The lack of and the need for a definition Micro Businesses, the very smallest businesses in our communities, have particular challenges and particular importance in our society. They are the key source of economic activity in deprived and rural areas, they are the group in which all new businesses start, and particularly relevant now, they are the most likely source of employment for those falling out of the public sector retrenchment. As a guide, more than two thirds of businesses in the UK employ fewer than 5 people and have a turnover of less than £250,000. They represent more than 15% of the economy. They need to be defined to be consistently supported across all government departments.
A department-by-department guide
Tax treatment of these businesses is critical. Without assistance, they will not flourish, they will not employ and they will not grow if tax is a barrier. They often have little time and no expert support. A flat tax might be the answer, however this requires further research. Likewise poor access to finance for what are seen as high risk ventures is a key barrier – new incentives to investors need to be found.
Business Innovation and Skills
Over-regulation and scarcity of education that supports start-ups are both barriers to an entrepreneurship culture. Lord Young’s work is a start but exemption for micro businesses from categories of regulation as a whole could drive a step change – that includes European legislation and possibly some employment legislation. Access to finance for what are high risk businesses also needs addressing – both debt and equity.
Department of Transport
Micro businesses are often rurally based, with heavy dependence on local roads and an extensive rail infrastructure. Although many micro-businesses are reliant on the internet, our transport does remain inadequate for many.
Crime for micro businesses is largely about theft of physical goods or intellectual property. Fewer policemen and women on the beat and inadequate affordable IP infringement protection has financial consequences – and for a small business can potentially lead to failure.
Department of Health
Micro businesses will be required to promote public health. This is reasonable provided it is not over-bureaucratic and burdensome.
Department for International Development
Micro businesses engaged in social enterprise may source from and trade with the developing world. Licensing has become a significant barrier. UKTI tends to focus on larger enterprises.
Department for Energy and Climate Change
A number of micros are looking at carbon free, green technology. Incentives and schemes to help small start-ups in this area would be helpful. While utility support for less well-off individuals exists, there are no equivalents for micro start-ups.
Department for Education
Apprenticeships are not very accessible to micro businesses, nor is there any mechanism to connect them to skills and technical colleges. Self starters have a mindset which needs to be reflected and encouraged through the education system. Very few think of setting up a business straight from school or university and no support mechanisms exist once they have left the institution.
Creative Media and Sport
Broadband and mobile phone coverage is key and often poor for rural businesses. E Commerce is a huge opportunity but currently subject to legislative barriers that need addressing. Tourism represents a major interest group in this sector who want help with internal domestic tourism. Micro’s need their fair share of the Olympic opportunities.
Environment, Food and Rural Affairs
Farmers are key micro and any regulation cull must agricultural businesses. Rural poverty is not well understood and the disproportionate value of micros to those economies is unrecognized. Watre charges in the South West are a key local issue.
Micros need a fair share of government contracts – that goes beyond simplifying the tendering process. Economies of scale and buying power can rule them out. Third sector micros are often hindered by bureaucracy.
Communities and Local Government
Some LEPs do not have good representation on their boards from micro business community and there is a risk they will be ignored. Regional Growth Fund money is hard to access. Funds available are not well advertised. Local government support for micros with incubator units is patchy. The localism bill needs to recognize the interests of businesses.
Work and Pensions
Pension reforms on automatic enrolment and retirement age bring challenges to smaller businesses. The changes to benefits should help the unemployed to start businesses and small businesses to employ more flexibly. Maternity and Paternity rules from Europe may need to be challenged for a micro. They should be exempt from EU legislation.