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During this such a brief explanation related to the report on small firms 2010 2015 by the prime ministers advisor on enterprise.
THE REPORT ON
SMALL FIRMS
2010-2015
A
THE REPORT ON
SMALL FIRMS
2010-2015
BY THE PRIME MINISTER’S
ADVISOR ON ENTERPRISE
Lord Young
February 2015
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THE REPORT ON
SMALL FIRMS
2010-2015
1
CONTENTS
Foreword 3
Executive Summary 5
Summary of key developments for small business 7
The Golden Age for Small Firms 9
Opportunity rather than necessity 11
There has never been a better time to start a business 12
Start Up Loans 13
Enterprise for everyone, whatever their background 13
Looking ahead 15
Enterprise in Education 16
Embedding enterprise into education 16
Making education captive and relevant – Enterprise Advisers 17
Closing the gap between employers and young people – an Enterprise Passport 17
Future Earnings and Employment Record 17
Supporting young people to start a business 18
Modern businesses require employees with relevant digital skills 19
Teachers 20
Looking ahead 20
New ways of doing business 21
Technology is making it easier to start a business 21
Home-based businesses 22
Incubation and acceleration 22
Social Enterprises 23
Looking ahead 23
THE REPORT ON
SMALL FIRMS
2010-2015
2
Public Procurement: a £0.25 trillion opportunity 24
Visibility, bureaucracy and payment 24
A ‘single market’ for procurement 25
Changes to PQQs 25
Making all procurement opportunities accessible in one place 25
Paying on time 26
Enforcement and accountability 26
Looking ahead 26
Accessing Finance 28
The new British Business Bank 29
Peer-to-peer lending and crowd-funding 29
Business angels 30
Looking ahead 30
Business Support 32
Encouraging small ?rms to take advice 32
Improving Government’s support offer to business 33
Targeted support for growth potential businesses 33
Enabling small ?rms to access help on the ground 33
Looking ahead 34
Case Studies 36
G John Surveys Ltd 36
3fPT 37
Prosper 4 Group 38
Fiver Challenge 39
Allied Ventura Ltd 40
Rotunda Living 41
Appear Here 42
Andrew Francis Butchers 43
Austin Hayes Ltd 44
MarketInvoice 45
Giant Leap Childcare 46
Notes 47
THE REPORT ON
SMALL FIRMS
2010-2015
3
FOREWORD
I have been involved
with small ?rms for a very long
time. After qualifying as a lawyer, practicing
for about a year, I joined a large quoted mail
order and retail company and, after ?ve years
of frustration as an executive, decided to take
the plunge and start my own business. That
was back in 1961, a very different world
from today.
Since then, of course, I’ve had many other
occupations from executive chairman of
one of the largest FTSE companies, ?ve
years in the civil service followed by ?ve
years in the Cabinet, been both a banker
and an investment banker, and an investor
and developer of technology companies, but
always I would return to my ?rst love, starting
businesses and indeed started quite a few
over the decades. Even to this day I have
never forgotten the excitement, the sense of
achievement and the feeling of self-worth that
I experienced when I started and ran my ?rst
company. That is why my interest throughout
the eighties and during the last ?ve years, has
been to encourage more and more people to
experience what I experienced.
I found, when I returned to government, that
the public sector was just as closed to small
?rms as it was back in the 80s and I’m delighted
that as a result of a great deal of work amongst
a large number of people the public sector is
being opened up to small ?rms. I expect this
will substantially reduce public expenditure
(although I am sure ways will be found to
spend the savings) but even more importantly
it will introduce a degree of innovation that is
today sorely lacking and will lay the foundation
for many large ?rms of the next decade.
I also developed an abiding interest in
education, although my interest was always
for those who were low achievers. Back in the
early 80s I discovered, whilst introducing the
Youth Training Scheme, that far too many
young people were condemned to the bottom
quartile when they were only 12 or 13 by not
being shown the relevance of their lessons, so
switching off and ?nding that once they were
off the train there was no way back.
I’m very grateful to the Prime Minister who
has given me this opportunity, somewhat
late in life, to deal with a number of these
issues. I believe that if we give young people
the opportunity to meet role models who can
show them the relevance of their lessons, and
take advantage of opportunities that will be
opened up by the Enterprise Passport, we will
create a very different environment for many
hundreds of thousands of young people to live
a more meaningful and satisfying life.
These last four years have, in many ways,
been some of the most productive of my life.
I have been very fortunate in the of?cials
who have worked with me during that time.
When I retired back in 1989 I left 10 years of
government life with a high regard for the
numerous civil servants I’d worked with over
those years. My experiences over the last few
years have, if anything only increased that
regard and I owe a great debt to those who
have, by convention, to be nameless.
David Young
February 2015
THE REPORT ON
SMALL FIRMS
2010-2015
4
LORD YOUNG:
BIOGRAPHY
The Rt Hon Lord Young of Graffham CH DL
graduated from University College London
before becoming a solicitor. He spent
a year in the profession before moving
on to establish a number of successful
businesses. He became Chairman of the
Manpower Services Commission in 1982,
entered the Cabinet in 1984, became
Secretary of State for Employment in 1985
and in 1987 became Secretary of State
for Trade and Industry and President of
the Board of Trade. He was Executive
Chairman of Cable and Wireless plc from
1990 to 1995 and thereafter Chairman of
Young Associates Ltd, which invests in new
technologies. In October 2010 he published
a report on Health and Safety, Common
Sense Common Safety.
Lord Young was appointed as an advisor to
the Prime Minister on Enterprise in October
2011. He has delivered a three-part review
to the Prime Minister on enterprise and
small business.
Make Business Your Business, published
in May 2012, was the ?rst comprehensive
review for Government on small business
since the Bolton Report of 1971. This
highlighted the record number of start-up
businesses as part of a growing culture of
enterprise and entrepreneurship in the UK.
This report introduced a new Government
programme, Start Up Loans, providing
loans and mentoring to get a business
venture started.
