5 5 1 Surveyors/Estate Agents 3 2 3 2 3 4 Health and Safety Executive 2 2 5 1 1 1 Other Governmental Organisations17 2 1 * 1 2 3 An RDA 1 3 * 1 1 2 Federation of Small Businesses 1 3 * 3 1 1 Figures in bold are statistically significant at the 95% confidence level against the overall finding; * = a figure of less than 0.5% but higher than zero

9.7 Where advice had been sought, this most commonly related to:

• financial matters (27 per cent of those seeking advice)

• business growth (19 per cent)

• tax/NI law and payments (16 per cent)

• employment law/redundancies (14 per cent)

• regulations (nine per cent)

16 This question differs from that used in the ASBS surveys, hence comparisons are not possible. 17 E.g. ACAS, VOSA, LSC, Carbon Trust

65

• health and safety (six per cent)

9.8 SME employers were most likely to mainly access advice and information face-to-face (59 per cent of those seeking advice) or over the telephone (27 per cent), whilst just seven per cent predominantly sought advice via websites, and just 6 per cent did so through email communications. Over a third (35 per cent) turned to online information sources as their first port of call before then investigating further through other channels.

Business Mentors

9.9 During the course of the 12 months prior to the survey, one in ten SME employers (11 per cent) had used a business mentor, i.e. someone with business expertise who provides ongoing support with the development and running of their business.

Table 9.2: Whether used business mentor in last 12 monthsli – by sector

Base = all SME employers All SME

Emps. Primary Prod-uction

Constr-uction TRAD

Business

Services

Other Services

SBS 2010. Un-weighted (n) = 3,817 64 527 315 1,157 793 961

% % % % % % %

Yes 11 4 11 10 8 12 17

No/don’t know 89 96 89 90 92 88 83


9.10 SME employers that have been in operation for fewer than 10 years are most likely to seek support from a business mentor (14 per cent, compared with nine per cent of those that have been in business for 10 or more years).

9.11 By sector, SME employers operating in ‘other services’ are most likely to call upon a business mentor for support (17 per cent), whilst those in transport, retail and distribution were the least likely (eight per cent).

9.12 By size, 10 per cent of micro businesses had used a business mentor in the last 12 months, compared to 15 per cent of both small and medium-sized businesses.

66

Awareness and usage of Business Link

9.13 A series of questions were asked of all SME employers in England regarding the Business Link service, and of Welsh employers regarding the Flexible Support for Business service provided by the Welsh Assembly Government.

9.14 Overall, 42 per cent of English and Welsh SME employers claimed that they were aware of “a publicly-funded service providing access to information and advice for businesses, including a national network of local operators” (42 per cent in England, compared with 37 per cent in Wales).

9.15 Of those English SMEs claiming awareness of this service, half (50 per cent) correctly identified that Business Link was the service being referred to; in Wales, however, just 17 per cent spontaneously recalled Flexible Support for Business or the Welsh Assembly Government.

9.16 When the remaining businesses (reporting awareness of the business support service, but not correctly identifying its name) were prompted, 86 per cent of those in England said that they had heard of Business Link, though just 22 per cent in Wales had heard of Flexible Support for Business.

9.17 This equates to 89 per cent of all SME employers in England being aware of Business Link (on either a spontaneous or prompted basis), compared with 25 per cent of those in Wales in relation to Flexible Support for Business.

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Experience of accessing government business support services

9.18 All SME employers were asked about the extent to which they regard the range of government services available for businesses as being easily accessible, and then whether they would like government support but struggle to find out what is available.

Table 9.3: Views on the accessibility and availability of government services and supportlii

Base = all SME employers “I find government services

easily accessible”

“I would like government support to develop my

business but struggle to find out what is available”

SBS 2010. Un-weighted (n) = 3,817 3,817

% %

Agree strongly 15 27

Agree slightly 22 18

Neither agree nor disagree 27 22

Disagree slightly 13 15

Disagree strongly 16 14

Don’t know 7 5

TOTAL AGREE 37 45

TOTAL DISAGREE 29 29

NET AGREE - DISAGREE 12 16

9.19 Whilst 37 per cent of SME employers felt that government services are easy to access, 45 per cent would like to make use of government support but have difficulties finding out what is available to them.

9.20 Micro-sized businesses were most likely to be struggling to determine what government support might be available, with 45 per cent agreeing that this is the case, compared with 43 per cent of small businesses and 38 per cent of medium-sized businesses.

9.21 By sector, Construction employers face the greatest difficulties finding out what government support is available and appropriate, with 51 per cent expressing agreement in respect of this statement.

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Working for the public sector

9.22 Only a relatively small minority of SME employers had either expressed an interest in, or bid for, contracts advertised by the public sector, with 12 per cent having bid in the previous 12 months, and five per cent expressing an interest but not ultimately bidding.

9.23 Medium-sized employers were considerably more likely to have expressed interest in or bid for public sector contracts (40 per cent), compared with 28 per cent of small employers and 16 per cent of micro-sized employers.

9.24 By sector, construction and business services businesses stand out as being most likely to have involvement with contracts issued by the public sector (30 per cent and 25 per cent respectively).

9.25 Thirty per cent of SME employers had actually undertaken work for the public sector during the course of the 12 months prior to the survey. Again, medium-sized businesses were more likely to have done so (46 per cent), in comparison to 41 per cent of small businesses and 27 per cent of micro-sized businesses. Similarly, construction sector employers are again most likely to have worked on public sector contracts (47 per cent).

9.26 It is worth noting, however, that where business has been done for the public sector, this was more likely to have been as part of a larger supply chain (53 per cent) than businesses acting in the capacity of prime contractor (42 per cent).

Table 9.4: Main customer within public sectorliii – by sector

Base = all SME employers who have done business for the public sector



Services Other

Services

SBS 2010. Un-weighted (n) = 1,437 17 178 175 314 324 429

% % % % % % %

Local Authorities 53 33 55 65 51 43 59

Health Service 19 * 21 14 20 21 20

HE/FE institutions 12 15 12 12 13 8

Departments of State (excl. MoD) 10 51 4 5 7 17 7

Ministry of Defence 3 0 4 * 5 3 *


9.27 The majority of SME employers that had done work for the public sector had done so for a Local Authority (53 per cent). Nineteen per cent had done work for the Health Service and 12 per cent had done work for Further or Higher Education institutions. Three per cent had undertaken contracts for the Ministry of Defence, with a further 10 per cent doing so for other Departments of State.

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9.28 Differences by size of employer are relatively slight, though there is more variation by sector, as the table above demonstrates.

Survey conducted and report written by IFF Research.

April 2011

Steve Lomax, Director

Ben Davies, Associate Director Lydia Reynolds, Senior Research Executive

John Newton, Research Executive

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ENDNOTES: QUESTIONNAIRE REFERENCES i Q1: How many sites in the UK does your business operate from, including your head office?

ii Q4: What is the legal status of your organisation? READ OUT AS NECESSARY

iii Q4: What is the legal status of your organisation? READ OUT AS NECESSARY

iv Q153: Is your business VAT registered?

v Q5: And how many years has this firm been trading? This includes under all ownerships and all legal statuses.

vi Q164: How many partners or directors are there in day-to-day control of the business now, including yourself?

vii Q158: Is your business a family owned business? (A family business is majority owned by members of the same family)

viii Q166: How many of your [TEXT SUBSTITUTION: NO OF DIRECTORS AT Q164] partners/directors are women? Q167: Is more than 50% of the business owned by women?

ix Q37: Do you think of your business as a social enterprise, by which I mean a business that has mainly social or environmental aims?

x Q1a: How many employees does your business currently employ across all sites, excluding owners and partners?; Q11: You said earlier that your business currently employs [INSERT Q1A RESPONSE] people, excluding owners and partners. How many people did the business employ 12 months ago across all sites (still excluding owners and partners)?

xi Q1a: How many employees does your business currently employ across all sites, excluding owners and partners?; Q11: You said earlier that your business currently employs [INSERT Q1A RESPONSE] people, excluding owners and partners. How many people did the business employ 12 months ago across all sites (still excluding owners and partners)?

xii Q1a: How many employees does your business currently employ across all sites, excluding owners and partners?; Q17: How many people do you expect the business to employ in twelve months time (excluding owners and partners)?

xiii Q1a: How many employees does your business currently employ across all sites, excluding owners and partners?; Q17: How many people do you expect the business to employ in twelve months time (excluding owners and partners)?

xiv Q149: Compared with the previous 12 months, has your turnover in the past 12 months increased, decreased or stayed roughly the same?

xv Q149: Compared with the previous 12 months, has your turnover in the past 12 months increased, decreased or stayed roughly the same?

xvi Q151: In the next 12 months do you expect your turnover to increase, decrease, stay roughly the same?

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xvii Q151: In the next 12 months do you expect your turnover to increase, decrease, stay roughly the same?

xviii Q35: Taking into account all sources of income in the last financial year, did you generate a profit or surplus?

xix Q36: Do you pay more than 50% of your trading profit or surplus [IF DID NOT/DON’T KNOW/ UNWILLING TO SAY GENERATED A PROFIT IN THE LAST FINANCIAL YEAR, I.E. Q35 ‘2-4’: when you generate one] to owners/shareholders?

xx Q161: Do you anticipate the closure, or a full transfer of the ownership of your business in the next 5 years?

xxi Q49: I’d now like to turn to the future that you foresee for your business. Over the next two to three years, do you aim to grow your business?

xxii Q49a: Do you expect to fund your business growth using internal finances or from external finance providers?

xxiii Q50: Does your business plan to do any of the following over the next two to three years?

xxiv Q50: Does your business plan to do any of the following over the next two to three years?

xxv Q53a: I’d now like to turn to the range of tasks that you need to do when running a business, and for you to tell me how capable you think your business is at doing them. I’m going to read out a list of business activities and I’d like you to rate your business from 1 to 5, where 1 is rated as very poor and 5 as very strong. You can include in your assessment any external expertise you use to achieve the task.

xxvi Q86: I’d now like you to think about innovation within your business i.e. new products and processes. Have you introduced new or significantly improved products or services in the past twelve months? xxvii Q88: Have you introduced new or significantly improved processes in the last twelve months?

xxviii Q27: I’d now like to ask you a few questions about the nature of your trading activity. So, first of all, does your business sell goods or services or licence your product outside the UK?

xxix Q32: What are the barriers that prevent your business exporting?

xxx Q137: Over the past 12 months, has your business funded or arranged any training and development for staff in the organisation, including any informal on the job training?

xxxi Q143: Does your business use the Internet for any of the following?

xxxii Q66: Now I’d like to ask you some questions about financing your business. Have you tried to obtain finance for your business in the past 12 months?

xxxiii Q66: Now I’d like to ask you some questions about financing your business. Have you tried to obtain finance for your business in the past 12 months?

xxxiv Q67: I'd like to ask you about this... what did you try to obtain finance for? IF MORE THAN ONCE (Q66/2): I'd like to ask you about the most important of these occasions. What did you try to obtain finance for?

72

xxxv Q79: Why have you not applied for finance in the last 12 months?

xxxvi Q69: What type of finance did you seek? Please include all types of finance including where you failed to obtain it.

xxxvii Q70: How much finance did you seek?

xxxviii Q72: Did you have any difficulties in obtaining this finance from the first source you approached?

xxxix Q72: Did you have any difficulties in obtaining this finance from the first source you approached?/Q75: Did you eventually go on to obtain the finance you needed for your business, for example, from another external source?

xl Q74: What reasons were given for your application for finance being turned down/for receiving less finance than you sought/having problems raising all the finance?

xli Q77: To what extent would you say you understand the way in which banks assess business credit risk?

xlii Q65: How would you describe your business’s relationship with its bank? Please answer on a scale of 1 to 5, where one signifies the relationship is very poor and 5 that it is very good.

xliii Q78: Have you made a complaint to your bank in the last three years? IF YES: What did you complain about on the last occasion?

xliv Q80: Do you have a problem with customers paying you later than you require them to in your normal terms of business?

xlv Q82: Have you ever taken a customer to court for not paying their debts? Q84: Have you taken legal action against anyone under the late payment legislation in the last 12 months?

xlvi Q56: So, overall, which is the biggest obstacle to the success of your business?

xlvii Q62: Which regulations do you consider to be an obstacle to the success of the business?

xlviii Q63a: Which types of taxation, VAT, PAYE, national insurance, business rates etc. do you consider to be obstacles to the success of your business? xlix Q60: You mentioned earlier that cash flow is an obstacle to the success of your business. Which, if any, of the following do you consider to be causes of this cash flow difficulty?

l Q90a: Where have you been for external advice or information on matters affecting your business the last 12 months?

li Q95: In the last 12 months have you used a business mentor – that is somebody with business expertise who supports you through the development and running of your business on a continuous basis?

lii Q130: Thinking about the range of government services available for business that are delivered locally and nationally, to what extent do you agree or disagree with the following statements?

liii Q133: What part of the public sector was your main customer?

73

© Crown copyright 2011

You may re‐use this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. Visit www.nationalarchives.gov.uk/doc/open‐government‐licence, write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected].

This publication is also available on our website at www.bis.gov.uk

Any enquiries regarding this publication should be sent to:

Department for Business, Innovation and Skills 1 Victoria Street London SW1H 0ET Tel: 020 7215 5000 If you require this publication in an alternative format, email [email protected], or call 020 7215 5000. URN 11/P74

BIS Small Business Survey 2010 Women-led businesses boost Report prepared for the Department of Business, Innovation and Skills (BIS)

June 2011

i


URN/ © Crown Copyright 2011



Enterprise and Economic Development Analysis BIS Enterprise Directorate 2 St. Paul’s Place 125 Norfolk Street Sheffield S1 2FJ

Email enquiries should be addressed to:


spcunnin

Typewritten Text

11/1078

spcunnin

Typewritten Text

ii

Acknowledgements

The authors would like to thank the BIS Enterprise Directorate Enterprise and Economic Development Analysis for their diligence in checking the figures and data contained in the tables and for general proof reading.

iii

Table of Contents

Acknowledgements........................................................................................................................................ ii

1 Summary ................................................................................................................................................. 1


Business performance.................................................................................................................................. 2

Growth .......................................................................................................................................................... 2




Usage of business support and Government services................................................................................. 5



Survey method.............................................................................................................................................. 6

Note on the report......................................................................................................................................... 7

Statistical confidence.................................................................................................................................... 8


Size............................................................................................................................................................... 9

Sector ......................................................................................................................................................... 10

Age of business .......................................................................................................................................... 11

Legal status ................................................................................................................................................ 12

Turnover ..................................................................................................................................................... 13

Number of partners/directors...................................................................................................................... 14


VAT registration.......................................................................................................................................... 15


4 Business performance......................................................................................................................... 18


Number of people women-led SME employers expect to employ in 12 months time................................ 19

Profit ........................................................................................................................................................... 21

iv

5 Growth ................................................................................................................................................... 23

Plans for growth.......................................................................................................................................... 23

Extent of plans for achieving future business growth................................................................................. 23


Perceptions of business capability ............................................................................................................. 25

Business capability: Innovation .................................................................................................................. 26

Business capability: Exporting.................................................................................................................... 27

Business capability: Training ...................................................................................................................... 27

Attitudes to risk ........................................................................................................................................... 30





Amount of finance sought........................................................................................................................... 35


8 Obstacles to the success of the business......................................................................................... 39

Biggest obstacle to the success of the business........................................................................................ 39

Overall incidence of obstacles to success of business .............................................................................. 40

Regulations as an obstacle to success of business................................................................................... 40


Sources of business advice sought............................................................................................................ 42

Business Mentors ....................................................................................................................................... 44


1

1 Summary

Profile of businesses

1.1 Fourteen per cent of all SME employers in the SBS 2010 were women-led, defined as being led by a woman or a management team with more than half of its members being women. This proportion was very similar to that seen in previous ASBS surveys.

1.2 Over eight in ten (86 per cent) women-led SME employers in the SBS 2010 were micro businesses (those employing one to nine staff members), just over one in ten (13 per cent) were small businesses (10 – 49 staff), and two per cent were medium businesses (50-249 employees). The size of these businesses is not significantly different from SME employers in general.

1.3 Women-led SME employers were more likely than SME employers in general to be involved in ‘other services’ (public administration, education, health and social work, other community, social and personal activities). Twenty-nine per cent of women-led SME employers fell into this sector, compared to 12 per cent of all SME employers.

1.4 Women-led SME employers were also more likely than SME employers to be in the hotel and restaurant sector (nine per cent compared to five per cent of all SME employers). Women-led businesses were less likely to be found in the construction and production sectors.

1.5 Almost half of women-led SME employers (45 per cent) ran private limited companies, with sole proprietorships being the next most common type of business (29 per cent). Women-led SME employers are more likely to be sole proprietors and are less likely to be limited companies than SME employers as a whole.

1.6 Almost one in five (18 per cent) of women-led SME employers had an annual turnover of less than the VAT threshold of £67,000, compared to 12 per cent of all SMEs. The mean average turnover of women-led SME employers was much less (just below £500,000) than for SME employers generally (£1,168,000).

1.7 Women-led SME employers tended to have fewer directors or partners than SME employers generally. Forty-nine per cent of women—led SME employers were led by just one person, compared to 41 per cent of all SME employers.

1.8 Women-led SME employers were less likely to be family businesses than SME employers overall (55 per cent compared to 63 per cent).

1.9 Despite 44 per cent of women-led SME employers perceiving their businesses to be a social enterprise, only nine per cent fell into the BIS definition of this.

2

Business performance

1.10 Eighteen per cent of women-led SME employers in the SBS 2010 employed more people when surveyed than one year previously, with 17 per cent employing fewer. Compared to SME employers in general, women-led businesses were less likely to have employed fewer staff than 12 months previous (all SME employers = 21 per cent). Women-led businesses in the business service sector were the most likely to have had a net gain in employment levels.

1.11 Fifty-nine per cent of women-led SME employers predicted their staffing levels would remain the same over the next 12 months (25 per cent predicted staffing levels would increase in 12 months time and 15 per cent predicted they would decrease). These expectations were very similar to the levels seen for all SME employers.