Growing Your Business, published in May
2013, looked at how new and developing
small ?rms can grow, and expand into
new markets. This paved the way for major
Government reforms of public procurement
to make it easier for small suppliers to
win public sector contracts, a new Small
Business Charter to extend the reach of
university business schools into their local
small business communities, and a Growth
Voucher programme to enable small ?rms
to gain the help they need to grow and
scale-up.
Enterprise for All, published in June 2014,
reviews the relevance of enterprise in
education. In December 2014 Government
accepted the recommendations in this
report and this has led to the creation of
a new company, focused on leadership
and engagement between employers and
educators, to do more to better inspire and
motivate young people in their education
and choices for their futures. The company
will develop a new Enterprise Passport and
Enterprise Advisers.
Lord Young was appointed Member of the
Order of the Companions of Honour (CH) in
the 2015 New Year Honours.
THE REPORT ON
SMALL FIRMS
2010-2015
5
EXECUTIVE SUMMARY
When the Prime Minister
asked me to report on small ?rms in 2011
the only other report was the 1971 Bolton
Report. Bolton’s conclusion seems scarcely
credible today: that the small ?rms sector
was in a state of terminal decline in both
number and in contribution to output and
employment and in a few years would cease
to exist. Economies of scale would make the
remaining 800,000 small ?rms uncompetitive
and doomed to extinction.
1
Today, I am pleased to report almost the
exact opposite. There are now 5.2 million
small ?rms in the UK and they account for
48% of employment and 33% of private sector
turnover. Indeed over nineteen out of twenty
?rms in the land today employ fewer than
ten people. This shift in the number and
importance of small businesses has not been
simply a linear trend over 40 years; within this
Parliament alone I have seen a transformation.
The business population has increased by 17%
since 2010. In 2011 we saw a record number
of start-ups, and the beginning of 2014 saw a
record increase in the number of ?rms.
2
Many factors have affected the environment
for small ?rms including tax and regulation,
but the biggest difference has been the
accessibility and mass adoption of new
technology. Technology has lowered
the barriers to entry for people from all
backgrounds and ages to make a business
idea happen, and to use mobile and digital
devices to ?nd customers, make sales and
fund new ventures. While the internet had
arguably reached critical mass in 1997, it
has really been within the last ?ve years
that smartphones and tablets have become
relatively cheap enough to become commonly
used by people to go and work for themselves.
At the same time, there has been a
complete culture change in our attitude to
entrepreneurship and small ?rms. In the last
?ve years I have met countless numbers of
inspiring entrepreneurs and small ?rms –
from all ages and backgrounds and all
reporting that starting a business is the most
exciting and challenging thing they have
ever done. When you think back to before
this Parliament, there was little effort to
inspire and encourage people to consider
entrepreneurship as a viable career choice;
public sector procurement was virtually
closed to small suppliers; small ?rms reported
that the landscape of business support was
too confusing and inaccessible, including very
few sources of ?nance to start and grow a
business; and there was very little recognition
within our education system about the skills
and attitudes that enterprise can offer young
people to prepare for their futures, including
the opportunity to be their own boss.
These were just some of the priorities I have
looked at since my appointment as the Prime
1 Bolton Report 1971: The Report of the Committee of Enquiry
into Small Firms
2 BIS Business Population Estimates 2010-2014
THE REPORT ON
SMALL FIRMS
2010-2015
6
Minister’s Enterprise Advisor earlier in this
Parliament, when he asked me to write a report
on how the Government supports enterprise
and small ?rms and what needs to change.
There have been other reports in this time
that have highlighted the development of
fast growing, high tech, early stage ?rms
and we are seeing the emergence of exciting
new clusters like the ‘Silicon Roundabout’
in East London where the private sector and
Government are collaborating to help these
start-ups innovate and raise equity capital. Yet
the vast majority of businesses are very small
low-tech and low-cost enterprises that employ
fewer than 10 people. This has been the focus
of my reviews on small business and my aim
to look at those areas of Government policy
where small ?rms are not being heard and not
being supported.
This report draws together the
recommendations and outputs from my three
papers on small ?rms and enterprise and
some of the wider developments that have
raised ambition about enterprise and enabled
entrepreneurs to build successful businesses.
The Government has continued to support
small ?rms by improving the environment
around regulation, tax, exports as well as a
new British Business Bank. We have also seen
new initiatives come about in this Parliament
which will become world ?rsts – Start Up
Loans, Growth Vouchers, a single procurement
market-place through Contracts Finder, and a
new company responsible for enterprise and
careers for young people. Her Majesty has also
approved a Royal Charter to be granted to the
Association of Business Schools re?ecting the
work business schools do to help small ?rms,
and this will take effect shortly.
Put these together and you can see the
transformative effect on enterprise
opportunities in the UK today. This is the golden
age for small ?rms – there has never been a
better time to start and grow a business.
THE REPORT ON
SMALL FIRMS
2010-2015
7
Summary of key developments for small businesses
This is the Golden Age for
Small Firms
• A record number of small ?rms in the
UK: some 5.2 million, an increase of
760,000 since 2010.
• A record number of people in work – 30.8
million – and small ?rms accounting for
48% of private sector employment.
• Global Entrepreneurship and
Development Institute rank the UK the
most entrepreneurial country in Europe
and 4th in the world
• Start Up Loans Company have lent £131
million to 25,000 businesses and created
33,000 jobs.
We have created a more supportive
environment for small ?rms
• The Employment Allowance gives
businesses and charities a £2,000
tax cut off their National Insurance
Contributions. Bene?ting up to 1.25
million businesses, this will result in
around 450,000 small businesses being
taken out of paying National Insurance
Contributions altogether.
• A £1.1 billion package of business rates
measures, with extra relief for small
businesses through the extended
doubling of the Small Business Rate
Relief.
• The Apprenticeship Grant for Employers
provides £1,500 to ?rms taking on their
?rst apprentice. In the ?rst year, 80% of
grants went to ?rms employing 25 people
or fewer, helping small ?rms train up
their future workforce.
• Since the start of 2011, the Government
has reduced the annual net cost to
business of domestic regulation by £2.2
billion.
• By the end of 2014, 500,000 businesses
had signed up for a ‘Your Tax Account’ to
manage their tax affairs more easily and
cheaply and, from the 2013/14 tax year,
small self-employed businesses have
been able to submit tax returns to HMRC
on a cash basis, reducing bureaucracy.
Education is opening up to enterprise
and the modern world of work
• A new company will bring coherence
and leadership to enterprise learning
in education, backed with £20m in the
?rst year. The company will develop an
Enterprise Passport and a network of
Enterprise Advisers.
• The publication of the Future Earnings
and Employability Record will enable
young people to make better informed
choices about their education options
and decisions for their futures.
• A new set of industry-designed short
digital courses will enable small ?rms to
hire skilled employees to enable them to
take advantage of digital opportunities.
The barriers to starting a business
are disappearing
• Technology is having a transformative
effect on small businesses to trade, raise
?nance, export, market and network.
This includes a record rise in the
numbers of home-based businesses.
• The internet represents a £19 billion
business opportunity for small ?rms
in the UK. Government’s £100 million
Broadband Connection Vouchers are
enabling small ?rms to get connected.
• Government has 80 sites that are
available for start-ups and charities to
use ?exibly, reducing their need to take
on long rents.
• The number of businesses with a social
mission is increasing – social enterprises
now account for 6% of ?rms and the UK’s
social investment market is worth over
£200 million.
THE REPORT ON
SMALL FIRMS
2010-2015
8
Government is opening up a quarter
of a trillion pound public sector
procurement market to small ?rms
• Abolishing Pre-Quali?cation
Questionnaires for all low value
contracts. For all other contracts, a more
simpli?ed, standard questionnaire will
be developed – dramatically reducing the
red tape involved in tendering for public
sector contracts.
• Public sector contracts will be advertised
on a new Contracts Finder portal.
• All public bodies and their supply chains
will have a legal duty to pay invoices
within 30 days.
• Mystery Shopper will have more powers
to enforce good procurement practice.
Small ?rms now have more ways of
accessing ?nance for growth
• The new British Business Bank is making
business ?nance markets work more
effectively for small ?rms. It generated
£890 million of new lending and
investment in the 12 months to the end
of September 2014.
• Encouraging banks to lend to small ?rms
via the Funding for Lending scheme.
Participants will be able to earn further
allowances by lending to small or
medium sized enterprises (SME) in 2015,
by drawing £5 in the scheme for every £1
of net lending to SMEs.
• Peer to peer and crowdfunding ?nance
continues to rise, with £1.3bn of
transactions occurring in the ?rst half
of 2014.
• The Seed Enterprise Investment Scheme
is now permanent, and has already
helped over 2,000 companies to raise
more than £175 million of investment.
An easier way to ?nd and access
business support
• The world-?rst Growth Vouchers
programme is subsidising small and
micro ?rms to take their ?rst form of
strategic advice, from an accredited
adviser, and test what works.
• An improved offer for all businesses
provides inspiration and advice from
www.GREATbusiness.gov.uk, backed up
by legal information on GOV.UK
• The Business Growth Service brings
together all targeted advice for small
?rms with high growth potential, so
businesse s will be referred seamlessly to
experts in different areas.
• A new Small Business Charter will
encourage business schools to support
small ?rms, alongside local growth
hubs dedicated to helping small
businesses grow.
THE REPORT ON
SMALL FIRMS
2010-2015
9
THE GOLDEN AGE
FOR SMALL FIRMS
3 BIS Business Population Estimates 2010-2014
4 ONS Labour Market Statistics 2010-2014
5 BIS Business Population Estimates 2014
Record increases in the number of small businesses, self-employment and employment
Source: ONS Labour Force Survey, Employment and self-employment
& BIS Business Population Estimates for the UK and Regions
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There are a record
number of small ?rms in the UK: some
5.2 million, an increase of 760,000 since 2010.
In the last year alone the business population
increased by 330,000,
3
another record for
small businesses and further evidence that
these ?rms have shown themselves to be
incredibly resilient in the face of dif?cult
economic conditions over recent years.
The labour market has performed well beyond
expectations. There are 30.8 million people in
employment – more than ever before and self-
employment has played a major role. There
are over 4.5 million self-employed people in
the UK, an increase of 500,000 since 2010.
4
As well as the rise in self-employment,
small ?rms have become more important
in providing employment and now account
for 48% of private sector employment.
5
This
re?ects the dynamism and ?exibility that
is becoming increasingly present in the
economy, with people less likely to work for
a large employer for their entire career than
thirty years ago.
THE REPORT ON
SMALL FIRMS
2010-2015
10
The chart immediately below shows that
small ?rms now account for nearly half
of private sector employment, large ?rms
contribute less than 40%.
Micro entrepreneurs and very small ?rms
dominate the business landscape. Most of
these will remain as sole traders and self-
employed enterprises, often described as
Small ?rms dominate the business population
Source: BIS Population Estimates for the UK and Regions 2014
80%
60%
40%
20%
0%
100%
99.3%
53.2%
39.9%
0.1%
13.5%
12.2%
0.6%
33.2%
47.9%
0-49 employees 50-249 employees 250 and over employees
Businesses Employment Turnover
Source: BIS Business Population Estimates for the UK and Regions 2014
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Zero employees 1-9 (micros) 10-49 (small) 50-249 (medium) 250+ (large)
Non-employing businesses continue to grow
THE REPORT ON
SMALL FIRMS
2010-2015
11
‘lifestyle businesses’. However, many of
these ?rms will have a strong ambition to
grow and will look at ways in which they
can invest in their business to scale-up. We
are already seeing a number of Start Up
Loan businesses taking on new staff and
expanding into new markets.