1.12 Twenty-nine per cent of women-led SME employers in the SBS 2010 had increased turnover compared to the previous year. Turnover remained the same for 32 per cent, and decreased for 36 per cent). These figures were very similar to those for SME employers generally.

1.13 Looking ahead to the next 12 months, 38 per cent of women-led SME employers predicted their turnover would be at a higher level than at the time of interview, 40 per cent predicted turnover would be at about the same level and 18 per cent predicted it would be at a lower level. This proportion predicting lower turnover was higher than it was for SME employers generally.

Growth

1.14 Two-thirds (66 per cent) of women-led SME employers were aiming to grow their business over the next two to three years – a proportion that is lower than for SME employers as a whole (74 per cent).

1.15 Seventy-one per cent of women-led SME employers were aiming to increase the skills of their workforce over the next two to three years, 64 per cent were aiming to reduce costs by increasing the productivity of the workforce, 61 per cent were aiming to increase turnover by exploiting new markets and 60 per cent were aiming to increase the leadership capability of their managers. Women-led SME employers were more likely to want to invest in training than SME employers as a whole.

1.16 Only 16 per cent of women-led SME employers exported goods or services outside the UK, a lower figure than the 23 per cent of SME employers overall. The reason for this is likely to be the lower proportion of women-led businesses in the production sector than for SME employers generally.

Business capability

1.17 Women-led SME employers were asked how capable their management team was at a number of aspects of business management. In line with SME employers as a whole, areas where performance was rated most highly were; taking decisions on regulation and tax issues (62 per cent rated their business as strong in this area) and people management, such as recruitment and delegation (rated as strong by 61 per cent). Women-led SME employers were less likely to rate their business as being strong at entering new markets (22 per cent) and accessing external finance (24 per cent). In all of these measures, women-led businesses rated their management team similarly to SME employers generally.

3

1.18 Women-led SME employers were asked what would encourage more women to set up a business. Although a range of suggestions were given, the two most frequently mentioned were financial assistance or funding (14 per cent) and help with childcare (13 per cent).

4

Access to finance

1.19 A quarter (26 per cent) of women-led SME employers sought finance in the last 12 months, the same proportion as for SME employers as a whole.

1.20 Women-led SME employers that sought finance were as confident as SME employers generally that they would succeed in getting it. However, they were more likely than SME employers to have taken steps to ensure success, such as having an up to date business plan, and having this looked over by a professional adviser.

1.21 In line with SME employers as a whole, 54 per cent of women-led SME employers who sought finance did so to gain working capital or cashflow. Eleven per cent of women-led SME employers sought finance to acquire capital for equipment or vehicles, lower than the 21 per cent of SME employers who had sought finance for this reason, a reflection of the fact that fewer women-led SME employers were found in the production or construction sectors.

1.22 Women-led SME employers were most likely to have sought a bank loan (43 per cent of those that had applied for finance). Compared to all SME employers that had sought finance, women-led SME employers were less likely to have applied for an overdraft (23 per cent compared to 35 per cent for all SME employers), and were more likely to have applied for a grant (21 per cent, compared to nine per cent of all SME employers).

1.23 The average amount of finance applied for by women-led SME employers was less than for SME employers in general (mean average for women-led SME employers was £125,000 compared to just over £240,000 for all SME employers).

1.24 Over half of women-led SME employers that sought finance (55 per cent) experienced some difficulties in obtaining this finance from the first source they approached: 38 per cent did not obtain any of the finance they sought, nine per cent obtained some but not all of the finance sought and seven per cent obtained all the finance but with some difficulty. These proportions were very similar to those seen for all SME employers. Compared to previous years, obtaining finance became more difficult for both women-led SME employers, and SME employers generally.

1.25 Overall, 62 per cent of women-led SME employers that sought finance managed to gain all the finance they needed, with 51 per cent obtaining it from the first source they approached. A further 10 per cent obtained some but not all they needed, and 24 per cent were unable to obtain any finance. These proportions were similar to those for all SME employers.


1.26 When asked to name the main obstacle to the success of their business, as with SME employers overall, women-led SME employers were most likely to mention the economy (31 per cent). Women-led SME employers were more likely than all SME employers to have mentioned taxation, VAT, PAYE, NI and business rates (13 per cent compared with eight per cent).

5


1.27 Over the course of the 12 months prior to the SBS 2010, 55 per cent of women-led SME employers had sought external advice or information on matters affecting their business. Among those seeking advice, accountants were the most frequently consulted source (mentioned by 33 per cent of those who had sought advice), followed by consultants (17 per cent), Business Link local services (12 per cent), trade/ business associations (10 per cent) and local authorities (10 per cent).

1.28 Fifteen per cent of women-led SME employers had used a business mentor, and 42 per cent did some networking activities by making time to speak to or meet with other businesses or entrepreneurs.

Survey conducted and report written by IFF Research. June 2011 Steve Lomax, Director Lydia Reynolds, Research Manager

6

2 Background and aims

Aims of the survey

2.1 This report sets out the key findings from the 2010 Small Business Survey (SBS) women-led businesses boost.

2.2 The SBS was a large scale telephone survey, comprising 4580 interviews, commissioned by the Department for Business, Innovation and Skills (BIS) as a follow up to the 2007/8 Annual Survey of Small Businesses (ASBS). The mainstage for this was conducted between 2nd July and 7th September 2010 by IFF Research Ltd. The findings, representative of all SME employers in the UK, can be found in a separate report1.

2.3 The main aims of the SBS were:

• To monitor key enterprise indicators and how these have changed in comparison to previous surveys. In particular the survey measures characteristics of Small and Medium-sized Enterprises (SMEs2) such as the proportions which are women and MEG (minority-ethnic) led, and the proportions applying for and obtaining external finance




Survey method

2.4 In addition to the main SBS, BIS commissioned an additional 1,726 interviews with boosts of women and MEG businesses. These interviews resulted in a 1,012 sample size for women-led SMEs. This report is concerned with the women-led businesses.

2.5 Women-led businesses were found in three separate ways:

• (a) Women-led SMEs that had taken part in the 07/08 and 06/07 ASBS’s were recalled and asked a full questionnaire. Three hundred and ninety-seven interviews were gained from this source (365 with employees).

1 http://www.bis.gov.uk/assets/biscore/enterprise/docs/b/11‐p74‐bis‐small‐business‐survey‐2010 2 SMEs are defined as having less than 250 employees. Only those with employees are included in this analysis

http://www.bis.gov.uk/assets/biscore/enterprise/docs/b/11-p74-bis-small-business-survey-2010

7

• (b) Women-led SMEs were free-found via screening from Dun & Bradstreet sourced sample. This sample was structured by size in a similar model to the mainstage SBS (1/6 no employees, 1/3 micro businesses, 1/3 small businesses, 1/6 medium-sized businesses), but skewed towards sectors known to have higher than average proportions of women-led businesses. Five hundred interviews were gained from this source (426 with employees).

• (c) Women-led SMEs that had taken part in the SBS 2010 were recalled and asked a short questionnaire consisting of new questions, not asked in the mainstage SBS. The data from this interview was then merged with the answers they had given in the mainstage SBS. One hundred and fifteen interviews were gained from this source (87 with employees)

2.6 Because of the various skews occurring through the sampling methods, a number of weighting criteria were applied to correct these and make the dataset representative of all Women-led SME employers, according to the profile achieved in the (weighted) SBS mainstage. The SBS mainstage has itself been weighted to correct size and regional imbalances, using targets derived from the SME Statistics for the UK and Regions 20093 published by BIS. The weighting targets applied to the Women-led dataset were based upon size, broad sector and region.

Note on the report

2.7 Please note that the findings presented in this report relate to SME employers only. That is to say, those with no employees have been excluded within the dataset reported on. This is consistent with the SBS 2010 reporting and reduces the overall sample size of the women-led dataset to 878.

2.8 Also note that the first few tables reported upon in Section 3 of this report (size, sector and region) are based upon the women-led SME employers found in the mainstage SBS 2010 (599 businesses in total), and not the full women-led boost. This is because the women-led dataset is weighted according to these strata, and therefore the data are findings from the mainstage and not the boost. Figures for age of business are also based on the mainstage women-led SME employers, as the sampling method for the boosts is skewed against newer businesses.

2.9 Comparisons are shown against all SME employers interviewed in the SBS mainstage, and against women-led businesses identified in the 07/08 and 06/07 ASBS surveys.

3 http://stats.bis.gov.uk/ed/sme. The figures are drawn from a combination of the Inter Departmental Business Register which contains all businesses operating VAT or PAYE schemes, and the survey‐based Labour Force Survey (LFS) which is the main source for estimating the number of the self‐employed. LFS data is based on the last quarter of 2008 and the first quarter of 2009.

http://stats.bis.gov.uk/ed/sme

8


2.10 The overall sample size is sufficiently large to mean that overall findings for all women-led SME employers in the UK can be reported upon with a relatively high degree of statistical reliability. At the overall level, the statistical error for a finding of 50 per cent (the most statistically sensitive or unreliable level of finding) is +/- 3.3 per cent. Sample sizes and standard errors for sub-groups are shown below. Unless stated otherwise, all findings reported are statistically significant.

Table 2.1: Statistical confidence in survey findings4 Base = all women-led SME employers in SBS 2010 boost Sample Size Standard Error

All UK 878 +/- 3.3%

Micro (1-9 employees) 506 +/- 4.4%

Small (10-49 employees) 305 +/- 5.6%

Medium (50-249 employees) 67 +/- 12.0%

Primary/production/construction (ABCDEF) 85 +/- 10.6%

Transport, retail and distribution (GHI) 383 +/- 5.0%

Business services (JK) 109 +/- 9.4%

Other services (LMNO) 301 +/- 5.6%

All SME employers in mainstage SBS 2010 3817 +/- 1.6%

Women-led SME employers in mainstage SBS 2010 599 +/- 4.0%

Women-led SME employers in ASBS 07/08 932 +/- 3.2%

Women-led SME employers in ASBS 06/07 1021 +/- 3.1%


9

3 Profile of businesses

Size5

3.1 Based on the SME Statistics for the UK and Regions 20096 published by BIS there are 4.8 million enterprises in the UK. Of these, 25 per cent (1.2 million are employers).

3.2 Fourteen per cent of SME employers in the SBS 2010 were women-led, defined as being led by a woman or a management team with more than half of its members being women. This proportion of women-led SME employers is exactly the same as that seen in ASBS 06/07 and ASBS 07/08.

3.3 In addition to these, a further 25 per cent of all SME employers were equally led by men and women. A further nine per cent had women directors as a minority, and 52 per cent were entirely male-led. Again, these proportions have not changed significantly compared to the two ASBS surveys.

Table 3.1: Size

Base = all women-led SME employers/all SME employers (SBS mainstage) Women-

led SME Employers

SBS 10

Women-led SME Employers

ASBS 07/08


ASBS 06/07

All SME Employers SBS 10

Un-weighted (n) = 599 932 1021 3817

% % % %

Micro (1-9 employees) 86 90 89 84

Small (10-49 employees) 13 9 10 14

Medium (50-249 employees) 2 1 1 2

Figures in bold are statistically significant at the 95% confidence level between women-led SME employers and all SME employers in SBS 2010

5 Please note that Tables 3.1‐3.3 are based on data from the mainstage 2010 SBS for reasons discussed in the previous chapter. 6 http://stats.bis.gov.uk/ed/sme. The figures are drawn from a combination of the Inter Departmental Business Register which contains all businesses operating VAT or PAYE schemes, and the survey‐based Labour Force Survey (LFS) which is the main source for estimating the number of the self‐employed. LFS data is based on the last quarter of 2008 and the first quarter of 2009.


10

3.4 Eighty-six per cent of women-led SME employers were micro businesses with 1-9 employees, 13 per cent had between 10-49 employees (small businesses), and two per cent had between 50 and 249 employees (medium sized businesses). The size profile of women-led SME employers was found to be similar to that of all SME employers. Compared to the ASBS 07/08 there were fewer women-led SME employers in the micro category, and more in the small category.

Sector7

3.5 The table below provides a more detailed breakdown of women-led SME employers in the 2010 SBS by sector.

Table 3.2: Sector


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 599 932 1021 3817

% % % %

Primary (AB) 3 2 2 3



Wholesale and retail trade, repair of motor vehicles and motorcycles (G)

21 27 33 23



Financial intermediation (J) 3 1 1 2

Real estate, renting and business service activities (K)

24 18 16 25

Public administration and defence, compulsory social security/Education (LM)

3 1 2 1


Other community, social and personal activities (O)

13 17 10 7


* = a figure of less than 0.5% but higher than zero

7 The dataset is weighted according to size, broad sector and region.

11

3.6 Women-led SME employers were more likely than SME employers generally to be found in the health/social work sector (13 per cent of women-led SME employers compared with four per cent of all SME employers), the other community, social and personal activities sector (13 per cent compared to seven per cent of all SME employers), and in the hotel/restaurant sector (nine per cent, compared to five per cent of all SME employers). Women-led SME employers were less likely than SME employers overall to be found in the production and construction sectors.

3.7 Compared to ASBS 07/08 there were fewer women-led SME employers in the production (CDE), wholesale and retail (G), hotels and restaurant (H) and other community (O) sectors. In contrast there were significantly more in business services (K) and health/social work (N).

Age of business

3.8 Three per cent of women-led SME employers had started their business less than one year before being interviewed, a higher proportion than for all SME employers. Other than this finding, women-led SME employers tended to be the same age as SME employers overall.

Table 3.3: Age of businessi


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 599 932 1021 3817

% % % %

Less than one 3 2 2 1

1 year 1 2 1 1

2 years 3 1 5 2

3 years 1 4 5 3

4 years 4 2 4 4

5 years 5 6 4 4

6-10 years 20 19 18 18

11-20 years 24 24 26 26

More than 20 years 38 38 32 40




3.9 The survey defines start-ups as those trading for less than four years or those which have changed ownership in the last three years. Based on this definition, 19 per cent of women-led SME employers were defined as start-ups in the SBS 2010, which was higher than the 14 per cent figure for all SME employers, but an insignificant decrease on the 21 per cent of women-led SME employers identified in the ASBS 2007/08.

12

Legal status8

3.10 Forty-five per cent of women-led SME employers in the SBS 2010 were private limited companies, limited by shares. The next most common legal status was sole proprietorship, with 29 per cent of women-led SME employers falling into this category. Compared to all SME employers there were fewer limited companies and more sole proprietorships. However, compared to previous ASBS surveys there has been a increase in private limited companies and a decrease in sole proprietorships among women-led SME employers, the same being true for all SME employers generally.

Table 3.4: Legal statusii

Base = all women-led SME employers/all SME employers Women-

led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

Private limited company, limited by shares (LTD)

45 34 36 59



Private company limited by guarantee 5 3 1 3


Public Ltd Company (PLC) 2 1 * 2

Limited liability partnership 1 1 * 2

Other (e.g. unincorporated associations/ Friendly Society/ Private Unlimited Company/ CIC / trust / charity)

5 1 2 3



8 From this point onwards, all 2010 data is based upon the Small Business Survey women‐led boost

13

Turnover

3.11 In the SBS 2010 women-led SME employers were more likely than SME employers as a whole to have a turnover under £500,000 (63 per cent compared with 52 per cent respectively). The mean and median average turnovers for women-led businesses were much lower than those for all SME employers. Turnover levels among women-led SME employers in the SBS 2010 were in line with levels seen in previous ASBS surveys.

Table 3.5: Turnoveriii


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

Less than £67,0009 18 20 17 12

£67,000-£99,999 9 10 9 6

£100,000-£249,999 23 18 20 17

£250,000-£499,999 13 10 11 17

£500,000-£999,999 9 9 7 13

£1,000,000-£1,499,999 5 3 5 7

£1,500.000-£2,800,000 4 2 2 5

£2,800,001-£4,999,99910 1 4

£5,000,000 or more * 2 2

3

Don’t know 11 15 17 7

Refused 9 11 10 10

Mean average11 £498,000 £425,000 £453,000 £1,168,000

Median average £158,000 £122,000 £150,000 £345,000


9 In the 07/08 ASBS this was £64,000, in 06/07 it was £61,000 10 In the 07/08 and 06/07 ASBS’s the code here was ‘over £2.8 million’ 11 Because of the changes to the precodes the mean and median averages for 07/08 and 06/07 are based on slightly different assumptions from 2010

14


3.12 Forty-one per cent of all SME employers in the SBS 2010 had only one partner/director, which compares with 49 per cent of women-led SME employers.

3.13 Compared with the ASBS 07/08 there were fewer women-led SME employers with two partners/directors in charge.

Table 3.6: Number of partners/directorsiv

Base = all women-led SME employers/all SME employers


SBS 10


ASBS 07/08


Un-weighted (n) = 878 932 3817

% % %

1 49 45 41

2 32 38 39

3 8 9 11

4 3 4 4

5 to 8 4 2 4

9 to 12 3 1 1

13+ 1 * 1



Family businesses

3.14 Fifty-five per cent of women-led SME employers were family owned businesses (a business which is majority owned by members of the same family). This is less than it was for all SME employers (63 per cent).

Table 3.7: Family businessesv



SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

Family owned business 55 61 62 63

Not family owned 45 39 38 37


15

3.15 Women-led SME employers in the SBS 2010 were less likely to be family owned than in the ASBS 2007/08 and the ASBS 2006/07, a trend which was also seen among SME employers generally.

VAT registration

3.16 Sixty-nine per cent of women-led SME employers in the SBS 2010 were VAT registered, which was significantly less than the proportion for all SME employers (83 per cent).

3.17 A greater number of women-led SME employers were VAT registered in the ASBS 2007/08 and the ASBS 2006/07, a trend which was also seen for all SME employers.

Table 3.8: VAT registrationvi


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %




Social enterprises

3.18 Forty-four per cent of all women-led SME employers in the SBS 2010 thought of their business as a social enterprise: a business that has mainly social or environmental aims. This was a much higher proportion than for all SME employers (26 per cent).

Table 3.9: Social enterprisesvii


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

Perceive themselves as a social enterprise 44 42 37 26

Conform to BIS definition of a social enterprise

9 6 7 7


17

3.19 BIS has a further definition of a social enterprise. This requires the enterprise to consider itself a social enterprise as above, but not pay more than 50% of profit or surplus to owners or shareholders, generate more than 25% of income from trading, and therefore have less than 75% of turnover from grants or donation. In addition, the business has to think of themselves as a very good fit with the statement ‘a business with primarily social or environmental objectives, whose surpluses are principally reinvested for that purpose in the business or community, rather than mainly being paid to shareholders and owners.’

3.20 Under this definition nine per cent of women-led SME employers were considered to be social enterprises in the SBS 2010. This was three percentage points higher than in the ASBS 07/08, and two percentage points more than seen in the ASBS 06/07.

3.21 Under this definition 15 per cent of small women-led businesses were classed as social enterprises. There were no significant differences by sector.

18

4 Business performance

Numbers employed compared to 12 months ago

4.1 Eighteen per cent of women-led SME employers in the SBS 2010 employed more people when interviewed than was the case 12 months ago. Seventeen per cent employed fewer than before, and 65 per cent employed approximately the same number. Compared to all SME employers, women-led SME employers were less likely to be employing fewer and were more likely to be employing the same number of staff.

Table 4.1: Numbers Employed Compared to 12 Months Agoviii

Base = all women-led SME employers/all SME employers trading for at least one year Women-

led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 876 920 1001 3779

% % % %


Same as 12m Ago 65 64 66 61

Fewer than 12m Ago 17 19 13 21

Don’t know * 1 1 *



4.2 Most likely to say they employed more staff than the previous year were women-led SME employers in the business service sector (27 per cent).

19

Number of people women-led SME employers expect to employ in 12 months time

4.3 Twenty-five per cent of women-led SME employers in the SBS 2010 expected to be employing more staff in 12 months time. Fifty-nine per cent expected to employ roughly the same number, and 15 per cent expected to employ fewer. These figures were very similar to those for all SME employers.

Table 4.2: Number of people expecting to employ in 12 months timeix


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

More in 12m Time 25 22 24 23

Same in 12m Time 59 60 62 62

Fewer in 12m Time 15 16 12 14


Figures in bold are statistically significant at the 95% confidence level between women-led SME employers and all SME employers in SBS 2010 and its boost

4.4 Women-led SME employers in the business service sector were most likely to have thought (32 per cent) they would employ more in 12 months time.

20


4.5 Twenty-nine per cent of women-led SME employers in the SBS 2010 said that turnover was greater when surveyed than it was a year ago. Thirty-two per cent said it was about the same, and 36 per cent said it was lower. These figures are very similar to those for all SME employers. Compared to the previous ASBS surveys a greater proportion of women-led SME employers said their turnover had decreased, a finding also seen for all SME employers.

Table 4.3: Turnover Now Compared to 12 Months Previouslyx

Base = all women-led SME employers/all SME employers trading for at least one year Women-

led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 876 920 1001 3779

% % % %


Same as 12m Ago 32 38 32 34

Turnover Lower Now 36 22 21 34




4.6 Thirty-eight per cent of women-led SME employers expected to have higher turnover in 12 months time, 40 per cent thought it would be the same and 18 per cent thought it would be lower. The proportion that expected to have lower turnover was higher than for all SME employers. It was also much higher than the proportions seen in the previous ASBS surveys, although this trend has also seen for all SME employers.

Table 4.4: Expectations of Turnover in 12 Months Timexi


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

More than now 38 51 54 41

Same as now 40 34 34 40

Less than now 18 11 5 14


Figures in bold are statistically significant at the 95% confidence level between women-led SME employers and all SME

21

employers in SBS 2010

Profit

4.7 Sixty-eight per cent of women-led SME employers generated a profit or surplus in their last financial year, with those working in the business services sector being more likely to have generated a profit (77 per cent).

Table 4.5: Whether generated a profit or surplus in the last financial yearxii


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

Yes 68 69 71 71

No 27 22 23 24


Unwilling to answer 1 1 2 4


4.8 Seventeen per cent of women-led SME employers paid more than 50 per cent of profit or surplus to owners or shareholders, which is a similar proportion to that for all SME employers. In comparison to the ASBS surveys this proportion has increased.

Table 4.6: Whether pay more than 50% of profit or surplus to owners or shareholdersxiii


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

Yes 17 13 11 19

No 75 76 81 72

Have never generated a profit or surplus 2 2 1 2


Unwilling to answer * 1 1 1

Figures in bold are statistically significant at the 95% confidence level between Women-led SME employers and all SME employers in SBS 2010

22


23

5 Growth

Plans for growth

5.1 Sixty-six per cent of women-led SME employers said they were aiming to grow their business over the next two to three years. This was lower than the proportion seen for all SME employers (74 per cent), but a similar proportion to that seen amongst women-led SME employers in the previous ASBS surveys.

Table 5.1: Whether aim to grow business over the next two or three yearsxiv


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

Yes 66 65 63 74

No 34 35 37 26

Figures in bold are statistically significant at the 95% confidence level between Women-led SME employers and all SME employers in SBS 2010 and its boost

5.2 Women-led SME employers in the business services sector were the most likely to be aiming to grow over the next two to three years (74 per cent).


5.3 Seventy-one per cent of all women-led SME employers intended to increase the skills of their workforce in the next two to three years, 64 per cent intended to reduce costs by increasing the productivity of their workers, and 61 per cent intended to increase their turnover by exploiting new markets. Sixty per cent of women-led SME employers intended to increase the leadership capability of their managers and 46 per cent intended to develop new products.

24

Table 5.2: Extent of plans for achieving future growthxv

Base = all women-led SME employers/all SME employers Women-led SME Employers

SBS 10


Un-weighted (n) = 878 3817

% %

Increase the skills of the workforce 71 66

Reduce costs by increasing the productivity of workers 64 61

Increase turnover by exploiting new markets 61 63

Increase the leadership capability of managers 60 51

Employ more staff 49 50

Develop new products 46 44

None of these 10 8

Figures in bold are statistically significant at the 95% confidence level between Women-led SME employers and all SME employers in SBS 2010

5.4 Women-led SME employers were more likely than SME employers as a whole to want to increase the skills of their workforce and increase the leadership capability of management.

5.5 Of women-led SME employers, those most likely to want to increase skills and improve management capability were found in the other services sector (78 and 66 per cent respectively). Those in the production sector were the most likely to want to exploit new markets (73 per cent), reduce costs (84 per cent), develop new products (77 per cent) and employ more staff (68 per cent).

25

6 Business capability

Perceptions of business capability

6.1 Respondents were asked how capable their management team was at a number of aspects of business management which have been linked to running a successful business. Respondents answered on a five point numeric scale, with a score of one to two indicating they were poor at the task, and a score of four to five indicating they thought they were strong.

Table 6.1: Perception of whether the business is strong or poor at business activitiesxvi


SBS 10


Un-weighted (n) = 878 878 3817

% % %

Strong 62 63 Taking decisions on regulation and tax issues Poor 11 9

Strong 61 59 People management, such as recruitment and delegation Poor 9 10

Strong 56 56 Developing and implementing a business plan and strategy Poor 13 14

Strong 53 53 Operational improvement

Poor 13 11

Strong 43 42 Developing and introducing new products or services Poor 17 21

Strong 43 41 Using formalised business systems such as customer information records Poor 25 26

Strong 22 26 Entering new markets

Poor 30 34

Strong 24 25 Accessing external finance

Poor 35 38


26

6.2 Overall, women-led SME employers were most likely to consider themselves capable at taking decisions on regulation and tax issues. Sixty-two per cent considered themselves strong at this, and only 11 per cent thought they were poor. There were no areas where women-led SME employers considered themselves to be poorer than for all SME employers.

Business capability: Innovation

6.3 Fifty-four per cent of women-led SME employers had introduced new or significantly improved products or services in the previous twelve months – a proportion that was significantly higher than for SME employers overall. Fifty-one per cent of women-led SME employers had introduced significantly new processes over the last 12 months; again this proportion was significantly higher than SME employers as a whole.

6.4 Compared to the previous ASBS surveys women-led employers are more likely to have had significantly improved processes in SBS 2010.

6.5 Those in the business services sector were more likely to have introduced new or significantly improved processes in the last 12 months (67 per cent).

Table 6.2: Whether SMEs have introduced new or significantly improved products, services or processes in the past twelve monthsxvii


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 45612 932 1021 1904

% % % %

Significantly improved products or services 54 50 47 47

Significantly improved processes 51 29 30 33

Neither 46 43 43 44


12 Please note that this question was only asked of half the sample, chosen at random

27

Business capability: Exporting

6.6 Sixteen per cent of women-led SME employers sold goods or services or licenced products outside of the UK in the SBS 2010. This was lower than the proportion of businesses exporting among SME employers as a whole ( 23 per cent). This is a result of there being fewer women-led businesses in the production sector, which is the sector most likely to export.

Table 6.3: Whether sell goods or services or licence products outside the UKxviii


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

Yes 16 15 23 23

No 83 85 77 77


Business capability: Training

6.7 Sixty-four per cent of women-led SME employers had arranged or funded training or development for staff in the past 12 months, a proportion that was similar to that for all SME employers.

6.8 Those in the transport, retail and distribution sector were less likely than average to have arranged or funded training (53 per cent), those in other services the most likely to have done so (72 per cent).

Table 6.4: Whether businesses have arranged or funded training or development for staff in the past 12 monthsxix


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 43213 932 1021 1937

% % % %

Yes 64 53 58 60

No 36 47 41 40



28

employers

Business capability: Technology

6.9 SME employers were asked whether they used the internet for a range of business purposes.

Table 6.5: Uses for the internetxx


SBS 10


Un-weighted (n) = 45114 1901

% %

Paying taxes online 66 70

Promoting your goods and services through a website 62 67

Advice on regulation 62 57

Seeking general business advice 52 51

Selling goods and services through a website 36 39

None of these 8 8


6.10 Women-led SME employers were as likely as SME employers overall to use the internet to pay taxes online, get advice on regulation, seek general business advice and sell goods and services through a website. However, they were less likely to promote goods and services through a website. For women-led SME employers, using the internet to promote goods and services was most common in the business service sector (79 per cent), and least likely in the transport, retail and distribution sector (52 per cent).


29

Encouragement to set up a new business

6.11 Women-led SME employers were asked what would encourage more women to set up a business. A wide range of answers were given. The answer most frequently mentioned spontaneously was financial assistance or funding to start a business (14 per cent), followed closely by help with childcare (13 per cent).

Table 6.6: What would encourage more women to set up in businessxxi

Base = all women-led SME employers Women-led SME Employers SBS 10

Un-weighted (n) = 61015

%

Financial assistance/funding to start a business 14

Help with childcare 13

Increased confidence 10

Better education/training 9

More information and advice on how to start a business 8

More Government help (generally) 7

More support generally 7

Better business networks 6

More lending from banks 4

More awareness of female businesswomen (role models) 5

Tax breaks/lower taxes 3

Less red tape/regulations 3

Improved advice on employment law 1

Other 8

Nothing 3

Don’t know/can’t think of anything 22

15 Reduced sample size because respondents who had businesses which were both women‐led and MEG‐led were only asked the similar question on what would encourage more people from ethnic minority backgrounds to set up in business. This was an open‐ended question and respondents may have given a response that fits into more than one category.

30

Attitudes to risk

6.12 Women-led SME employers were read a number of statements about the risk element of running a business and asked how far they agreed or disagreed that the statements reflected their views.

6.13 When asked whether they fear failure in business women-led SME employers were split evenly between the 44 per cent who agreed they do fear failure and the 42 per cent who disagreed.

6.14 Although 71 per cent of women-led SME employers agreed that they were scared of being in debt, the majority did identify with statements relating to the risk element of running a business: 73 per cent agreed that they enjoy the challenge of situations that many consider risky, 72 per cent agreed that they would rather work for a small business than a large one and 86 per cent agreed that people who start and fail at business deserve a second chance (except in the cases of fraud or malpractice).

Table 6.7: Attitudes to risk xxii

Base = all women-led SME employers

All Women-led SME Employers SBS 2010


% %

Agree 73 I enjoy the challenge of situations that many consider risky Disagree 18

Agree 71 I am scared of being in debt

Disagree 22

Agree 44 I fear failure in business

Disagree 42

Agree 72 I would rather work for a small than a large business Disagree 12

Agree 86 People who start and fail at business deserve a second chance (except in the cases of fraud or malpractice) Disagree 5

31

7 Access to finance

Whether sought finance in the last 12 months

7.1 Twenty-six per cent of women-led SME employers had tried to obtain finance for their business in the 12 months preceding interview. This was the same proportion seen for all SME employers, and a small but statistically significant rise on the 22 per cent who sought finance in the ASBS 07/08 and 20 per cent who sought it in the ASBS 06/07.

Table 7.1: Whether Sought Finance in the Last 12 Monthsxxiii



SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

YES – ANY 26 22 20 26

‐ Once 17 14 13 17

‐ More 9 8 7 9

NO 72 76 77 72



7.2 Finance was sought by 24 per cent of women-led micro businesses (1-9 employees), 34 per cent of small ones (10-49 employees) and 32 per cent of medium sized businesses (50-249 employees). There were no sectoral differences.

32

Preparations when applying for finance

7.3 Seventy-three per cent of women-led SME employers that had tried to obtain finance were confident of success before applying for finance (32 per cent were very confident and 41 per cent were fairly confident). This was a similar finding to that seen for all SME employers16.

Table 7.2: Confidence in success before applying for financexxiv

Base = all Women-led SME employers/all SME employers who applied for finance in the last 12 months


SBS 10

All SME Employers (Feb 2011 Business Barometer)


% %

Very confident 32 40

Fairly confident 41 40

Not very confident 14 9

Not at all confident 9 8

Don’t know 4 3

Figures in bold are statistically significant at the 95% confidence level between women-led SME employers in the SBS 2010 boost and all SME employers in the February Business Barometer; * = a figure of less than 0.5% but higher than zero

7.4 Women-led SME employers were asked whether they had taken a number of steps to ensure success in obtaining finance prior to application. Women-led SME employers were more likely than SME employers generally to have had an up to date business plan before application (67 per cent), to have had business plans looked over by a professional adviser (39 per cent), to have read business websites (34 per cent) and to have taken a course in business finance (14 per cent).

Table 7.3: Steps taken in order to ensure success in obtaining financexxv

Base = all women-led SME employers/all SME employers who applied for finance in the last 12 months

Women-led SME Employers SBS 10



% %

Up to date business plan 67 44

Received advice from bank 42 49

Business plan looked over by a professional adviser 39 26

Read business websites 34 20

Spoke to other businesses to get their advice 33 17

Took a course in business finance 14 6

None of these 16 33

Figures in bold are statistically significant at the 95% confidence level between women-led SME employers in the SBS 2010

16 Comparative data is from the Feb. 2011 Business Barometer as this question was not asked in SBS 2010 mainstage

33

boost and all SME employers in the February Business Barometer; * = a figure of less than 0.5% but higher than zero


7.5 Fifty-four per cent of women-led SME employers that applied for finance did so to gain working capital or to alleviate cashflow difficulties. Eleven per cent wanted to invest in capital equipment or vehicles, 11 per cent wanted to improve buildings and eight per cent wanted to buy land or buildings.

7.6 Women-led SME employers were less likely than SME employers as a whole to apply for finance to acquire capital equipment or vehicles. This is related to the fact that there are fewer women-led businesses in the production sector than in the general SME employer population.

Table 7.4: Reasons for Applying for Financexxvi

Base = all Women-led SME employers/ all SME employers who applied for finance in the last 12 months


SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 251 220 248 1193

% % % %

Working capital, cashflow 54 54 40 56

Capital equipment or vehicles 11 13 20 21

Improving buildings 11 9 9 9

Buying land or buildings 8 6 9 10

Business expansion/growth 6 5 5 1

Training/Staff Development 6 3 3 1

Buying another business 3 2 3 2

Research & Development 3 5 4 2

Marketing 1 2 * 2

Management buy out * 0 0 1

Other 4 * 2 2

Don’t know/refused 1 * 1 *

Figures in bold are statistically significant at the 95% confidence level between women-led SME employers and all SME employers in SBS 2010; * = a figure of less than 0.5% but higher than zero

7.7 Of those women-led SME employers that did not seek finance, the predominant reason was that the finance was not needed, although women-led SME employers were less likely to give this as a reason than SME employers overall

34

Table 7.5: Reasons For Not Applying for Finance in the Last 12 Monthsxxvii

Base = all women-led SME employers/ all SME employers who did not apply for finance in the last 12 months


SBS 10



% %

Not needed it 76 82

Did not want to take on additional risk 7 5

Thought would be rejected 6 4

Thought it would be too expensive 3 4

Other reason 5 3

Don’t know 5 2



7.8 Of those that applied for finance, 43 per cent of women-led SME employers applied for a bank loan and 23 per cent a bank overdraft.

Table 7.6: Type of Finance Soughtxxviii



SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 251 220 248 1193

% % % %

Bank loan 43 39 37 40

Bank overdraft 23 29 28 35

Grant 21 11 13 9

Leasing or hire purchase 4 8 10 9

Mortgage 4 5 10 6

Equity finance 1 1 1 1

Government guaranteed loan 1 * 1 2

Factoring/invoice discounting * * * 2

Loan from family/business * 2 2 3

Other 4 6 1 10


Figures in bold are statistically significant at the 95% confidence level between women-led SME employers and all SME employers in SBS 2010 ; * = a figure of less than 0.5% but higher than zero

35

7.9 The proportion of women-led SME employers that sought finance that applied for a grant was much higher (21 per cent) than for SME employers (nine per cent) generally. This was particularly likely to happen among women-led SME employers in the other service sector seeking finance (42 per cent).

7.10 The proportion seeking grants rose significantly compared to the previous ASBS surveys.

7.11 The proportion of women-led SME employers seeking overdrafts was lower than for all SME employers. However, this proportion has not decreased significantly on the ASBS surveys.