Opportunity rather than necessity
The increase in start-ups and self-employment
is not driven by necessity but by desire. Those
who choose to start a business or enter self-
employment are doing so because they want
to, they view it as an opportunity rather than
feeling they have no other alternative (see the
graph Most entrepreneurs start a business because
they want to on page 12). Last year a RSA/
populous survey of business owners found
that 84% agreed that being self-employed
meant they were more content in their
working lives and that only 27% of those who
started up in the recessionary period of 2008-
2012 did so to escape unemployment.
6
Self-employment is a vital part of the labour
market. As well as business owners, self-
employed people are referred to as freelancers,
consultants and contractors. These are
independent professionals who provide
important services to a wide range of businesses
in different sectors. For them, and the clients
they work with, self-employment is the model
they are actively choosing as the best way of
using their skills and earning an income. Self-
employment provides ?exibility and a varied
career; it is not the poor cousin of employment.
Source: BIS Population Estimates for the UK and Regions 2014
50%
40%
30%
20%
10%
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60%
70%
80%
76%
20%
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0 1-9 10-49 50-249 250 or more
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Micro ?rms dominate small businesses
Number of employees in addition to business owner
6 Salvation in a start-up? The origins and nature of the self-
employment boom, RSA, May 2014
THE REPORT ON
SMALL FIRMS
2010-2015
12
There has never been a better time to
start a business
The UK is one of the best places in the world
to run a business. The UK is ranked in the top
10 in the world for doing business by the World
Economic Forum and World Bank. In addition
the Global Entrepreneurship and Development
Institute rank the UK as an entrepreneurial
country 1st in Europe and 4th in the world.
This represents a signi?cant improvement in
recent years rising from as low as 14th in 2012.
7
Perhaps then it is not surprising that the
aspiration to run a business is increasing.
Particularly encouraging is the incredible
entrepreneurial spirit amongst young people.
This has been intensifying since 2010 and it is
now the case that those aged 18 -24 are almost
twice as likely as older age groups to say they
intend to start a business in the next 3 years.
Over the last ?ve years, the Government and
the private sector have done a lot to increase
the number of start-ups. In early 2011 StartUp
Britain, a national campaign by entrepreneurs
to celebrate enterprise in the UK was launched
to inspire the next generation of small ?rms.
StartUp Britain bus tours have reached 20,000
people
8
and from early 2012 the Government-
backed Business in You campaign used
successful entrepreneurs’ stories to illustrate
how an idea can become a business.
Small businesses are capturing the public
imagination. While shows like Dragon’s Den
and The Apprentice have been around since
2005, their ‘high-drama’ formats do not always
give a realistic view of what it means to be an
entrepreneur. The real world of small business
is now reaching a large audience through
Small Business Saturday and the Government’s
Business is GREAT campaign. I hope that these
initiatives will continue to break down the
7 Global Entrepreneurship and Development Index 2014 8 StartUp Britain ?gures
Most entrepreneurs start a business because they want to
TEA: Proportion of the working-age population involved in starting or running a business under 42 months old
Source: GEM UK report 2013 – G7 countries
12.7%
12.2%
5.0%
4.6%
3.4%
3.7%
2.7%
1.8%
1.2%
0.9%
0.7%
0.6%
0.9%
7.3%
0% 0%
5%
10%
15%
20%
25%
30%
2%
4%
6%
8%
10%
12%
14%
Total TEA Necessity TEA % of TEA which is necessity
Necessity TEA: Those starting a business to escape unemployment
US Canada UK Germany France Italy Japan
%
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A
THE REPORT ON
SMALL FIRMS
2010-2015
13
myths and highlight the opportunity about
what it means to run a small ?rm.
Start Up Loans
The ?ndings from my ?rst report, Make
Business Your Business, showed that there was
no lack of aspiration amongst people to start
a business, particularly for young people.
The problem they were reporting was a lack
of start-up capital. For many years, start-up
businesses have found it very dif?cult to
obtain funding from banks, as banks have
focused their lending on more established
businesses where there is less risk of default.
This weakness was exacerbated by the
?nancial crisis, when banks became more risk
adverse with respect to their credit decisions.
To overcome this, in 2012 we launched the
Start Up Loans Company. Initially working
with 18-24 year olds, it offers small loans of
around £5,000 to people with viable business
plans. The initial demand for this was
extraordinary – 6,500 loans with a total value
of £39.2 million drawn down in the ?rst year.
Start Up Loans does more
than provide funding. The
crucial thing for start-ups
is not only the ?nance;
it is access to advice and
support. Organisations that
deliver Start Up Loans also
provide access to a mentor for the ?rst year
of a business, along with other events and
seminars that support the managers of new
ventures to make their businesses successful.
Enterprise for everyone, whatever their
background
The early success of Start Up Loans convinced
the Government to remove the existing
age cap and increase funding to enable it to
produce more loans. This enabled a broader
range of delivery and referral partners to join.
By the end of 2014, we had lent £131 million
to 25,000 businesses. When you take in to
account the employees of these businesses,
Start Up Loans has supported 33,000 jobs
in under three years. The businesses are
2
0
0
8
-
1
0
2
0
0
9
-
1
1
2
0
1
0
-
1
2
2
0
0
1
1
-
1
3
More and more people say they intend to start a business soon
Source: GEM APS 2002-2013, rolling average
Adults aged 18-65
0%
1%
2%
3%
4%
5%
6%
7%
8%
See Case
Studies of G
John Surveys
and 3fPT on
pages 36 and
37
4.2%
4.6%
6.3%
7.0%
THE REPORT ON
SMALL FIRMS
2010-2015
14
incredibly diverse; as are the people who run
them. 37% are female-led, compared to 20% of
all businesses. The age range of loan recipients
range from 18 to 75. 45% were unemployed
before they obtained their loan.
9
I was particularly keen that this universal
programme could also be focused at areas
of particular need. Those leaving our armed
forces are in many cases highly-skilled in risk
management, decision making, team working
and specialist technical skills. Yet self-
employment for ex-military personnel is not
always thought of as a viable option; indeed it
may not even occur to those who have spent
years in a chain of command. In 2013 I was
pleased to launch X-Forces, a Start Up Loan
delivery partner that focuses exclusively on
the ex-military community. The businesses
they have helped to launch are proving that
military training equips many people with the
right skills for self-employment. In their ?rst
18 months, they have offered 250 loans and
these applicants are proving to be some of the
most successful Start Up Loan businesses.
I also wanted, to test whether enterprise
could have similar results in supporting ex-
offenders who have completed their sentence.
Since April 2014, The Department for Business,
Innovation and Skills and the National Offender
Management Service have been working with
the Start Up Loans Company to pilot targeted
enterprise learning and business planning
support at prisoners in the last few months
of custody. This pilot involves two existing
Start Up Loan delivery partners: Bright Ideas
Trust and Pinetree Trust. For those that have a
business idea, they can then bene?t from group
and one-on-one business planning support and
apply for a Start Up Loan. If their application is
successful, the loan will be drawn down once
they are released.
Enterprise is for everyone, at all ages
Source: BIS ED analysis of ONS Labour Force Survey, average Q1 2013 to Q4 2013
0%
5%
10%
15%
20%
25%
30%
35%
Newly self-employed Self-employed population
21%
23%
17%
6%
1%
10%
20%
27%
18%
16-19 20-29 30-39 40-49 50-59 60+
29%
24%
4%
9 Start Up Loan Company ?gures
See Case
Study of
Prosper 4
Group on
page 17
THE REPORT ON
SMALL FIRMS
2010-2015
15
It is early days and too early to know if the
scheme is a success – the full evaluation will
follow in due course. I do not want to pre-
empt the results but, given that re-offending
rates on sentences over one year, fall from
24% to 19% if the individual feels re-engaged
with society through employment,
10
I expect
enterprise support to also play an important
role in supporting offenders to re-engage in
society. Separately, I would like to see the
Ministry of Justice consider what provision
can be made for those in transition between
prison and release – for example in the two
open units in the female estate – to start a
business and begin test-trading.
As well as these examples,
there are many others for
whom starting a business
might be the best option, for
example: people with caring
responsibilities, long-term
conditions that make it hard to work from
anywhere but home, or people who frequently
relocate for their spouse’s job.
Looking ahead
In the last ?ve years, government and
the private sector have done a great deal
to change the attitude towards starting
a business and the support for start-ups,
particularly through Start Up Loans. While I
am certain that there are more start-ups to
come, as more people realise their aspiration
to work for themselves, the challenge for
growth is how we can support these small
?rms to be productive, ?nd the skilled
employees they need, and win contracts.
This attention to growth should be the focus
of future enterprise policy but this must
not be at the expense of making it easy to
start a business, particularly for those who
?nd it harder to access employment or other
sorts of start-up capital. I would like to see
Start Up Loans increasingly measured as an
employment programme that has a social
bene?t, rather than purely on the growth and
turnover of the businesses.
As the number of loan recipients increases,
we might look ahead to a model where
repayments for Start Up Loans, which are
personal loans, can be collected via the
tax system in a similar way to the student
loan repayment model. This would reduce
the bureaucracy involved for collecting
repayments and chasing defaults –
substantially reducing costs which bene?ts
both government and the individuals. I would
hope it would also have an impact on the
default rate as people whose business fails
would ?nd it easier to make repayments if
they enter employment.
10 Ministry of Justice, Analysis of the impact of employment
on reoffending following release from custody using
Propensity Score Matching, March 2013
See Case
Study of
Prosper 4
Group on
page 38
See Case
Study of
Prosper 4
Group on
page 17
THE REPORT ON
SMALL FIRMS
2010-2015
16
ENTERPRISE
IN EDUCATION
The changing world
of work and the increasing aspiration
towards starting a business poses a
challenge for our education system to
which some still have to recognise. Schools,
colleges and universities are responsible
for equipping young people with the skills
they need to succeed in life. At one time this
meant the ability to work as part of a team
in a large organisation; today working in a
small company or for yourself requires quite
different skills. More small ?rms mean that
there is greater churn in the labour market,
leading to portfolio careers.
With self-employment on the rise, young
people need to leave education with skills like
creativity, resilience, perseverance and self-
belief, summed up by the word ‘enterprise’. It
is now well over 30 years since I introduced
the Youth Training Scheme. The challenges
we faced then are similar to those we have
today, namely the number of young people
demotivated with few or no quali?cations, and
only convinced that they are failures. On the
other end of the spectrum, our academically
gifted are offered narrow career options
and lack the core skills that enterprise can
encourage. This was a key focus of my third
review on Enterprise for All.
Embedding enterprise into education
Enterprise in education is much more than the
creation of entrepreneurs. It is about motivating
young people to succeed and supporting them
to develop a more positive attitude to life.
This is important in any future profession
or vocational activity, and will enable them
to make better choices throughout their
education, professional and personal lives.
In 2014 I reviewed enterprise in the entire
education system. In Enterprise for All
I highlighted many good examples of
education institutions and their staff creating
enterprise experiences for their pupils and
students. This should begin at the earliest
age and I have seen this work in pioneering
schools like Herringthorpe Infant School in
Rotherham, where enterprise is embedded
into everything they do.
I am keen to replicate this across
more schools throughout the
country and in 2014 we introduced
Fiver (with Young Enterprise and
Virgin Money), to give children
£5 for the month of June to see what they could
turn it in to. The ?rst year was a spectacular
success with 31,000 children taking part
11
and
at the award ceremony it was duly revealed that
Flutter?ys, the most pro?table business in the
9-11 age group, made £495.23 in just four weeks
by making and selling bookmarks and bracelets.
Clearly young entrepreneurs to watch!