7.12 Twenty-two per cent of women-led SME employers seeking finance sought less than £10,000, with only one per cent seeking more than £1 million. The mean average amount of finance sought was £125,000, with the median £11,000. In general, women-led SME employers sought less finance than all SME employers.

Table 7.7: Amount of Finance Soughtxxix

Base = all women-led SME employers/ all SME employers who applied for finance in the last 12 months


SBS 10



% %

Less than £10,000 22 18

£10,000-£24,999 22 23

£25,000-£49,000 17 14

£50,000-£99,999 10 11

£100,000-£249,999 10 11

£250,000-£499,999 7 6

£500,000-£999,999 1 4

£1 million or more 1 5

Don’t know/refused 12 9

Mean Average £125,000 £240,450

Median Average £11,000 £41,000


36


7.13 Thirty-eight per cent of women-led SME employers that tried to obtain finance were unable to obtain any from the first source they approached. Nine per cent obtained some from the first source but not all of the money they required, whilst seven per cent obtained all they needed but with some problems. Of those women-led SME employers that sought finance over the past 12 months, 55 per cent had difficulties obtaining finance from the first source approached.

Table 7.8: Any Difficulty Obtaining Finance from First Source Approachedxxx



SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 251 220 248 1193

% % % %

ANY DIFFICULTY 55 36 32 51

‐ Unable to obtain any finance 38 22 15 35

‐ Obtained some but not all the finance required

9 8 9 7

‐ Obtained all the finance required but with some problems

7 6 8 9

NO DIFFICULTY 44 64 66 47



7.14 These proportions were similar to those seen for all SME employers. The proportion of women-led SME employers that encountered difficulties has risen significantly compared to the previous ASBS surveys, but the same is also true of SME employers generally.

7.15 For women-led SME employers, 47 per cent of those that sought overdrafts were unable to obtain finance from the first source approached. This was not significantly higher than the rejection rate for bank loans (38 per cent) or grants (32 per cent), but those that sought grants were more likely than average to not receive all the money they required (34 per cent).

37

7.16 Of those that did not obtain any finance from the first source they approached, or who only got some of the money they needed, about a quarter (23 per cent) went on to get all the finance they needed from another source. Overall therefore, the proportions of women-led SME employers that sought finance and the eventual outcomes are as follows:

• 62 per cent (16 per cent of all women-led SME employers) obtained all the finance they required

• 10 per cent (3 per cent of all women-led SME employers) obtained some but not all of the finance they required

• 24 per cent (6 per cent of all women-led SME employers) did not obtain any of the finance sought they required from any source

Table 7.9: Eventual outcome of application for financexxxi

Base = all women-led SME employers/ all SME employers who applied for finance in the last 12 months


SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 251 220 248 1193

% % % %

OBTAINED ALL THEY NEEDED 62 85 82 68

‐ From first source 51 69 74 56

‐ From another source 11 16 7 11

OBTAINED SOME, BUT NOT ALL 10 4 4 6

OBTAINED NONE 24 11 12 21


Figures in bold are statistically significant at the 95% confidence level between women-led SME employers and all SME employers in SBS 2010 ; * = a figure of less than 0.5% but higher than zero

7.17 These proportions were not significantly different from those for all SME employers. The proportion that obtained no finance from any source is significantly higher than that seen in previous ASBS surveys, however, this is also the case for all SME employers.

38

7.18 The table below shows the reasons given for the difficulties in obtaining finance from the first source approached. Insufficient security was the reason given most often (12 per cent), with a similar proportion stating that no reason had been given to them. Women-led SME employers that had difficulty obtaining finance were less likely to mention these reasons than SME employers as a whole.

7.19 The women-led questionnaire contained precodes for this question that had not appeared on the mainstage SBS questionnaire (indicated by a N/A sign in the table below). Thus eight per cent mentioned that there had been too many applicants for the grant they sought, six per cent that banks tend to prefer to lend to other types of businesses, three per cent that their business (not the sector necessarily) was considered to be too risky, and two per cent that they lacked confidence in the meeting.

7.20 Women-led SME employers were also more likely than SME employers as a whole to state their application had been rejected for reasons other than insufficient security; for instance they were more likely to cite lack of credit history, lack of any security and, poor personal credit history as reasons for their application being rejected.

Table 7.10: Reasons for Difficulties Arranging Financexxxii

Base = all women-led SME employers /all SME employers who had difficulties arranging finance in the last 12 months


SBS 10



% %


No reason given 11 24


Too many applicants for grant 8 N/A


No credit history/not been in business long enough 6 2

No security 6 2

Banks prefer to lend to other types of businesses 6 N/A


Poor personal credit history 5 1

Decision still pending 5 2

Recession/current credit climate 4 6

Business considered too risky 3 N/A

Lacked confidence in the meeting 2 N/A

Too many outstanding loans/mortgages 2 1

Inadequate business plan 1 1

Rejected terms of finance offered * 5

Other 10 10



39


Biggest obstacle to the success of the business

8.1 When prompted, a third (31 per cent) of women-led SME employers said that the state of the economy was the main obstacle to the success of their business, marking a significant rise on the 2007/08 and 2006/2007 ASBS surveys (18 per cent and 11 per cent respectively). This trend was also evident among all SME employers.

8.2 A greater proportion of women-led SME employers than SME employers as a whole mentioned taxation, VAT, PAYE, NI and business rates as being obstacles (13 per cent compared with eight per cent respectively).

8.3 A greater proportion of medium sized women-led SME employers cited obtaining finance as the main obstacle than the other two size bands (29 per cent of mediums compared with nine per cent of micros and 14 per cent of small businesses cited this as their main obstacle).

8.4 Cashflow was a bigger problem for micro women-led SME employers than for the other two sizebands (10 per cent of micros cited this as their main obstacle compared to seven per cent of small businesses and one per cent of mediums).

Table 8.1: Main Obstacle to the Success of the Businessxxxiii


led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

The Economy 31 18 11 33

Taxation, VAT, PAYE, NI, rates 13 13 13 8

Obtaining finance 10 4 3 8

Cashflow 9 10 10 11

Competition 9 15 17 10

Regulations 6 9 10 7

Recruiting staff 4 4 7 2


40

Overall incidence of obstacles to success of business

8.5 Many women-led SME employers reported additional obstacles to success (either spontaneously or on a prompted basis). When results for all obstacles are combined, the most frequently mentioned obstacles in the SBS 2010 were:

• the economy (80 per cent of women-led SME employers, compared to 81 per cent of all SME employers)

• competition (50 per cent, compared to 58 per cent of all SME employers)

• taxation, VAT, PAYE, NI, business rates (53 per cent, compared to 50 per cent of all SME employers)

• cash flow (54 per cent, compared to 49 per cent of all SME employers)

• regulations (52 per cent, compared to 47 per cent of all SME employers)

• obtaining finance (48 per cent, compared to 39 per cent of all SME employers).

Regulations as an obstacle to success of business

8.6 Where women-led SME employers reported regulations as an obstacle to business success, they were asked which regulations specifically they considered to be obstacles, and in what ways.

Table 8.2: Regulations considered to be obstacles to business successxxxiv

Base = all women-led SME employers/ all SME employers considering regulations an obstacle to business success


SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 471 247 308 1917

% % % %

Health and safety 31 27 37 35

Employment 19 21 13 14

No specific/all regulations 17 14 N/A 11

Tax-related 16 16 15 20

Sector specific 15 6 11 16

Environmental 6 7 11 7

Planning, development, etc. 4 2 7 7


41

8.7 Health and safety regulations were the most commonly cited obstacles, reported by one in three (31 per cent) of all those citing regulations as a barrier to success.

8.8 These were followed by employment related regulations (19 per cent), tax and sector-specific regulations (mentioned by 16 per cent and 15 per cent respectively). Despite women-led SME employers being more likely to mention tax, NI etc. as an obstacle to their business than all SME employers, they were less likely to mention regulations relating to tax (16 per cent compared to 20 per cent).

42



9.1 Over the year prior to the survey, over half (55 per cent) of all women-led SME employers had sought external advice or information on matters affecting their business.

9.2 The most commonly used sources of advice were accountants (consulted by 33 per cent of those seeking advice), and consultants (17 per cent). Twelve per cent had sought advice through Business Link local services and six per cent sought advice via the Businesslink.gov.uk website. Ten per cent had sought help from a trade/business association and a further 10 per cent consulted their local authority.

Table 9.1: Sources of external advice consulted in last 12 monthsxxxv 17

Base = all women-led SME employers / all SME employers who have sought advice


SBS 10



% %

Accountant 33 37

Consultant 17 20

Business Link local services 12 12

Trade/business association 10 7

Local Authority 10 3

Solicitor/lawyer 8 10

A friend/family member 7 3

Bank 7 6

Businesslink.gov.uk website 6 6

Business networks 4 2

Federation of Small Businesses 4 1

Other businesses in industry 4 4

Other specialists, e.g. HR/Marketing 3 4

Websites (general) 3 3


17 This question differs from that used in the ASBS surveys, hence comparisons are not possible.

43

employers in SBS 2010; * = a figure of less than 0.5% but higher than zero

44

9.3 Compared to all SME employers that sought advice, women-led SME employers were more likely to have consulted trade associations, local authorities, friends and family, business networks and the Federation of Small Business.

Business Mentors

9.4 During the course of the 12 months prior to the survey, 15 per cent of women-led SME employers had used a business mentor (i.e. someone with business expertise who provides ongoing support with the development and running of their business). This was a greater proportion than SME employers as whole (11 per cent of whom had used a business mentor).

Table 9.2: Whether used business mentor in last 12 monthsxxxvi

Base = all Women-led SME employers / all SME employers


SBS 10



% %

Yes 15 11

No/don’t know 84 89


9.5 Forty-two per cent of women-led SME employers did some networking in the past 12 months by making time to speak or meet with other businesses or entrepreneurs.

Table 9.3: Whether make time to speak or meet with other businesses/entrepreneursxxxvii

Base = all women-led SME employers / all SME employers


SBS 10

All SME Employers (Feb 2011 Business Barometer)18


% %

Yes 42 41

No 58 59


18 This question was not asked in the mainstage SBS 2010, so the comparison is with the February 2011 Business Barometer.

45


9.6 The majority of women-led SMEs (83 per cent) had not bid for a public sector contract or expressed an interest in bidding in the last 12 months. Larger women-led SME employers were more likely to have done so.

Table 9.4: Whether bid for public sector contractsxxxviii

Base = all women-led SME employers All Women-led SME Employers

SBS 10

Micro (1-9 employees)

Small (10-49 employees)

Medium (50-249 employees)

Un-weighted (n) = 878 506 305 67

% % % %

Bid in the last 12 months 12 11 17 26

Expressed an interest in the last 12 months but not bid

4 3 8 4

Neither of these 83 85 75 69

Don’t know 1 1 * 2

Figures in bold are statistically significant changes between the total column and the sub-groupst

* = a figure of less than 0.5% but more than zero

9.7 Twenty-nine per cent of women-led SME employers had done some work for the public sector in the previous 12 months. Sixteen per cent of women-led SME employers worked for the public sector as the prime contractor (compared with 12 per cent of SME employers as a whole) and 10 per cent did so as part of a supply chain (compared with 19 per cent of SME employers as a whole).

Table 9.5: Work for the public sectorxxxix

Base = all Women-led SME employers/all SME employers Women-

led SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 932 1021 3817

% % % %

YES ANY 29 21 21 30

‐ As prime contractor 16 12

‐ Part of the supply chain only 10 19

‐ Don’t know if prime contractor or supply chain

2

N/A N/A

2

NONE 70 78 78 69

Don’t know/refused 2 1 * 1

Figures in bold are statistically significant at the 95% confidence level between women-led employers and all SME

46

employers in SBS 2010; * = a figure of less than 0.5% but more than zero

47

9.8 Among women-led SME employers that did not bid for public sector contracts (but for whom such contracts would be relevant to their business) 14 per cent said they did not bid because of a lack of knowledge of the process. Thirteen per cent said they did not bid due to the size of their business, and 12 per cent said they were deterred because the process would have taken too much time.

Table 9.6: Barriers to bidding for public sector contracts as part of the supply chainxl

Base = all women-led SME employers for whom public sector business is relevant, but who have not bid for contracts, either as lead or part of the supply chain


SBS 10


%

Lack of knowledge of the process 14

Size of the business 13

Takes too much time 12

Bureaucracy/red-tape 6

No relevant opportunity has arisen 6

Lack of funding 4

Other 9

No barriers 8

Don’t know/can’t think of a reason 31

48

9.9 Women-led SME employers for whom public sector work was relevant were asked what barriers prevented them from selling more to the public sector. Two-thirds of women-led SME employers asked about barriers (66 per cent) said that the effort involved in bidding or pre-qualifying for public sector contracts prevented them from selling more to the public sector. Fifty-five per cent cited exclusion from framework agreements or approved supplier lists as a barrier and 51 per cent cited lack of information about public sector opportunities.

Table 9.7: Barriers to selling more to the public sectorxli

Base = all Women-led SME employers for whom public sector business is relevant Women-led SME Employers

SBS 10


%

Effort involved in bidding or pre-qualifying for public sector contracts 66

Exclusion from framework agreements and approved supplier lists 55

Lack of information about public sector opportunities 51

Lack of understanding of the public sector procurement process 45

Difficulties engaging with prime contractors 42

Lack of consistency in the tendering process 42

Public sector specifications exclude type of business 35

Perceived risk of the public sector dealing with SMEs 34

Post tender debriefing not being helpful 32

Difficulties selling an innovative product 27

Other 5

None of these 12

Don’t know/refused 3

49

ENDNOTES: QUESTIONNAIRE REFERENCES i Q5: And how many years has this firm been trading? This includes under all ownerships and all legal statuses.

ii Q4: What is the legal status of your organisation?

iii Q148: Can you please tell me the approximate turnover of your business in the past 12 months?

iv Q164: How many partners or directors are there in day-to-day control of the business now, including yourself?

v Q158: Is your business a family owned business? (A family business is majority owned by members of the same family)

vi Q153: Is your business VAT registered?

vii Q37: Do you think of your business as a social enterprise, by which I mean a business that has mainly social or environmental aims?

viii Q1a: How many employees does your business currently employ across all sites, excluding owners and partners?; Q11: You said earlier that your business currently employs [INSERT Q1A RESPONSE] people, excluding owners and partners. How many people did the business employ 12 months ago across all sites (still excluding owners and partners)?

ix Q1a: How many employees does your business currently employ across all sites, excluding owners and partners?; Q17: How many people do you expect the business to employ in twelve months time (excluding owners and partners)?

x Q149: Compared with the previous 12 months, has your turnover in the past 12 months increased, decreased or stayed roughly the same?

xi Q151: In the next 12 months do you expect your turnover to increase, decrease, stay roughly the same?

xii Q35: Taking into account all sources of income in the last financial year, did you generate a profit or surplus?

xiii Q36: Do you pay more than 50% of your trading profit or surplus [IF DID NOT/DON’T KNOW/ UNWILLING TO SAY GENERATED A PROFIT IN THE LAST FINANCIAL YEAR when you generate one] to owners/shareholders?

xiv Q49: I’d now like to turn to the future that you foresee for your business. Over the next two to three years, do you aim to grow your business?

xv Q50: Does your business plan to do any of the following over the next two to three years?

xvi Q53a: I’d now like to turn to the range of tasks that you need to do when running a business, and for you to tell me how capable you think your business is at doing them. I’m going to read out a list of business activities and I’d like you to rate your business from 1 to 5, where 1 is rated as very poor and 5 as very strong. You can include in your assessment any external expertise you use to achieve the task.

50

xvii Q86: I’d now like you to think about innovation within your business i.e. new products and processes. Have you introduced new or significantly improved products or services in the past twelve months? xviii Q27: I’d now like to ask you a few questions about the nature of your trading activity. So, first of all, does your business sell goods or services or licence your product outside the UK?

xix Q137: Over the past 12 months, has your business funded or arranged any training and development for staff in the organisation, including any informal on the job training?

xx Q143: Does your business use the Internet for any of the following?

xxi Q53e: What do you think would encourage more women to think about setting up their own businesses?

xxii Q53a: I am now going to read out some statements that have been made about running a business. For each that I read out please tell me the extent to which you agree or disagree

xxiii Q66: Now I’d like to ask you some questions about financing your business. Have you tried to obtain finance for your business in the past 12 months?

xxiv Q77a: Before you applied for finance, how confident were you that you would be successful?

xxv Q77b: Before you applied for finance, did you take any of the following steps to try and ensure you were successful in obtaining finance?

xxvi Q67: I'd like to ask you about this... what did you try to obtain finance for? IF MORE THAN ONCE (Q66/2): I'd like to ask you about the most important of these occasions. What did you try to obtain finance for?

xxvii Q79: Why have you not applied for finance in the last 12 months?

xxviii Q69: What type of finance did you seek? Please include all types of finance including where you failed to obtain it.

xxix Q70: How much finance did you seek?

xxx Q72: Did you have any difficulties in obtaining this finance from the first source you approached?

xxxi Q72: Did you have any difficulties in obtaining this finance from the first source you approached?/Q75: Did you eventually go on to obtain the finance you needed for your business, for example, from another external source?

xxxii Q74: What reasons were given for your application for finance being turned down/for receiving less finance than you sought/having problems raising all the finance?

xxxiii Q56: So, overall, which is the biggest obstacle to the success of your business?

xxxiv Q62: Which regulations do you consider to be an obstacle to the success of the business?

xxxv Q90a: Where have you been for external advice or information on matters affecting your business the last 12 months?

51

xxxvi Q95: In the last 12 months have you used a business mentor – that is somebody with business expertise who supports you through the development and running of your business on a continuous basis?

xxxvii Q97: Do you make time to speak or meet with other businesses or entrepreneurs to get help and advice about running your business?

xxxviii Q131: In the past 12 months have you expressed an interest in or bid for any contract advertised by the public sector?/Q1311i: Have you ever joined forces with another business to bid for public sector work rather than as a lead bidder?

xxxix Q131a: In the past 12 months have you actually done any business for the public sector?/ Q132c: Has any of this work for the public sector in the last 12 months been as the prime contractor or has it only been as part of the supply chain?

xl Q131ii: Is there anything that prevents you from bidding for public sector contracts as part of a supply chain?

xli Q132a2: Which of these, if any, would you say are barriers to you selling more to the public sector?