I have also seen the impact that enterprise
learning can have in further and higher
education including Barking and Dagenham
College and Leeds University where I was
able to visit and see ?rst-hand how they
share a common approach to enterprise and
engagement with business and employers across
all of the areas that their students study. This
emphasis on enterprise learning is happening in
other areas of education but it is not the norm.
See Case
Study of
Fiver on
page 39
11 Young Enterprise ?gures
THE REPORT ON
SMALL FIRMS
2010-2015
17
The offer from education institutions supported
by government and the private sector needs to
be managed with greater coherence to allow all
young people to bene?t as a lifelong experience
of enterprise throughout their education.
The government and the employers I have
engaged have recognised this need for
change. The recommendations I made (where
responsibility lies with government) will
be enacted in full. In December 2014 we
announced the creation of a new enterprise
and education company, to be chaired by
Christine Hodgson, Executive Chairman of
Capgemini UK. This company will be focused
on leadership and engagement between
employers and educators, to do more to better
inspire and motivate young people in their
education and choices for their futures.
12
Making education captive and relevant –
Enterprise Advisers
The disconnection between education and
businesses has made it dif?cult for young
people to plan their future. Imagine entering a
profession when you do not understand what
it means to work in an of?ce and interact with
customers, let alone how business works. The
new company will break down the barriers
between work and school. This means private
sector organisations taking the responsibility
to work with the education sector to improve
the skills of their future workforce.
The new company is proposing to work with
the Local Enterprise Partnerships and other
local intermediaries to put in place a network
of Enterprise Advisers, who will often be local
business people, providing advice to head
teachers on developing an enterprise offer for
their pupils as part of their duty under the
Careers Statutory Guidance. The two areas I
would like Enterprise Advisers to focus on are
getting speakers in to schools that can enthuse
and motivate young people with the reason for
their study and programmes that give young
people a taste of what their future holds for
them, not just in business but also in the public
sector and their professions. For many young
people the fourth R is relevance and we must
keep education relevant to their life to come.
Traditional careers advice has focused its
attention on young people when they are about to
leave school. That is too late. The age that I think
is most important, and where Enterprise Advisers
can play a key role, is with 11-13 year olds and
when children are being introduced to academic
education. This is the age when they can be
inspired and motivated to excel in their studies
but also be switched off education entirely.
Closing the gap between employers and
young people – an Enterprise Passport
The changes in the world of work mean that
employers are looking for different skills when
recruiting. Smaller businesses in particular
need to know more about an individual than
exam results can show, such as how they
can work in a team or their ability to come
up with new ideas and challenge the status
quo. According to this year’s CBI/Pearson
Education and Skills survey, over half (61%) of
?rms are concerned about the resilience and
self-management of school leavers and a third
(33%) with their attitude to work.
13
To develop these work and life skills, young
people must have rich, rewarding and
stretching enterprise experiences at school,
college and university. Through the creation
of an Enterprise Passport, employers will be
able to see what activities their prospective
employee has undertaken outside of his or
her core lessons, and the impact of these on
the individual, enabling them to form a better
picture of what they might bring to the ?rm.
Once this is in place, those schools and colleges
that embrace and encourage enterprise
and extra-curricular learning will have a
mechanism for chronicling their achievements
and for having these recognised by Ofsted.
Future Earnings and Employment Record
Within higher education, it is the students
themselves that must be convinced of the
value of enterprise to drive change. Since 1970
there has been a great change in the funding
of universities and eighteen year olds are now
12https://www.gov.uk/government/news/new-careers-and-
enterprise-company-for-schools
13http://www.cbi.org.uk/media/2807987/gateway-to-growth.pdf
THE REPORT ON
SMALL FIRMS
2010-2015
18
making the choice to invest large sums of
money in their future. In Enterprise for All, I
recommended that the government publishes
the Future Earnings and Employment Record
(FEER), to enable young people to make informed
decisions about education choices based on the
bene?ts and future prospects they stand to gain.
From this year, work on FEER will begin and
this will show the types of occupation and the
salaries that graduates from different courses
and institutions can expect and enable potential
undergraduates to compare one university with
another. This will also apply to colleges.
I would expect FEER to be a catalyst for
these education institutions to adopt more
focus on enterprise. There are an increasing
number of young people who want to work for
themselves and FEER will create an accurate
record of the number of graduates who start a
business upon graduation.
This will provide important evidence
for us to judge universities’ enterprise
and entrepreneurship credentials. In the
meantime, universities’ commitment to
student entrepreneurship will be judged by
a new Duke of York Award for University
Entrepreneurship and I hope this illustrates
good practice and help to improve the
collective enterprise offer across the higher
education sector. I am pleased that the
National Business Awards are going to run the
award and look forward to the ?rst winner to
be announced in November.
Supporting young people to start a
business
It is clear that there is an incredible
entrepreneurial spirit amongst young people.
This has been intensifying since 2010 and it is
now the case that those aged 18-24 are almost
twice as likely as older age groups to say they
intend to start a business in the next 3 years.
This spirit should be encouraged.
The option to start a business should not
be con?ned to those studying business or
high-tech subjects. In the 2000s, there was
a move in universities to support science
and digital ‘spin-outs’ but enterprise wasn’t
seen as something for arts or humanities
students. In the last ?ve years, universities
have recognised that low-tech and no-tech
businesses can be successful and provide
Young people are more likely to want to start a business
Source: GEM APS 2002-2013, rolling average
2
0
0
2
-
0
4
2
0
0
3
-
0
5
2
0
0
4
-
0
6
2
0
0
5
-
0
7
2
0
0
6
-
0
8
2
0
0
7
-
0
9
2
0
0
8
-
1
0
2
0
0
9
-
1
1
2
0
1
0
-
1
2
2
0
1
1
-
1
3
0%
2%
4%
6%
8%
10%
12%
14%
18-24 years 25-65 years
7.6%
8.4%
8.3%
8.1%
7.6%
7.1%
6.5%
6.8%
11.1%
12.1%
4.6%
5.1%
5.0%
4.7%
4.4%
4.1%
3.8%
4.2%
5.5%
6.0%
THE REPORT ON
SMALL FIRMS
2010-2015
19
their students with a way of supporting
themselves. In the same period, universities
have placed greater importance on student
enterprise as opposed to just focusing
on generating intellectual property, tech
transfer and businesses started by their
academic community.
The best mechanisms that I have seen
for universities to reach all students are
enterprise societies to spark their interest and
elective modules to equip them with a basic
understanding of new venture creation. In
Enterprise for All, I set out some of the good
examples of these modules I have seen during
visits to universities across the country. I
would like all students to have the chance
to take one of these modules as part of their
undergraduate studies. Taking a module in
enterprise or entrepreneurship should be
about more than just learning enterprising
skills; it should also equip students with
a basic understanding of how to start and
run their own business as a part of their
quali?cation, including business planning,
pitching to investors and doing a cash?ow.
One of the bene?ts of these modules, where
they are cross-faculty, is that by bringing
together students of different disciplines, they
will learn how to build constructive teams
with individuals from different backgrounds
with different interests and skill sets. I have
seen how this builds their communication
skills and con?dence that will stand them in
good stead when applying for a job or seeking
customers in the future.
Further education students must be given the
same opportunities to learn how to work for
themselves as their peers. Students taking
vocational courses are not only learning
employable skills; in many cases they are
preparing to enter sectors where being self-
employed or freelancing is increasingly
common. This makes it very important they
know how to either start a business or to
manage their affairs as a freelancer.
In Enterprise for All, I was pleased to announce
that City and Guilds had decided to move to
include a business start-up offer as a companion
to level 3 quali?cations, and that Pearson was
intending to take steps in this direction. This is
a good start but needs to go further. I would like
every vocational course at all levels to include
this module, and for it to be compulsory.
Modern businesses require employees
with relevant digital skills
In Growing Your Business, I looked at the
reasons that more small ?rms were not
trading online, and found that they did not
all have the capability to make effective use
of digital tools and opportunities. A constant
challenge for small ?rms is keeping up with
the high pace of technological change. Most
?rms report that they cannot ?nd people with
the right skills to recruit. Yet computer science
degrees have the highest unemployment
rate six months after graduation,
14
whilst
Information and Communications Technology
courses have the highest unemployment rate
of all vocational subjects.
15
I made this a priority in my role on the
Government’s Digital Taskforce. Over the
next decade it is estimated that the economy
will create an additional 1 million new digital
roles that need ?lling so we must make sure
that courses are equipping people with the
skills that businesses want. In November 2014
we announced a set of new government and
industry-backed digital quali?cations. Degree
Apprenticeships will allow young people
to complete a degree at the same time as
working for a business – earning a salary
which is two thirds funded by Government,
whilst learning how to use their newly
acquired skills in a business environment.
The fast-moving nature of the digital economy
means that even those who have digital
skills need to keep these up to date. A new
set of industry-designed and accredited short
courses will provide intensive training in the
areas that employers need immediately, and
will be delivered ?exibly so that they can
14 The Annual Population Survey, Of?ce for National Statistics
(ONS), 2012
15 Higher Education Statistics Agency – Destinations of
Leavers from Higher Education Survey 2012/13
THE REPORT ON
SMALL FIRMS
2010-2015
20
be studied alongside a full-time job. Small
businesses looking to hire people for digital
jobs will have con?dence that applicants who
have completed these courses will have the
skills they are looking for.
Part of the problem is that not all courses
teach the skills that businesses need. To train
the digital innovators of the future and to set
the standard for higher vocational provision,
we are creating a National College for Digital
Skills with industry and education providers.
The ?rst phase of the National College, with its
hub in London, will start developing the new
curriculum and working with students in 2015
before scaling up in terms of student numbers
and potential new locations in other parts of
the country in future years.
Teachers
I want to increase emphasis on the important
part teachers have to play in the delivery of
enterprise in education. The role of businesses
and employers is key to providing teachers
and lecturers with both the tools to bring
enterprise in to the classroom and in providing
the incentive for them to do so. Teachers and
lecturers who have not recently worked in
business may naturally ?nd it harder to inspire
their students about their future work choices,
including the possibility of setting up a business.
The world of work is changing so fast that we
need to make it easy for teachers to convey a
positive attitude to work to their charges.
During my work on Enterprise for All, I worked
with the Confederation of British Industry (CBI)
on the concept of a programme for teachers
to gain insight into the principles of running
a business and the skills looked for by today’s
employers. I want to repeat my call to all
businesses and business groups to take this
forward. As well as being useful for teachers
to update their knowledge, I would like this
to be incorporated into every teacher training
programme so that new recruits to the profession
have the chance to apply their understanding of
business to their lesson plans straight away.
Looking ahead
The creation of the new enterprise and
education company marks a crucial moment
in the relationship between government,
employers and the education sector to improve
young people’s skills and their readiness
for the future. The time where government
knew best and could set the agenda alone has
gone. I proposed this company as a genuine
partnership to help break the disconnection
between education and work. Once the
company is in place, the private sector will be
equally responsible for saying what skills are
needed and making the Enterprise Passport
and Advisers relevant to them and a success.
I want us to ensure that the Careers Statutory
Guidance increases its traction with head
teachers and their responsibility to inspire
and engage their pupils about enterprise
opportunities for their futures. Whilst the
enterprise offer takes different forms in
different schools, both the Enterprise Passport
and Advisers provide critical tools to support
headteachers in achieving this, whilst the
teacher training programme will improve
support for teachers. A key part of this will be
about how the new company and its partners
can support headteachers in resolving the
correlation between enterprise learning and
delivering their priorities around attainment,
behaviour and participation. The role of Ofsted
is also pivotal in how schools demonstrate the
impact of their enterprise offer.