BIS Small Business Survey 2010 Minority Ethnic Group (MEG) led businesses boost Report prepared for the Department of Business, Innovation and Skills (BIS)

June 2011

i


URN/ © Crown Copyright 2011



Enterprise and Economic Development Analysis BIS Enterprise Directorate 2 St. Paul’s Place 125 Norfolk Street Sheffield S1 2FJ

Email enquiries should be addressed to:


spcunnin

Typewritten Text

11/1079

spcunnin

Typewritten Text

ii

Acknowledgements

The authors would like to thank the BIS Enterprise Directorate Enterprise and Economic Development Analysis for their diligence in checking the figures and data contained in the tables and for general proof reading.

iii

Table of Contents

Acknowledgements........................................................................................................................................ ii

1 Summary ................................................................................................................................................. 1


Business performance.................................................................................................................................. 1

Growth .......................................................................................................................................................... 1




Usage of business support and Government services................................................................................. 3



Survey method.............................................................................................................................................. 4

Note on the report......................................................................................................................................... 5

Statistical confidence.................................................................................................................................... 6


Overall number and size............................................................................................................................... 7

Sector ........................................................................................................................................................... 8

Region .......................................................................................................................................................... 9

Age of business .......................................................................................................................................... 10

Legal status ................................................................................................................................................ 11

Turnover ..................................................................................................................................................... 12

Number of sites........................................................................................................................................... 13

Number of partners/directors...................................................................................................................... 13

Ethnicity of Partners/Directors .................................................................................................................... 15


VAT registration.......................................................................................................................................... 17


4 Business Performance......................................................................................................................... 19

iv


Number of people SME employers expect to employ in 12 months time .................................................. 20

Turnover now compared to 12 months previously ..................................................................................... 21

Profit ........................................................................................................................................................... 22

5 Growth ................................................................................................................................................... 24

Plans for growth.......................................................................................................................................... 24

Extent of plans for achieving future business growth................................................................................. 25


Perceptions of business capability ............................................................................................................. 26

Business capability: Innovation .................................................................................................................. 27

Business capability: Training ...................................................................................................................... 29

Business Capability: Technology................................................................................................................ 29

Encouragement to set up new business .................................................................................................... 31

Attitudes to risk ........................................................................................................................................... 32



Preparations for applying for finance.......................................................................................................... 36



Amount of finance sought........................................................................................................................... 42


8 Obstacles to the success of the business......................................................................................... 46

Biggest obstacle to the success of the business........................................................................................ 46

Overall incidence of obstacles to the success of the business ..................................................................47

Regulations as an obstacle to the success of the business....................................................................... 47


Sources of business advice sought............................................................................................................ 49

Business mentors ....................................................................................................................................... 50

Networking with other entrepreneurs ......................................................................................................... 51


Barriers to bidding for public sector contracts ............................................................................................ 54

1

1 Summary

Profile of businesses

1.1 MEG-led SME businesses are defined as those where at least half of the management team are from a minority ethnic group. Eight per cent of all SME employers were MEG-led according to the Small Business Survey 2010 (SBS).

1.2 Forty-six per cent of MEG-led employers interviewed had a majority of partners or directors of Indian origin, 18 per cent of Pakistani origin and 16 per cent of black origin.

1.3 In terms of size, 88 per cent of MEG-led SME employers were micro businesses (with 1-9 employees), 11 per cent were small businesses (with 10-49 employees) and one per cent were medium businesses (with 50-249 employees).

1.4 The two most common sectors that MEG-led SME employers worked in were wholesale/retail (35 per cent of MEG-led SME employers) and business services (28 per cent).

Business performance

1.5 Sixty per cent of MEG-led SME employers had retained the same amount of staff as 12 months ago, 21 per cent employed more staff, and 19 per cent employed fewer. Turnover remained at roughly the same level as 12 months ago for 41 per cent, increased for 27 per cent, and decreased for 29 per cent. Compared to all SME employers in the SBS, fewer MEG-led businesses had decreased turnover.

1.6 Looking ahead to the next 12 months, 56 per cent of MEG-led SME employers expected to have the same number of staff, 25 per cent expected to employ more, and 18 per cent expected to employ fewer. Compared to all SME employers, MEG-led businesses were more likely to employ fewer staff in 12 months time.

1.7 Forty-three per cent of MEG-led SME employers expected their turnover to increase in 12 months time, 37 per cent predicted it will be at the same level and 14 per cent predicted it will decrease.

Growth

1.8 Three quarters (74 per cent) of MEG-led SME employers were aiming to grow their business over the next two to three years, the same proportion as for all SME employers.

1.9 MEG-led SME employers intended to take a number measures that could increase growth. The most common of these measures being to increase the skills of the workforce (73 per cent), increase turnover by exploiting new markets (66 per cent), increase the leadership capacity of managers (66 per cent) and reduce costs by increasing the productivity of workers (65 per cent). MEG-led employers were more likely to implement these measures than SME employers generally.

2

Business capability

1.10 MEG-led SME employers were asked how capable their management team was at a number of aspects of business management. MEG-led SME employers most frequently felt they were strong at taking decisions on regulation and tax issues (63 per cent), people management (59 per cent) and developing and implementing a business plan and strategy (59 per cent). Twenty-five per cent of MEG-led SME employers rated their management team as being strong at accessing external finance, and 30 per cent rated their business as strong at entering new markets. Compared to SME employers generally, MEG-led employers considered themselves poorer at people management, and stronger at formalised business systems and entering new markets.

1.11 Fifty-four per cent of MEG-led SME employers had introduced new or significantly new products and services over the past 12 months, and 50 per cent had introduced new or significantly new processes. Both these figures were higher than for SME employers generally (47 per cent and 33 per cent respectively).

1.12 Eighteen per cent of MEG-led SME employers reported they exported goods or services outside the UK. This was lower than the figure for SME employers generally, due to the low number of MEG-led employers in the production sector.

Access to finance

1.13 Thirty per cent of MEG-led SME employers interviewed had tried to obtain business finance in the last 12 months, a similar proportion as that for SME employers generally.

1.14 Among those who had applied for finance the main reason was to gain working capital or cashflow (mentioned by 46 per cent of MEG-led SME employers). The next most common reasons were to aquire capital equipment or vehicles (18 per cent), and to make improvements to buildings (13 per cent).

1.15 Among those who had applied for finance the most frequently sought type was a bank loan (53 per cent). A bank overdraft was the next most frequent type of finance sought (26 per cent).

1.16 Sixty-two per cent of MEG-led employers that had applied for finance encountered difficulties with the first source they approached, with 43 per cent being unable to obtain any finance from this first source. This compares with 51 per cent of all SME employers encountering difficulties, and 35 per cent being unable to obtain finance from the first source approached. Overall, 30 per cent of MEG-led employers that applied for finance were unable to gain any finance from any source, which was significantly higher than the 21 per cent observed among all SME employers. The main given reasons for not being able to obtain finance were insufficient security and the recession/credit crunch.


1.17 When prompted with a list of potential obstacles to the success of their business and asked which was the main obstacle, the most frequently mentioned issue was the state of the economy (26 per cent), followed by obtaining finance (15 per cent); competition (13 per cent); and cashflow (11 per cent). Compared to all SME employers, MEG-led businesses were more likely to mention obtaining finance and competition as an obstacle, and less likely to mention the economy and regulations.

3


1.18 Forty per cent of MEG-led SME employers had sought external advice in the 12 months prior to being interviewed. Support had been sought from a wide range of sources with the most frequently mentioned being an accountant (28 per cent), a consultant (14 per cent) and Business Link Local Services (12 per cent).

1.19 Fourteen per cent of MEG-led SME employers had used a business mentor in the last 12 months, and 51 per cent had done some sort of networking activities by making time to speak or meet with other businesses or entrepreneurs to get help or advice about running their business. MEG-led businesses were more likely to have done this than SME employers generally.

1.20 Ten per cent of MEG-led SME employers had bid for contracts advertised by the public sector in the last 12 months. Five per cent had expressed an interest in a contract but had not actually bid for it and four per cent had jointly bid for a public sector contract with another business, but not as the lead contractor.

1.21 Twenty-three per cent of MEG-led SME employers had worked for the public sector in the last 12 months (11 per cent as the prime contractor; nine per cent as part of the supply chain). Compared to SME employers generally, MEG-led employers were less likely to have been part of the supply chain.

1.22 Among the 80 per cent of MEG-led SME employers who had not bid for a public sector contract or expressed an interest in doing so over the past 12 months the most common reason given was the size of the business (22 per cent) followed by a lack of knowledge of the process (11 per cent), bureaucracy/red-tape (seven per cent), lack of funding (five per cent), no relevant opportunity (four per cent), and that the process takes too much time (four per cent).

Survey conducted and report written by IFF Research.

June 2011

Steve Lomax, Director

Lydia Reynolds, Research Manager

John Newton, Research Executive

4

2 Background and aims

Aims of the survey

2.1 This report sets out the key findings from the 2010 Small Business Survey (SBS) Minority Ethnic Group (MEG) led businesses boost.

2.2 The SBS was a large scale telephone survey, comprising 4580 interviews, commissioned by the Department for Business, Innovation and Skills (BIS) as a follow up to the 2007/8 Annual Survey of Small Businesses (ASBS). The mainstage for this was conducted between 2nd July and 7th September 2010 by IFF Research Ltd. The findings, representative of SME employers in the UK, can be found in a separate report1.

2.3 The main aims of the SBS were:

• To monitor key enterprise indicators and how these have changed in comparison to previous surveys. In particular the survey measures characteristics of Small and Medium-sized Enterprises (SMEs2) with employees; such as the proportions which are women and MEG (minority-ethnic) led, and the proportions applying for and obtaining external finance




Survey method

2.4 In addition to the main SBS, BIS commissioned an additional 1,726 interviews with boosts for MEG-led businesses. These interviews resulted in a 1,000 sample size for MEG-led businesses. This report is concerned with the MEG-led businesses.

2.5 MEG-led businesses were found in three separate ways:

• (a) MEG-led SMEs that had taken part in the 07/08 and 06/07 ASBS’s were recalled and asked a full questionnaire. Two hundred and one interviews were gained from this source (189 with employers).

1 http://www.bis.gov.uk/assets/biscore/enterprise/docs/b/11‐p74‐bis‐small‐business‐survey‐2010 2 SMEs are defined as having less than 250 employees.

http://www.bis.gov.uk/assets/biscore/enterprise/docs/b/11-p74-bis-small-business-survey-2010

5

• (b) MEG-led SMEs were free-found via screening from Dun & Bradstreet sourced sample. This sample was structured by size in a similar model to the mainstage SBS (1/6 no employees, 1/3 micro businesses, 1/3 small businesses, 1/6 medium-sized businesses), but skewed towards areas known to have higher than average proportions of residents from ethnic minority backgrounds. Six hundred and eighty one interviews were gained from this source (572 with employers).

• (c) MEG-led SMEs that had taken part in the SBS 2010 were recalled and asked a short questionnaire consisting of new questions, not asked in the mainstage SBS. The data from this interview was then merged with the answers they had given in the mainstage SBS. One hundred and thirty-seven interviews were gained from this source (117 with employers)

2.6 Because of the various skews occurring through the sampling methods, a number of weighting criteria were applied to correct these and make the dataset representative of all MEG-led SME employers, according to the profile achieved in the (weighted) SBS mainstage. The SBS mainstage has itself been weighted to correct size and regional imbalances, using targets derived from the SME Statistics for the UK and Regions 20093 published by BIS. The weighted targets applied to the MEG-led dataset were based upon size, broad sector, region and whether the business was women-led or not4.

Note on the report

2.7 Please note that the findings presented in this report relate to SME employers only. That is to say, those with no employees have been excluded within the dataset reported on. This is consistent with the SBS 2010 reporting and reduces the overall sample size of the MEG-led dataset to 878.

2.8 Also note that the first few tables reported upon in Section 3 of this report (size, sector and region) are based upon the MEG-led businesses found in the mainstage SBS 2010 (248 businesses in total), and not the full MEG-led boost. This is because the MEG-led dataset is weighted according to these strata, and therefore the data are findings from the mainstage and not the boost. Figures for age of business are also based on the mainstage MEG-led SME employers, as the sampling method for the boosts was skewed against newer businesses.

2.9 Comparisons are shown against all SME employers interviewed in the SBS mainstage, and against MEG-led businesses identified in the 07/08 and 06/07 ASBS surveys.

3 http://stats.bis.gov.uk/ed/sme. The figures are drawn from a combination of the Inter Departmental Business Register which contains all businesses operating VAT or PAYE schemes, and the survey‐based Labour Force Survey (LFS) which is the main source for estimating the number of the self‐employed. LFS data is based on the last quarter of 2008 and the first quarter of 2009. 4 This stratum was required because the women‐led and MEG‐led fieldwork occurred concurrently.


6


2.10 The overall sample size is sufficiently large to mean that overall findings for all MEG-led SME employers in the UK can be reported upon with a relatively high degree of statistical reliability. At the overall level, the statistical error for a finding of 50 per cent (the most statistically sensitive or unreliable level of finding) is +/- 3.3 per cent. Sample sizes and standard errors for sub-groups are shown below. Unless stated otherwise, all findings reported are statistically significant.

Table 2.1: Statistical confidence in survey findings5 Base = all MEG-led SME employers in SBS 2010 boost Sample Size Standard Error

All UK 878 +/- 3.3% London 370 +/- 5.1% East Midlands 105 +/- 9.6% West Midlands 107 +/- 9.5% Rest of UK 296 +/- 5.7% Micro (1-9 employees) 590 +/- 4.0% Small (10-49 employees) 236 +/- 6.4% Medium (50-249 employees) 52 +/- 13.6% Primary/production/construction (ABCDEF) 55 +/- 13.2% Wholesale and retail (G) 365 +/- 5.1% Hotels and restaurants (H) 118 +/- 9.0% Transport and communications (I) 49 +/- 14.0% Business services (JK) 95 +/- 10.1% Other services (LMNO) 196 +/- 7.0% MEG-led employers in mainstage SBS 2010 248 +/- 6.2% MEG-led employers in ASBS 07/08 427 +/- 4.7% MEG-led employers in ASBS 06/07 521 +/- 4.3%


7

3 Profile of businesses

3.1 Please note that Tables 3.1-3.4 are based on data from the mainstage 2010 SBS for reasons discussed in the previous chapter.

Overall number and size

3.2 Based on the SME Statistics for the UK and Regions 20096 published by BIS there are 4.8 million enterprises in the UK. Of these, 25 per cent (1.2 million) are employers.

3.3 Eight per cent of SME employers were minority ethnic group (MEG) led, defined as being led by a member of a minority ethnic group or a management team with at least half of its members from minority ethnic groups. This proportion was highest in London, where 28 per cent of SME employers are MEG-led, and lowest in Northern Ireland (0 per cent). For other regions the proportion was between four and 10 per cent.

3.4 The proportion of SME employers in the UK that were MEG-led is the same as that seen in the ASBS 07/08, and only one percent higher than in the ASBS 06/07.

3.5 Eighty-eight per cent of MEG-led SME employers were micro businesses with 1-9 employees, 11 per cent had between 10-49 employees (small businesses), and one per cent had between 50 and 249 employees (medium sized businesses). MEG-led businesses appear slightly smaller on average than SMEs generally, but the finding is not statistically significant.

Table 3.1: Size

Base = all MEG-led SME employers/all SME employers – (SBS mainstage) MEG-led

SME Employers

SBS 10

MEG-led SME Employers

ASBS 07/08


ASBS 06/07


Un-weighted (n) = 248 427 521 3817

% % % %

Micro (1-9 employees) 88 91 90 84

Small (10-49 employees) 11 8 9 14

Medium (50-249 employees) 1 1 1 2

Figures in bold are statistically significant at the 95% confidence level between MEG-led employers and all SME employers in SBS 2010

6 http://stats.bis.gov.uk/ed/sme. The figures are drawn from a combination of the Inter Departmental Business Register which contains all businesses operating VAT or PAYE schemes, and the survey‐based Labour Force Survey (LFS) which is the main source for estimating the number of the self‐employed. LFS data is based on the last quarter of 2008 and the first quarter of 2009.


8

Sector7

3.6 The table below provides a more detailed breakdown of MEG-led SME employers in the SBS 2010 by sector.

Table 3.2: Sector


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 248 427 521 3817

% % % %

Primary (AB) * * 1 3



Wholesale and retail trade, repair of motor vehicles and motorcycles (G)

35 38 36 23



Financial intermediation (J) * 2 2 2

Real estate, renting and business service activities (K)

28 20 15 25

Public administration and defence, compulsory social security/Education (LM)

2 1 2 2


Other community, social and personal activities (O)

4 5 6 7



3.7 Thirty-five per cent of all MEG-led employers were to be found in the wholesale and retail trade sector (which includes motor repair). This compares to just 23 per cent of all SME employers. MEG-led employers were also more likely than average to work in the hotel/restaurant sector (nine per cent compared to five per cent of all SME employers), in transport, storage and communication (seven per cent compared to four per cent of all SME employers), and in health/social work (seven per cent compared to four per cent of all SME employers).

7 The dataset is weighted according to size, broad sector and region

9

3.8 Compared to the ASBS 07/08 the proportion of MEG-led employers in health and social work increased significantly from three to seven per cent.

Region

3.9 Nearly half of all MEG-led employers (46 per cent) were based in London. This is a significant increase of 13 percentage points on the ASBS 07/08. By contrast, the proportion based in the South East decreased from 15 per cent to 6 per cent.

Table 3.3: Region


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 248 427 521 3817

% % % %

East Midlands 4 6 8 7

East of England 8 12 14 10

London 46 33 31 14

North East 4 1 4 3

North West 10 7 9 11

South East 6 15 10 15

South West 4 3 4 10

West Midlands 7 7 8 9

Yorkshire and Humber 5 8 5 8

Scotland 3 5 5 5

Wales 2 3 2 4

Northern Ireland * 0 1 3



10

Age of business

3.10 MEG-led employers tended to have younger businesses than SME employers generally. Three per cent of MEG-led SME employers were less than one year old, compared to one per cent among SME employers. Whereas 40 per cent of all SME employers had businesses aged over 20 years, this only applied to 24 per cent of MEG-led employers.

Table 3.4: Age of businessi


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 248 427 521 3817

% % % %

Less than one 3 5 2 1

1 year 2 2 2 1

2 years 4 2 4 2

3 years 1 3 4 3

4 years 8 4 5 4

5 years 4 6 3 4

6-10 years 22 23 17 18

11-20 years 31 29 30 26

More than 20 years 24 27 33 40




3.11 The survey defines start-ups as those trading for less than four years or those which have changed ownership in the last three years. Based on this definition, 39 per cent of MEG-led businesses were start-ups, which was a much higher proportion than the 14 per cent of all SME employers.

11

Legal status8

3.12 Compared to all SME employers, MEG-led businesses were less likely to be private limited companies (49 per cent, compared to 59 per cent of all SME employers), and were more likely to be sole proprietorships (28 per cent, compared to 19 per cent of all SME employers). However, in this respect the trend was for MEG-led employers to be less likely to be sole proprietors than was the case in ASBS 07/08 (down seven percentage points).

Table 3.5: Legal statusii

Base = all MEG-led SME employers/all SME employers MEG-led

SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

Private limited company (LTD) 49 44 42 59



Private company limited by guarantee 3 2 * 3

Limited liability partnership 2 1 * 2


Public Ltd Company (PLC) 1 1 1 2

Other (e.g. unincorporated associations/ Friendly Society/ Private Unlimited Company/ CIC / trust / charity)

5 * 1 3



3.13 Among start-up MEG-led employers and those formed in the last 10 years 57 per cent were limited companies compared to 42 per cent of those aged more than 10 years. Conversely, only 19 per cent of start-ups were sole proprietorships, compared to 31 per cent of those formed more than 10 years ago.

3.14 Among MEG-led employers, limited companies were most likely to be found in the production sector (77 per cent) and were least likely to be found in the other service sector (38 per cent), where there were a higher than average proportion of companies limited by guarantee (CLGs – nine per cent), and community interest companies (CICs – six per cent). Partnerships were most likely to be found in the transport, retail and distribution sector (19 per cent).

8 From this point onwards, all 2010 data is based upon the Small Business Survey MEG‐led boost

12

Turnover

3.15 MEG-led employers had lower annual turnovers than SME employers generally. Sixteen per cent had a turnover below the VAT threshold of £67,000, compared to 12 per cent of all SME employers. The mean average turnover was below £750,000, compared to more than a million pounds for all SME employers.

Table 3.6: Turnoveriii


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

Less than £67,0009 16 20 13 12

£67,000-£99,999 9 8 7 6

£100,000-£249,999 21 16 16 17

£250,000-£499,999 13 16 20 17

£500,000-£999,999 11 11 8 13

£1,000,000-£1,499,999 4 4 6 7

£1,500.000-£2,800,000 3 2 5 5

£2,800,001-£4,999,99910 2 4

£5,000,000 or more 1 3 4

3


Refused 11 8 11 10

Mean average11 £744,000 £731,000 £906,000 £1,168,000

Median average £207,000 £220,000 £287,000 £345,000


3.16 Thirty per cent of start-up MEG-led employers had a turnover of less than £67,000.

9 In the 07/08 ASBS this was £64,000, in 06/07 it was £61,000 10 In the 07/08 and 06/07 ASBSs the code here was ‘over £2.8 million’ 11 Because of the changes to the precodes the mean and median averages for 07/08 and 06/07 are based on slightly different assumptions from 2010

13

Number of sites

3.17 Eighty-seven per cent of MEG-led employers operated from one site only, 11 per cent from between two and three sites, and only two per cent operate from four or more sites. These figures are consistent with the 2006/07 and 2007/08 ASBS and with the figures for all SME employers in 2010.

Table 3.7: Number of sitesiv


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

1 87 85 89 86

2-3 11 12 10 11

4+ 2 2 * 3

Figures in bold are statistically significant at the 95% confidence level between MEG-led employers and all SME employers in SBS 2010; * = a figure of less than 0.5% but higher than zero


3.18 Forty-seven per cent of MEG-led SME employers only had one director, 38 per cent had two, and the remaining 15 per cent had more than two. Compared with all SME employers, MEG-led SMEs had fewer directors or partners.

Table 3.8 : Number of partners/directorsv

Base = all MEG-led SME employers/all SME employers


SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

1 47 50 52 41

2 38 40 40 39

3 9 6 5 11

4 2 3 3 4

5 to 8 2 1 1 4

9 to 12 1 1 0 1

13+ * * * 1

Figures in bold are statistically significant at the 95% confidence level between MEG-led employers and all SME employers

14

in SBS 2010; * = a figure of less than 0.5% but higher than zero

15

Ethnicity of Partners/Directors

3.19 Nearly half of all MEG-led employers (46 per cent) had partners or directors of Indian origin, 18 per cent had partners/directors of Pakistani origin, and 16 per cent had partners/directors of Black origin. Compared to the ASBS 07/08 there were more partners/directors of Black African and Bangladeshi origin, and fewer of Black Caribbean origin.

Table 3.9: Ethnicity of Partners/Directorsvi 12

Base = all MEG-led SME employers/SME employers giving details of ethnicity MEG-led

SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 788 305 361 3612

% % % %

Indian 46 44 45 3

Pakistani 18 19 15 2

Black African 9 5 4 1

Bangladeshi 9 3 2 *

Black Caribbean 6 10 2 1

Chinese 4 6 7 *

Other Asian 4 6 11 1

Mixed White and Black Caribbean 4 4 3 *

Mixed White and Asian 2 3 5 *

Mixed White and Black African 2 2 3 *

Other Mixed Background 1 2 3 *

Other Black Background * * 1 *

ANY ASIAN 80 77 80 6

ANY BLACK 16 15 7 2

ANY MIXED 9 11 14 1


12 Figures are based only on those giving their own ethnicity (for sole proprietorships), or that of the owners, partners and directors (for multiple management). Those saying ‘other ethnic group’ are excluded, as are those that refuse or do not know the ethnicity. White owners, directors and partners not shown.

16

Family businesses

3.20 Fifty-eight per cent of MEG-led employer SMEs were family businesses, where the majority of the business was owned by members of the same family. This was significantly lower than for all SME employers, and the proportion of MEG-led family businesses has declined since ASBS 07/08 by 13 percentage points.

Table 3.10: Family businessesvii


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

Family owned business 58 71 74 62

Not family owned 42 29 26 38


3.21 MEG-led family businesses were most common in the production (79 per cent) and transport, retail and distribution (76 per cent) sectors, and were least common in other services (43 per cent) and business services (47 per cent). Fifty-one per cent of start-ups were family owned, compared to 67 per cent of those started up over ten years ago.

Table 3.11: Family businesses – by predominant ethnic groupviii

Base = all MEG-led SME employers


SBS 10

Indian Pakistani/ Bangladeshi

Black Other

Un-weighted (n) = 878 364 203 131 180

% % % % %

Family owned business 58 67 57 45 56

Not family owned 42 33 43 55 44

Figures in bold are statistically significant at the 95% confidence level between the total and the sub-groups

3.22 By the predominant ethnic group within a MEG-led business, family businesses were more common where partners/directors were of Indian origin (67 per cent).

17

VAT registration

3.23 Seventy-two per cent of MEG-led employers were VAT registered. This was below the proportion for all SME employers (83 per cent), and mainly explained by the lower turnover of MEG-led businesses. Compared to ASBS 07/08 the proportion of MEG-led SME employers that were VAT registered has decreased significantly by seven percentage points.

Table 3.12: VAT registrationix


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %




3.24 Only 40 per cent of MEG-led employer businesses in the other services sector were VAT registered, and the increase in numbers of MEG-led employers in this sector helps to explain the decline in overall MEG-led employer VAT registrations.

18

Social enterprises

3.25 Thirty per cent of MEG-led employers thought of their business as a social enterprise: a business that has mainly social or environmental aims13. This was significantly more than the equivalent figure for all SME employers. However, only seven per cent corresponded to the BIS definition of a social enterprise14, which was no different than the figure for all SME employers.

Table 3.13: Social Enterprisesx


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

Perceive themselves as a social enterprise 30 34 30 26

Conform to BIS definition of a social enterprise

7 6 4 7


13 This question was not asked to those businesses that pay more than 50% of profits to shareholders. Twenty‐four per cent (weighted) were not asked this question but are still included in the base population.

14 Defined as considering themselves to be a social enterprise, not paying more than 50% of profit or surplus to owners or shareholders, generating more than 25% of income from trading, and having less than 75% of turnover from grants or donations.

19

4 Business Performance

Numbers employed compared to 12 months ago

4.1 Twenty-one per cent of MEG-led SME employers employed more people when surveyed than they did one year ago. This was significantly higher than the 17 per cent of all SME employers that reported an increase, and also significantly higher than the MEG-led figure in the ASBS 07/08. This represents a difference from all SME employers where the proportion employing more staff declined by two percentage points between the ASBS 07/08 and the SBS 2010.

Table 4.1: Numbers Employed Compared to 12 Months Agoxi

Base = all MEG-led SME employers/all SME employers trading for at least one year MEG-led

SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 873 413 510 3779

% % % %


Same as 12m Ago 60 70 68 61

Fewer than 12m Ago 19 14 14 21

Don’t know 1 * 3 *



4.2 Nineteen per cent of MEG-led micro businesses employed more staff when surveyed than 12 months ago, as well as 31 per cent of small MEG-led businesses, and 34 per cent of medium-sized ones. The higher proportion of MEG-led employers employing more staff than was the case for all SME employers is partly explained by the relatively high number of MEG-led start ups15, 33 per cent of which employ more people now than a year ago.

15 Start‐ups are defined as those trading for less than four years, or those that have changed ownership in the last three years. In the case of Table 4.1 those trading for less than one year are excluded.

20

Number of people SME employers expect to employ in 12 months time

4.3 Twenty-five per cent of MEG-led SME employers expected to employ more staff in 12 months time. Fifty-six per cent expected to employ roughly the same numbers, and 18 per cent expected to employ fewer.

4.4 Compared to all SME employers the proportion of MEG-led employers that thought they would employ fewer staff in 12 months time is higher (18 per cent compared to 14 per cent).

Table 4.2: Number of people expecting to employ in 12 months timexii


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3779

% % % %

More in 12m Time 25 26 28 23

Same in 12m Time 56 58 58 62

Fewer in 12m Time 18 15 13 14



4.5 Forty-one per cent of medium-sized MEG-led SMEs thought they would employ more, compared to 32 per cent of small businesses, and 24 per cent of micros. Thirty-seven per cent of start-ups thought they will employ more, compared to just 21 per cent of those aged 10 years or more.

21


4.6 Twenty-seven per cent of MEG-led SME employers reported that turnover was greater when surveyed than it was a year ago, 41 per cent said it was about the same, and a further 29 per cent said it was less.

Table 4.3: Turnover Now Compared to 12 Months Previouslyxiii

Base = all MEG-led SME employers/all SME employers trading for at least one year MEG-led

SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 873 413 510 3779

% % % %


Same as 12m Ago 41 41 35 34

Turnover Lower Now 29 27 26 34



4.7 Compared to all SME employers MEG-led businesses were more likely to have had stable turnover over the past 12 months, and were less likely to have had lower turnover.


4.8 Forty-three per cent of MEG-led SME employers expected to have higher turnover in 12 months time, 37 per cent thought it will be about the same and 14 per cent thought it will be lower. These figures were similar to those for all SME employers.

Table 4.4: Expectations of Turnover in 12 Months Timexiv


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

More than now 43 47 53 41

Same as now 37 30 27 40

Less than now 14 17 14 14



22

4.9 By sector MEG-led businesses in business services were the most likely to expect an increase (52 per cent) in turnover over the next 12 months. Those in transport, retail and distribution (38 per cent) and other services (33 per cent) were the least likely to expect an increase. Fifty-eight per cent of start-ups expected an their turnover to increase over the next 12 months, compared to 37 per cent of those trading for 10 years or longer.

Profit

4.10 Sixty-seven per cent of SME employers generated a profit or surplus in their last financial year. This was significantly less than the 71 per cent who made a profit among all SME employers.

Table 4.5: Whether generated a profit or surplus in the last financial yearxv


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

Yes 67 75 71 71

No 28 18 23 24


Unwilling to answer 2 1 2 4


4.11 Unlike for SME employers as a whole where medium-sized businesses were more likely to make a profit, there were no significant differences for MEG-led employers by size or sector.

23

4.12 Twenty-four per cent of MEG-led employers paid more than 50% of profit or surplus to owners or shareholders, significantly higher than the 19 per cent who did this among all SME employers. This is in spite of the relatively high numbers of other service businesses among MEG-led employers, only 13 per cent of which paid more than 50% of profit or suplus to owners or shareholders. However, 28 per cent of MEG-led transport, retail and distribution businesses paid more than 50% of profit to owners or shareholders, which compares with only 16 per cent in this sector for all SME employers.

Table 4.6: Whether pay more than 50% of profit or surplus to owners or shareholdersxvi


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

Yes 24 21 27 19

No 67 69 64 72

Have never generated a profit or surplus 1 2 4 2


Unwilling to answer * 1 * 1



24

5 Growth

Plans for growth

5.1 Seventy four per cent of MEG-led SME employers were aim to grow their business over the next two to three years, the same proportion as for all SME employers. Compared to the ASBS 07/08 this is a significant increase of six percentage points.

Table 5.1: Whether aim to grow business over the next two or three yearsxvii


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

Yes 74 68 69 74

No 26 32 31 26


5.2 Least likely to be aiming to grow were those in transport, retail and distribution (68 per cent). No other sector was more likely than average to want to grow. Eighty-nine per cent of medium-sized businesses were aiming to grow, compared to 78 per cent of small ones, and 73 per cent of micros. Eighty-six per cent of start-ups wanted to grow compared to 66 per cent of those trading for over 10 years.

25


Table 5.2: Extent of plans for achieving future growthxviii Base = all MEG-led SME employers/all SME employers MEG-led SME

Employers

SBS 10



% % Increase the skills of the workforce 73 66

Increase turnover by exploiting new markets 66 63

Increase the leadership capability of managers 66 51

Reduce costs by increasing the productivity of workers 65 61

Employ more staff 62 50

Develop new products 50 44

None of these 8 8


5.3 Seventy-three per cent of MEG-led SME employers intended to increase the skills of their workforce in the next two to three years, 65 per cent intended to reduce costs by increasing the productivity of their workers, and 66 per cent intended to increase the leadership capability of their managers. Sixty-six per cent of SME employers intended to increase their turnover by exploiting new markets, and 50 per cent intended to develop new products.

5.4 With the exception of exploiting new markets, these proportions were all significantly higher than the equivalent figures for all SME employers. Yet the proportion not intending to implement any of these strategies is the same for both groups, indicating that MEG-led employers were more likely than SME employers generally to intend to do a multiple of these actions.

5.5 As was the case for all SME employers, larger MEG-led SME employers were much more likely to want to implement these strategies than the smaller ones.

5.6 MEG-led businesses in the production sector were more likely than average to want to exploit new markets (89 per cent), employ more staff (79 per cent) and develop new products (74 per cent). Business and other services were more likely than average to want to increase leadership capability (76 per cent), and other services were more likely than average to want to increase workforce skills (85 per cent). Transport, retail and distribution businesses were more likely than average to be doing none of these things (12 per cent).

26

6 Business capability

Perceptions of business capability

6.1 Respondents were asked how capable they felt their business was at a number of tasks which have been linked to running a successful business. Respondents answered on a five point numeric scale, with a score of one to two indicating they were poor at the task, and a score of four to five indicating they thought they were strong.

Table 6.1: Perception of whether the business is strong or poor at business activitiesxix

Base = all MEG-led SME employers/all SME employers MEG-led SME Employers

SBS 10



% % %

Strong 63 63 Taking decisions on regulation and tax issues Poor 10 9

Strong 59 59 People management, such as recruitment and delegation Poor 13 10

Strong 59 56 Developing and implementing a business plan and strategy Poor 10 14

Strong 50 53 Operational improvement

Poor 13 11

Strong 40 42 Developing and introducing new products or services Poor 24 21

Strong 46 41 Using formalised business systems such as customer information records Poor 19 26

Strong 30 26 Entering new markets

Poor 30 34

Strong 25 25 Accessing external finance

Poor 38 38


27

6.2 Areas of strength for MEG-led employers in comparison to all SME employers were using formalised business systems (46 per cent) and entering new markets (30 per cent). On the other hand they were more likely to consider themselves poor at people management (13 per cent).

Business capability: Innovation

6.3 Fifty-four per cent of MEG-led SME employers had introduced new or significantly improved products or services in the past 12 months, 50 per cent had introduced significantly improved processes. Both these proportions were significantly higher than the equivalent figures among all SME employers.

Table 6.2: Whether SMEs have introduced new or significantly improved products, services or processes in the past twelve monthsxx


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 42816 427 521 1904

% % % %

Significantly improved products or services 54 46 54 47

Significantly improved processes 50 34 38 33

Neither 37 45 37 44


6.4 The proportions were also significantly higher than they were in the ASBS 07/08.

6.5 Larger MEG-led employers were more likely to have introduced new or improved products or services than smaller businesses (67 per cent of mediums, 65 per cent of small, 52 per cent of micros). However, there were no significant differences according to sector or age of the business.

6.6 For processes, the larger MEG-led employers were more likely to have made these changes (75 per cent of mediums, 61 per cent of small, 48 per cent of micros). The other services sector was the most likely to have made these changes (60 per cent) and transport, retail and distribution the least likely (39 per cent).

16 This question and selected others were only asked of half the sample.

28

Business capability: Exporting

6.7 Eighteen per cent of MEG-led employers exported outside of the UK. This was significantly lower than the 23 per cent that did this among all SME employers.

Table 6.3: Whether sell goods or services or licence products outside the UKxxi


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

Yes 18 22 23 23

No 82 78 77 77


6.8 The reason for this is largely related to the fact that there were relatively few MEG-led employers in the production sector compared to all SME employers, as this was the sector most likely to export (48 per cent for MEG-led, 42 per cent for all SME employers). Twenty-two per cent of MEG-led businesses in the business services sector exported (compared to 29 per cent for all SME employers), 14 per cent of transport, retail and distribution (compared with 18 per cent) and 7 per cent of other services (compared with 14 per cent).

6.9 Unlike all SME employers where older businesses aged 10+ years were more likely to export, there were no differences with MEG-led employers according to the age of the business, or even by the size of the business.

6.10 The proportion of MEG-led employers exporting has not changed significantly since ASBS 07/08.

6.11 Seven per cent of MEG-led employers that did not currently export plan to do so in the next 12 months, which was significantly higher than the 4 per cent seen for all SME employers. This proportion was highest for those businesses aged 4-10 years (12 per cent).

29

Business capability: Training

6.12 Fifty-six per cent of MEG-led SME employers had arranged or funded training or development for staff in the past 12 months, a similar proportion to all SME employers, but a nine point significant increase on the ASBS 07/08.

Table 6.4: Whether businesses have arranged or funded training or development for staff in the past 12 monthsxxii


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 445 427 521 1937

% % % %

Yes 56 47 49 60

No 44 53 51 40


6.13 As was also the case for all SME employers, this was most likely to have occurred in the business services (67 per cent) and other services sectors (79 per cent) and least likely in the transport, retail and distribution (33 per cent) sector. Small (87 per cent) and medium sized (85 per cent) MEG-led SME employers were much more likely to have done this than micros (52 per cent).

Business Capability: Technology

6.14 MEG-led SME employers were asked whether they used the internet for a range of business purposes. The larger the business the greater likelihood of the internet being used, the exception being for paying taxes online and seeking advice online.

Table 6.5: Uses for the internetxxiii

Base = all MEG-led SME employers/all SME employers MEG-led SME Employers

SBS 10



% %

Paying taxes online 59 70

Promoting your goods and services through a website 53 67

Seeking general business advice 47 51

Advice on regulation 46 57

Selling goods and services through a website 31 39

None of these 15 8

Figures in bold are statistically significant at the 95% confidence level between MEG-led employers and all SME employers

30

in SBS 2010

31

6.15 Compared to all SME employers, MEG-led businesses were less likely to use the internet except for seeking general business advice. This is explained by the high numbers of transport, retail and distribution businesses among MEG-led employers, 23 per cent of whom do not use the internet for any of these purposes.

Encouragement to set up new business

6.16 MEG-led employers were asked what would encourage more people from ethnic minorities to start up in business.

6.17 The main answer was more financial assistance or funding to start a business. Twelve per cent cited better education and training, a further 12 per cent more information and advice on how to start a business, and 11 per cent more Government help.

Table 6.6: What would encourage more people from ethnic minorities to set up in business – by predominant ethnic groupxxiv

Base = all MEG-led SME employers MEG-led SME Employers

SBS 10

Indian Pakistani/Bangla-deshi

Black Other

Un-weighted (n) = 878 364 203 131 180

% % % % %

Financial assistance/funding to start a business

26 23 27 31 25

Better education/training 12 6 18 14 14

More information and advice on how to start a business

12 11 14 15 11

More Government help (generally) 11 8 11 15 14

Better business networks 6 4 7 4 11

More lending from banks 6 10 4 2 3

The same as for non-minorities 5 9 1 2 6

More ethnic minority business people role models

4 2 1 10 5

More support generally 4 4 6 6 2

Increased confidence 4 3 2 9 2

Tax breaks/lower taxes 3 1 3 4 7

Less red tape/regulations 2 3 3 2 1

Improved advice on employment law

1 2 1 * 1

Other 10 11 8 9 11

Nothing 6 8 3 2 8

Don’t know/can’t think of anything 25 32 25 19 20


32

6.18 There were some differences according to the predominant ethnic group among business partners and directors. Indian-led businesses were more likely than average to mention bank lending (10 per cent) and also to say that MEG-led businesses do not need special treatment (nine per cent). Pakistani and Bangladeshi-led businesses were more likely to mention better education and training (18 per cent). Black-led businesses were more likely to mention having more business people as role models (10 per cent), and increased confidence (nine per cent).

6.19 Better education and training was more likely than average to be mentioned by medium sized MEG-led businesses (21 per cent), as was less red tape/regulations (seven per cent). Businesses in the business services sector were more likely than average to mention more advice on how to set up in business (17 per cent). Other services businesses were more likely than average to mention better education and training (17 per cent) and financial assistance (33 per cent).

Attitudes to risk

6.20 MEG-led employers were asked to agree or disagree with a number of questions concerning their attitudes to risk. These question were not asked in the mainstage SBS of all SME employers, but were asked of individuals in the 2005 Household Survey of Entrepreneurship (HSE) – Ethnic research Supplement17.

Table 6.7: Attitudes to risk – by predominant ethnic groupxxv

Base = all MEG-led SME employers All MEG-led SME Employers


Black Other

Un-weighted (n) = 878 364 203 131 180

% % % % % %

Agree 86 87 82 90 84 People who start and fail at business deserve a second chance (except in the cases of fraud or malpractice)

Disagree 9 9 9 8 8

Agree 75 76 76 75 72 I enjoy the challenge of

situations that many consider risky Disagree 14 11 17 15 16

Agree 73 70 77 75 75 I am scared of being in debt

Disagree 19 19 20 17 20

Agree 63 62 66 58 66 I would rather work for a small than a large business Disagree 17 19 15 14 18 I fear failure in business Agree 50 47 53 53 49

17 www.bis.gov.uk/files/file46963.doc

http://www.bis.gov.uk/files/file46963.doc

33

Disagree 40 44 37 35 40


6.21 Eighty-six per cent of MEG-led employers agreed that people who start and fail at business deserve a second chance (except in the cases of fraud or malpractice), whilst nine per cent disagreed. Start-up businesses (13 per cent) and those businesses working in the other services sector (15 per cent) were significantly more likely to disagree.

6.22 Seventy-five per cent of MEG-led employers agreed that they enjoy the challenge of situations that many find risky, whilst 14 per cent disagreed. Medium and small businesses were more likely to agree than micros (83 per cent of mediums, 81 per cent of smalls, 74 per cent of micros).

6.23 Seventy-three per cent agreed that they are scared of being in debt, whilst 19 per cent disagreed. Micro businesses were more likely to agree with this than small or medium-sized ones (74 per cent of micros, 66 per cent of small and medium). Start-ups (25 per cent) and those in transport, retail and distribution (23 per cent) were significantly more likely than average to disagree.

6.24 Sixty-three per cent agreed that they would rather work for a small than a large business, while 17 per cent disagreed. Interestingly, those working for medium sized businesses were more likely to agree than those working for micros (72 per cent compared with 64 per cent).

6.25 Fifty per cent feared failure in business, whilst 40 per cent disagreed with the sentiment. There were no trends in responses according to size or sector.

In Table 6.8: Attitude to risk on investment – by predominant ethnic groupxxvi


SBS 10


Black Other

Un-weighted (n) = 878 364 203 131 180

% % % % %

Prefer high risk/high returns 7 6 8 10 5

Prefer medium risk/medium returns 73 74 67 73 75

Prefer no risk/low returns 19 19 24 16 18

Don’t know/refused 1 * 2 1 3


6.26 Respondents were asked whether they would prefer to make high, medium or low risk investments should they receive a windfall of £50,000. This is another question that has not been asked in the SBS or previous ASBSs, but was asked in the Household Survey of Entrepreneurship.

6.27 Most MEG-led employers had a preference for medium risk investments (73 per cent), with only seven per cent preferring high risk (and potentially high return) investments.

34

6.28 There were few trends according to size or sector, but those in the transport, retail and distribution sector were the most likely to prefer a low risk (24 per cent) investment.

35

7 Access to finance

Whether sought finance in the last 12 months

7.1 Thirty per cent of MEG-led SME employers tried to obtain finance for their business in the 12 months preceding interview: 20 per cent having sought it once, and ten per cent more than once. These proportions were similar to those seen for all SME employers, but were significantly higher than those seen for MEG-led employers in the ASBS 07/08.

Table 7.1: Whether Sought Finance in the Last 12 Monthsxxvii


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

YES – ANY 30 22 26 26

‐ Once 20 15 15 17

‐ More 10 6 11 9

NO 69 77 73 72



7.2 As was the case for all SME employers, finance was more likely to be sought by the larger MEG-led SME employers. Forty-two per cent of small businesses, and 36 per cent of medium sized businesses sought finance, compared to 28 per cent of micros.

7.3 By sector finance was less likely to be sought by those in the transport, retail and distribution sector (26 per cent). There was no difference according to the age of the business.

36

Preparations for applying for finance

7.4 Forty-seven per cent of those that applied for finance were very confident of success before they applied, with a further 32 per cent being fairly confident. There were no significant differences in the levels of confidence by sub-group.

7.5 This question was not asked in the mainstage SBS, but has been asked in the Business Barometer series of surveys18. Overall there were no significant differences in the confidence levels of MEG-led businesses compared to SME employers generally.

Table 7.2: Confidence in success before applying for financexxviii

Base = all MEG-led SME employers that applied for finance/all SME employers that applied for finance MEG-led Employers

SBS 10



% %

Very confident 47 40

Fairly confident 32 40

Not very confident 12 9

Not at all confident 7 8

Don’t know 2 3 Figures in bold are statistically significant at the 95% confidence level between MEG-led employers in the SBS 2010 boost and all SME employers in the February Business Barometer * = a figure of less than 0.5% but higher than zero

7.6 MEG-led businesses were asked whether they had taken any of a number of steps to ensure success in obtaining finance, prior to application.

Table 7.3: Steps taken in order to ensure success in obtaining financexxix

Base = all MEG-led SME employers that applied for finance/all SME employers that applied for finance


SBS 10



% %

Up to date business plan 70 44

Received advice from bank 67 49

Business plan looked over by a professional adviser

45 26

Spoke to other businesses to get their advice 38 17

Read business websites 32 20

Took a course in business finance 22 6

None of these 7 33

Figures in bold are statistically significant at the 95% confidence level between MEG-led employers in the SBS 2010 boost and all SME employers in the February Business Barometer; * = a figure of less than 0.5% but higher than zero

18 A regular survey of 500 SME employers, occurring approximately every 2‐3 months from December 2008 onwards.

38

7.7 MEG-led employers were significantly more likely to undertake at least one of these actions than SME employers generally. In particular MEG-led businesses applying for finance were more likely to have had an up to date business plan (70 per cent) and to have received advice from their bank (67 per cent) before applying for finance. Start up businesses were more likely than other MEG-led employers to have had their business plan looked over by a professional adviser (58 per cent) or to have spoken to other businesses to get their advice (also 58 per cent).


7.8 Forty-six per cent of MEG-led SME employers that applied for finance did so in order to gain working capital or cashflow. Although this was the main reason for applying for finance, the proportion was significantly lower than for all SME employers.

Table 7.4: Reasons for Applying for Financexxx

Base = all MEG-led SME employers/ all SME employers who applied for finance in the last 12 months


SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 264 109 160 1193

% % % %

Working capital, cashflow 46 49 39 56

Capital equipment or vehicles 18 12 21 21

Improving buildings 13 11 11 9

Buying land or buildings 9 18 12 10

Marketing 6 0 0 2

Business expansion/growth 4 4 6 1

Research & Development 2 9 4 2

Buying another business 2 * 2 2

Training/Staff Development 2 3 3 1

Management buy out * 0 1 1

Other 6 1 5 2

Don’t know/refused 1 0 4 *

Figures in bold are statistically significant at the 95% confidence level between MEG-led employers and all SME employers in SBS 2010 ; * = a figure of less than 0.5% but higher than zero

7.9 The other main reasons for applying for finance were to buy capital equipment or vehicles (18 per cent), improving buildings (13 per cent) and buying land or buildings (nine per cent). Compared to all SME employers, MEG-led businesses are significantly more likely to apply for finance for marketing and business expansion.

7.10 Compared to the ASBS 07/08 MEG-led SME employers that applied for finance were less likely to want it to buy land/buildings or for R&D, and were more likely to want it for marketing.

40

7.11 Of the majority of MEG-led SME employers that did not seek finance, the predominant reason was that finance was not needed. This was the main reason given by all sizes and sectors. However, the proportion of MEG-led employers citing this reason was lower than was the case for all SME employers in the mainstage SBS.

Table 7.5: Reasons For Not Applying for Finance in the Last 12 Monthsxxxi

Base = all MEG-led SME employers/ all SME employers who did not apply for finance in the last 12 months


SBS 10



% %

Not needed it 77 82

Did not want to take on additional risk 8 5

Thought would be rejected 5 4

Thought it would be too expensive 4 4

Other reason 5 3

Don’t know 3 2


7.12 Eight per cent of MEG-led businesses that did not apply for finance said this was because they did not want to take on additional risk. This was significantly higher than was the case for all SME employers.

7.13 Five per cent of these MEG-led employers did not apply for finance as they thought they would be rejected. This was most likely to be the case in the transport, retail and distribution sector (10 per cent).

41


7.14 Of those MEG-led SME employers that applied for finance, 53 per cent applied for a bank loan and 26 per cent a bank overdraft. Eight per cent sought a grant, and seven per cent sought factoring/invoice discounting.

Table 7.6: Type of Finance Soughtxxxii



SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 264 109 160 1193

% % % %

Bank loan 53 43 47 40

Bank overdraft 26 21 24 35

Grant 8 12 4 9

Factoring/invoice discounting 7 * 1 2

Leasing or hire purchase 4 1 9 9

Mortgage 4 12 9 6

Loan from family/business 1 1 3 3

Equity finance 1 3 2 1

Government guaranteed loan * 2 2 2

Other 6 11 11 10


Figures in bold are statistically significant at the 95% confidence level between MEG-led employers and all SME employers in SBS 2010 ; * = a figure of less than 0.5% but higher than zero

7.15 Compared with all SME employers, bank loans were more likely to be sought by MEG-led employers, and overdrafts less likely. In addition, factoring/invoice discounting was more likely to be sought, and leasing/hire purchase less likely.

7.16 Among those that sought finance, most likely to apply for bank loans were those in the transport, retail and distribution sector (62 per cent). Thirty-five per cent of SME employers in the other services sector applied for grants.

42


7.17 Thirteen per cent of those seeking finance sought less than £10,000, with only two per cent seeking more than £1 million. The mean average amount of finance sought was just over £160,000, with the median £37,500. Compared with all SME employers, the sums of money sought were slightly less.

Table 7.7: Amount of Finance Soughtxxxiii



SBS 10



% %

Less than £10,000 13 18

£10,000-£24,999 26 23

£25,000-£49,000 10 14

£50,000-£99,999 19 11

£100,000-£249,999 10 11

£250,000-£499,999 5 6

£500,000-£999,999 2 4

£1 million or more 2 5


Mean Average £160,500 £240,450

Median Average £37,500 £41,000


43


7.18 Forty-three per cent of MEG-led employers that tried to obtain finance were unable to obtain any from the first source they approached. Fourteen per cent obtained some from the first source but not all of the money they required, whilst four per cent obtained all they needed but with some problems. This equates to 62 per cent of MEG-led employers that sought finance in the last 12 months having had difficulties obtaining finance from the first source approached, which equates to 19 per cent of all MEG-led SME employers.

Table 7.8: Any Difficulty Obtaining Finance from First Source Approachedxxxiv



SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 264 109 160 1193

% % % %

ANY DIFFICULTY 62 32 37 51

‐ Unable to obtain any finance 43 16 22 35

‐ Obtained some but not all the finance required

14 6 7 7

‐ Obtained all the finance required but with some problems

4 9 8 9

NO DIFFICULTY 35 68 61 47




7.19 These proportions were much higher than for SME employers generally. Whilst 47 per cent of all SME employers encountered no problems with their first application, this was only the case for 35 per cent of MEG-led employers. The proportion encountering difficulties obtaining finance from the first source approached was nearly twice that seen in ASBS 07/08 for MEG-led employers.

7.20 Difficulties with the first source approached occurred among all sizes and most sectors. Businesses in the other services sector were more likely than average not to encounter any problems obtaining finance from the first source approached (46 per cent).

7.21 Difficulties with the first source approached were most likely to be encountered when applying for bank overdrafts (71 per cent) and bank loans (64 per cent). Difficulties were less common when applying for factoring/invoice discounting (55 per cent) or grants (54 per cent). With grants, applicants were more likely to be offered some but not all of the money, than to be rejected completely by the first source.

44

7.22 Of those that did not obtain any finance from the first source they approached, or who only got some of the money they needed, some went on to get all the finance they needed from another source. Overall therefore, the outcomes of MEG-led SME employers that sought finance are as follows:

• 53 per cent (16 per cent of all MEG-led SME employers) obtained all the finance they required

• 13 per cent (4 per cent of all MEG-led SME employers) obtained some but not all of the finance they required

• 30 per cent (9 per cent of all MEG-led SME employers) did not obtain any of the finance sought

Table 7.9: Eventual outcome of application for financexxxv



SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 264 109 160 1193

% % % %

OBTAINED ALL THEY NEEDED 53 90 79 68

‐ From first source 39 77 69 56

‐ From another source 14 12 10 11

OBTAINED SOME, BUT NOT ALL 13 * 4 6

OBTAINED NONE 30 10 15 21



7.23 The overall proportion of MEG-led employers that was unsuccessful in obtaining finance was significantly higher than for all SME employers, and significantly higher than that seen in the ASBS 07/08.

7.24 The table overleaf shows the reasons given for the difficulties in obtaining finance from the first source approached. Most commonly respondents claimed that no reason was given for this. Thereafter, insufficient security was cited as the most common reason. This was also the most common reason among all SME employers that had difficulties obtaining finance.

45

Table 7.10: Reasons for Difficulties Arranging Finance (Unprompted)xxxvi

Base = all MEG-led SME employers /all SME employers who had difficulties arranging finance in the last 12 months


SBS 10



% %

No reason given 16 24


Recession/current credit climate 10 6

Banks prefer to lend to other types of business 10 N/A19

Lacked confidence in the meeting 6 N/A

Didn’t meet criteria 5 5

No credit history/not been in business long enough

5 2


Poor personal credit history 4 1

Rejected terms of finance offered 4 5

Decision still pending 4 2

Too many applicants for grant 4 0


Too many outstanding loans/mortgages 3 1

No security 3 2


Bank withdrew existing finance 1 *

Business too small/too new * 2

Inadequate business plan 1 1

Other 11 10



19 N/A indicates that these answers did not appear as mainstage questionnaire precodes.

46


Biggest obstacle to the success of the business

8.1 When prompted, around a quarter (26 per cent) of MEG-led SME employers said that the state of the economy was the main obstacle to the success of their business, marking a significant rise on the 2007/08 and 2006/2007 ASBSs (17 per cent and 8 per cent respectively). However, compared to all SME employers, MEG-led employers were less likely to mention this.

Table 8.1: Main Obstacle to the Success of the Businessxxxvii


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

The Economy 26 17 8 33

Obtaining finance 15 4 6 8

Competition 13 18 20 10

Cashflow 11 11 10 11

Taxation, VAT, PAYE, NI, rates 9 11 10 8

Regulations 5 11 9 7

Recruiting staff 3 6 6 2



8.2 MEG-led employers were more likely than SME employers generally to mention obtaining finance (15 per cent) and competition (13 per cent) as the main obstacle to their businesses’ success. Compared to the ASBS 07/08 obtaining finance was significantly more likely to be cited as the main obstacle to business sucess, and competition and regulations were significantly less likely to be so.

8.3 Obtaining finance was most likely to be the main obstacle for those in the business service sector (20 per cent), and competition was most likely to be the main obstacle in the transport, retail and distribution sector (18 per cent).

47

Overall incidence of obstacles to the success of the business

8.4 Many MEG-led SME employers reported additional obstacles to success (either spontaneously or on a prompted basis). When results for all obstacles are combined, the most frequently reported obstacles in 2010 were:

• the economy (80 per cent, compared with 81 per cent for all SME employers)

• competition (62 per cent, compared with 58 per cent for all SME employers)

• obtaining finance (60 per cent, compared with 39 per cent for all SME employers)

• cash flow (62 per cent, compared with 49 per cent for all SME employers)

• taxation, VAT, PAYE, national insurance, business rates (55 per cent, compared with 50 per cent for all SME employers)

• regulations (51 per cent, compared with 47 per cent for all SME employers)

8.5 For MEG-led employers taxation was most likely to be an obstacle for the transport, retail and distribution sector (62 per cent).

Regulations as an obstacle to the success of the business

8.6 Where employers reported regulations as an obstacle to business success, they were asked which specific regulations they considered to be obstacles, and in what ways.

Table 8.2: Regulations considered to be obstacles to business successxxxviii

Base = all MEG-led SME employers/ all SME employers considering regulations an obstacle to business success


SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 451 247 308 1917

% % % %

Tax-related 28 24 17 20

Health and safety 19 24 25 35

Sector specific 19 14 11 16

Employment 14 13 16 14

Planning, development, etc. 3 6 8 7

Environmental 4 7 5 7

No specific regulations or all regulations 11 8 14 11



48

8.7 Most likely to be mentioned by MEG-led employers was tax-related regulations (28 per cent), followed by health and safety (19 per cent) and sector specific regulations (19 per cent). This is in contrast to all SME employers for whom health and safety was the regulation most likely to be mentioned as an obstacle to business success (35 per cent).

8.8 Tax was most likely to be cited as an obstacle by business services (36 per cent), sector specific regulations by those in other services (29 per cent).

8.9 Those in production were more likely than average to mention environmental regulations (13 per cent, compared to three per cent average), minimum wage regulations (11 per cent, compared to three per cent average), and pensions (seven per cent, compared to one per cent average).

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9.1 Over the year prior to the survey, 40 per cent of MEG-led SME employers had sought external advice or information on matters affecting their business. This was significantly lower than the 49 per cent that had sought advice among all SME employers.

Table 9.1: Sources of external advice consulted in last 12 monthsxxxix 20

Base = all MEG-led SME employers / all SME employers who had sought advice

MEG-led SME Employers SBS 10



% %

Accountant 28 37

Consultant 14 20

Business Link local services 12 12

Trade/business association 8 7

Solicitor/lawyer 7 10

Business networks 7 2

Local Authority 7 3

A friend/family member 7 3

Other businesses in industry 4 4

Other specialists, e.g. HR/Marketing 4 4

Websites (general) 4 3

Surveyors/Estate Agents 4 3

Bank 3 6

Businesslink.gov.uk website 3 6

BIS 2 3

HMRC 2 3

Chamber of Commerce 1 3

An Enterprise Agency 1 3

Health and Safety Executive 1 2 Figures in bold are statistically significant at the 95% confidence level between MEG-led employers and all SME employers in SBS 2010; * = a figure of less than 0.5% but higher than zero

20 This question differs from that used in the ASBS surveys, hence comparisons are not possible.

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9.2 Thirty-nine per cent of MEG-led micro businesses had sought such advice, 49 per cent of small businesses, and 66 per cent of medium sized ones.

9.3 By sector, SME employers operating in business services (50 per cent) and other services (47 per cent) were particularly likely to have sought advice, with transport, retail and distribution the least likely (28 per cent). The same pattern was also observed among all SME employers.

9.4 Fifty-one per cent of start-ups had sought advice compared with 37 per cent of those aged 10 years or more.

9.5 Of those who had sought advice, accountants were the most commonly mentioned source (28 per cent of all MEG-led employers). These were followed by consultants (14 per cent). For both of these, MEG-led employers were less likely to consult them than all SME employers that sought advice.

9.6 Consultants were more likely to be used by medium sized businesses (42 per cent).

9.7 Compared with all SME employers, MEG-led businesses were more likely to have gone to business networks (seven per cent, compared to two per cent of all SME employers), local authorities (seven per cent compared to three per cent) and friends/family members (seven per cent compared to three per cent).

Business mentors

9.8 During the course of the 12 months prior to the survey, fourteen per cent of MEG-led SME employers had used a business mentor, a higher proportion than for all SME employers (11 per cent). This was most common for MEG-led business services (19 per cent), and least common in transport, retail and distribution (nine per cent). There were no significant differences by size.

Table 9.2: Whether used business mentor in last 12 monthsxl

Base = all MEG-led SME employers / all SME employers


SBS 10



% %

Yes 14 11

No/don’t know 86 89


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Networking with other entrepreneurs

9.9 Fifty-one per cent of MEG-led SME employers had made time to speak or meet with other businesses or entrepreneurs to get help and advice about running their businesses. In comparison with the February 2011 Business Barometer (the question was not asked in the SBS mainstage), this was a higher proportion than for all SME employers.

Table 9.3: Whether make time to speak or meet with other businesses/entrepreneursxli

Base = all MEG-led SME employers / all SME employers


SBS 10



% %

Yes 51 41

No 49 59


9.10 Among MEG-led SME employers, those in business services were most likely to do this (63 per cent), with those in transport, retail and distribution the least likely (42 per cent). There were no differences according to size of business.

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9.11 In the 12 months preceding interview, ten per cent of MEG-led SME employers had bid for contracts advertised by the public sector. A further five per cent had expressed an interest but not bid, and four per cent had joined forces with another business to bid for this type of work, but not as the lead contractor.

Table 9.4: Whether bid for public sector contractsxlii


SBS 10


Small (10-49 employees)

Medium (50-249 employees)

Un-weighted (n) = 878 590 236 52

% % % %

Bid in the last 12 months 10 9 16 28

Expressed an interest in the last 12 months but not bid

5 4 8 18

Have ever joined forces with another business to bid for public sector work (not as lead bidder)

4 4 6 1

None of these 80 82 70 53

Figures in bold are statistically significant changes between the 2010 SBS (all employers) and 2010 SBS MEG-led boost

* = a figure of less than 0.5% but more than zero

9.12 Larger MEG-led SMEs were more likely to have bid or expressed an interest but not bid (among mediums, 28 per cent had bid, and a further 18 per cent had expressed an interest but not bid).

9.13 By sector, 17 per cent of business services had made a bid, but only two per cent of MEG-led employers in the transport, retail and distribution sector.

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9.14 Twenty-three per cent of MEG-led employers had worked for the public sector in the 12 months preceding interview. This is lower than the 30 per cent of all SME employers who reported this.

Table 9.5: Worked for the public sector in past 12 monthsxliii


SME Employers

SBS 10


ASBS 07/08


ASBS 06/07


Un-weighted (n) = 878 427 521 3817

% % % %

YES ANY 23 19 16 30

‐ As prime contractor 11 12

‐ Part of the supply chain only 9 19

‐ Don’t know if prime contractor or supply chain

2

N/A N/A

2

NONE 77 80 83 69

Don’t know/refused * * * 1



9.15 Eleven per cent of MEG-led SME employers had worked for the public sector as a prime contractor, about the same proportion as for all SMEs. The difference between the two groups comes when working for the public sector as part of the supply chain. Whereas 19 per cent of all SME employers had done this in the 12 months preceding interview, this was only the case among 9 per cent of MEG-led employers.

9.16 Forty-seven per cent of MEG-led medium sized businesses had worked for the public sector in the 12 months preceding interview, compared to 34 per cent of small ones, and 21 per cent of the micros. Businesses in other services were the most likely to have done so (38 per cent), those in transport, retail and distribution the least likely (11 per cent).

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Barriers to bidding for public sector contracts

9.17 Among those MEG-led employers that had not bid or expressed interest in public sector contracts in the 12 months before interview, 27 per cent considered public sector contracts relevant. These were asked whether there was anything that prevented them from bidding for public sector contracts as part of a supply chain.

Table 9.6: Barriers to bidding for public sector contracts as part of the supply chainxliv

Base = all MEG-led SME employers for whom public sector business is relevant, but who have not bid for contracts, either as lead or part of the supply chain


SBS 10


Small/Medium (10-249 employees)

Un-weighted (n) = 173 111 62

% % %

Size of the business 22 23 10

Lack of knowledge of the process 11 12 8

Bureaucracy/red-tape 7 7 6

Lack of funding 5 5 0

No relevant opportunity has arisen 4 5 0

Takes too much time 4 3 10

Other 5 4 14

No barriers 14 15 8

Don’t know/can’t think of a reason 33 31 44


9.18 The most common reason given was the size of the business. This was particularly the case among micros (23 per cent), with ten per cent of small and medium-sized businesses not bidding for public sector contracts for this reason21. Most likely to say this were those in business services (38 per cent).

9.19 Other reasons for not bidding concerned lack of knowledge of the process (11 per cent), bureaucracy (seven per cent) and lack of funding (five per cent). Fourteen per cent conceded that there were no real barriers, and a third could not think of a reason.

9.20 All MEG-led SME employers who had already bid for or expressed interest in public sector contracts, and the remainder for whom public sector contracts are relevant, were then asked whether any of a number of possible barriers prevented them selling more to the public sector (see table overleaf).

21 The reason could relate to contracts being too small to bother with, or too large to handle.

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Table 9.7: Barriers to selling more to the public sectorxlv

Base = all MEG-led SME employers for whom public sector business is relevant

MEG-led SME Employers SBS 10


Small/ Medium (10-249 emps.)

Un-weighted (n) = 361 208 153

% % %

Lack of information about public sector opportunities 64 65 55

Effort involved in bidding or pre-qualifying for public sector contracts

62 62 59

Lack of understanding of the public sector procurement process

60 61 56

Exclusion from framework agreements and approved supplier lists

56 57 54

Difficulties engaging with prime contractors 48 48 48

Lack of consistency in the tendering process 43 42 49

Post tender debriefing not being helpful 42 41 43

Perceived risk of the public sector dealing with SMEs 40 42 31

Public sector specifications exclude type of business 37 37 37

Difficulties selling an innovative product 29 29 28

Other 3 2 3

None of these 13 14 8

Don’t know/refused 3 3 0 Figures in bold are statistically significant at the 95% confidence level between the total and the sub-groups

9.21 Lack of information about public sector opportunities was the main barrier to selling for 64 per cent of MEG-led employers for whom public sector businesses is relevant, followed by reluctance or inability to spare the time and effort to bid or pre-qualify for contracts (62 per cent), and a lack of understanding of procurement processes (60 per cent). There were no significant differences according to the size of the organisation.

9.22 Business services were more likely than average to cite the effort involved in bidding (70 per cent) and exclusion from frameworks (65 per cent) as barriers to bidding, whilst transport, retail and distribution were more likely to cite the difficulties they have selling an innovative product (37 per cent).

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ENDNOTES: QUESTIONNAIRE REFERENCES i Q5: And how many years has this firm been trading? This includes under all ownerships and all legal statuses.

ii Q4: What is the legal status of your organisation?

iii Q148: Can you please tell me the approximate turnover of your business in the past 12 months?

iv Q1: How many sites in the UK does your business operate from, including your head office?

v Q164: How many partners or directors are there in day-to-day control of the business now, including yourself?

vi Q172: Which ethnic groups do the owners, partners or directors belong to?

vii Q158: Is your business a family owned business? (A family business is majority owned by members of the same family)

viii Q158: Is your business a family owned business? (A family business is majority owned by members of the same family)

ix Q153: Is your business VAT registered?

x Q37: Do you think of your business as a social enterprise, by which I mean a business that has mainly social or environmental aims?

xi Q1a: How many employees does your business currently employ across all sites, excluding owners and partners?; Q11: You said earlier that your business currently employs [INSERT Q1A RESPONSE] people, excluding owners and partners. How many people did the business employ 12 months ago across all sites (still excluding owners and partners)?

xii Q1a: How many employees does your business currently employ across all sites, excluding owners and partners?; Q17: How many people do you expect the business to employ in twelve months time (excluding owners and partners)?

xiii Q149: Compared with the previous 12 months, has your turnover in the past 12 months increased, decreased or stayed roughly the same?

xiv Q151: In the next 12 months do you expect your turnover to increase, decrease, or stay roughly the same?

xv Q35: Taking into account all sources of income in the last financial year, did you generate a profit or surplus?

xvi Q36: Do you pay more than 50% of your trading profit or surplus [IF DID NOT/DON’T KNOW/ UNWILLING TO SAY GENERATED A PROFIT IN THE LAST FINANCIAL YEAR when you generate one] to owners/shareholders?

xvii Q49: I’d now like to turn to the future that you foresee for your business. Over the next two to three years, do you aim to grow your business?

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xviii Q50: Does your business plan to do any of the following over the next two to three years?

xix Q53a: I’d now like to turn to the range of tasks that you need to do when running a business, and for you to tell me how capable you think your business is at doing them. I’m going to read out a list of business activities and I’d like you to rate your business from 1 to 5, where 1 is rated as very poor and 5 as very strong. You can include in your assessment any external expertise you use to achieve the task.

xx Q86: I’d now like you to think about innovation within your business i.e. new products and processes. Have you introduced new or significantly improved products or services in the past twelve months? xxi Q27: I’d now like to ask you a few questions about the nature of your trading activity. So, first of all, does your business sell goods or services or licence your product outside the UK?

xxii Q137: Over the past 12 months, has your business funded or arranged any training and development for staff in the organisation, including any informal on the job training?

xxiii Q143: Does your business use the Internet for any of the following?

xxiv Q53e: What do you think would encourage more people from ethnic minority backgrounds to think about setting up their own businesses?

xxv Q53a: I am now going to read out some statements that have been made about running a business. For each that I read out please tell me the extent to which you agree or disagree

xxvi Q53g: On a different theme, suppose you received an unexpected windfall of £50,000 that you were required to reinvest. Which of these options best describes the type of investment you might make?

xxvii Q66: Now I’d like to ask you some questions about financing your business. Have you tried to obtain finance for your business in the past 12 months?

xxviii Q77a: Before you applied for finance, how confident were you that you would be successful?

xxix Q77b: Before you applied for finance, did you take any of the following steps to try and ensure you were successful in obtaining finance?

xxx Q67: I'd like to ask you about this... what did you try to obtain finance for. IF MORE THAN ONCE (Q66/2): I'd like to ask you about the most important of these occasions. What did you try to obtain finance for?

xxxi Q79: Why have you not applied for finance in the last 12 months?

xxxii Q69: What type of finance did you seek? Please include all types of finance including where you failed to obtain it.

xxxiii Q70: How much finance did you seek?

xxxiv Q72: Did you have any difficulties in obtaining this finance from the first source you approached?

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xxxv Q72: Did you have any difficulties in obtaining this finance from the first source you approached?/Q75: Did you eventually go on to obtain the finance you needed for your business, for example, from another external source?

xxxvi Q74: What reasons were given for your application for finance being turned down/for receiving less finance than you sought/having problems raising all the finance?

xxxvii Q56: So, overall, which is the biggest obstacle to the success of your business?

xxxviii Q62: Which regulations do you consider to be an obstacle to the success of the business?

xxxix Q90a: Where have you been for external advice or information on matters affecting your business the last 12 months?

xl Q95: In the last 12 months have you used a business mentor – that is somebody with business expertise who supports you through the development and running of your business on a continuous basis?

xli Q97: Do you make time to speak or meet with other businesses or entrepreneurs to get help and advice about running your business?

xlii Q131: In the past 12 months have you expressed an interest in or bid for any contract advertised by the public sector?/Q1311i: Have you ever joined forces with another business to bid for public sector work rather than as a lead bidder?

xliii Q131a: In the past 12 months have you actually done any business for the public sector?/ Q132c: Has any of this work for the public sector in the last 12 months been as the prime contractor or has it only been as part of the supply chain?

xliv Q131ii: Is there anything that prevents you from bidding for public sector contracts as part of a supply chain?

xlv Q132a2: Which of these, if any, would you say are barriers to you selling more to the public sector?

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