Finally, the FEER will provide a critical
backdrop and is something that universities
and colleges must plan for. Now more
than ever, colleges and universities
must demonstrate their added value, the
uniqueness of their institutions as well as
the richness of their student experience.
Enterprise and entrepreneurship is a point
of differentiation. I have spoken to young
people who have selected a university on
the sole reason that the institution provides
a good entrepreneurship programme. The
FEER will also present young people with
the opportunity to compare courses and
university and college. I believe we have a
duty to encourage conscious decision-making
and provide young people with the tools and
information to choose a course that will best
enable them to realise their potential.
THE REPORT ON
SMALL FIRMS
2010-2015
21
16 BIS Small Business Survey 2012 and Business Population
Estimates
17 Booz & Co 2012
18 IMRG CapGemini e-Retail Sales Index 2014
19 BIS Small Business Survey 2012
20 Broadband Delivery UK ?gures at end December 2014
NEW WAYS OF
DOING BUSINESS
A number of factors are
driving the increased aspiration to work
for yourself, and the ease of doing business
in the UK. In 1971, technology meant the
three T s – typewriter, telephone and telex.
Businesses needed premises for their clients
to reach them, employees to take customer
orders and write invoices. Economies of scale
meant that larger businesses were more
ef?cient and so ?ourished. There was little
support available for small ?rms.
In 2015, you can start a business with
nothing more than a smart phone. Effective
use of social media allows you to reach
customers. Goods can be sold online, with
PayPal handling the payment. Even without
your own website, you can sell products
via eBay, Amazon or specialist sites like
notonthehighstreet.com. You can start a
business from home, or from ?exible premises
that also provide support.
Technology is making it easier to start a
business
Technology is having a transformative effect
on small business to trade, raise ?nance,
export, market and network. Effective use of
technology and the internet can lower business
costs by making processes more ef?cient and
automated, and allow businesses to reach
more customers. Yet only 1.6 million (less than
a third) of small ?rms actively trade online.
16
Recent research suggested the internet
represents a £19 billion opportunity for small
?rms and the UK.
17
A clear illustration of how
quickly habits are changing is that in the run
up to Christmas in 2014, high-street shops
reported a decline in sales from previous
years, while throughout 2014 online sales grew
by 14% to £104 billion, according to ‘e-tail’
trade association the IMRG.
18
One barrier is the infrastructure. Not all
businesses have fast connections to the
internet, and in 2012 8% of businesses had no
internet connection at all.
19
In Growing Your
Business, I looked at the importance of access
to broadband for business practices, and since
then have been part of the cross-Government
effort to drive change. In 2013, Government
launched a £100 million Broadband Connection
Vouchers scheme to offer small ?rms a grant of
up to £3000 to cover the cost of getting super-
fast broadband installed in their premises. So
far, 7000 small ?rms have bene?tted but this
is just the tip of the iceberg so we are widening
the areas this year so more can apply.
20
Another barrier is simply whether small ?rms
understand the opportunity. Go ON UK, in
partnership with the Department for Business
Innovation and Skills, is running a SME Digital
Capability Programme, to ensure that small
businesses have the opportunity and ability
to build their basic online skills and presence.
During its ?rst year it is estimated that the
THE REPORT ON
SMALL FIRMS
2010-2015
22
programme has inspired 30,000 SMEs and
educated 5,500 of them to a greater level
leading them to take further action.
21
Those ?rms that are trading online can
become ‘inadvertent exporters’ by overseas
customers accessing their site and becoming
customers. In Growing Your Business, I
reported that 25% of PayPal’s activity in
the UK comes from overseas trading.
22
81%
of SMEs on eBay export to ?ve or more
countries.
23
Last year, eBay launched a new
initiative to support UK businesses to sell
overseas by allowing them to create a shop for
other eBay sites across Europe.
This ‘e-exporting’ needed more support from
Government. In 2013, as part of our Digital
Taskforce, we worked with businesses to
identify the barriers and obstacles faced
trading online in Europe. Issues identi?ed
ranged from regulatory barriers caused by
the absence of a harmonised EU regulatory
framework to differences in language and
cultural preferences. Government intends to
make changes to the regulations to remove
what barriers we can, and to do more to
support businesses to adapt their websites
through UKTI’s Passport to Export scheme.
Another signi?cant change that
technology has enabled is the
rise of the sharing economy,
through many platforms and
apps. For consumers, it means
cheaper taxis and more places
to stay. For small ?rms, it can mean no longer
having to buy expensive assets such as tools
or vans and instead using these on a per hour
basis as needed.
Home-based businesses
The physical barriers to starting a business
are also falling away. In 1980, we found that
there were not enough garage sized workshops
available for small businesses to start and to
encourage the building of more, we had to use
tax incentives. That problem is no longer with us
for today, knowledge based or service businesses
do not require large amounts of space, and even
small, artisan craft or food businesses can be
run from a well-equipped kitchen. Once you
might have been concerned about presenting
a professional image or worried about giving
customers your home address, today there are
now many ‘virtual of?ces’ that provide these
home-based businesses with a credible business
identity. In 2013 there were 2.9 million home-
based businesses; an increase of nearly half a
million since 2010. They contribute £300 billion
to the economy.
24
In Make Business Your Business, I looked
at the guidance available for entrepreneurs
thinking of starting their business at home,
and found it to be confusing. To make things
simpler, we published a Home Business
Guide which set out the legal position.
25
In
August 2014, the Prime Minister went further
and announced a package of measures,
including updated business rates and planning
guidance, to make it even easier to start and
run a business from home.
26
Incubation and acceleration
For those who are either unable or choose
not to run their business from home, it no
longer means taking out a long, in?exible rent
on a property. Often a hot desk in a shared
of?ce provides enough space for most new
start-ups. At any one time, small ?rms can
apply to use one of 80 Government sites with
1000 desk spaces available, under the Space
for Growth programme. Large businesses
are following suit, in particular banks that
recognise the bene?ts of forming relationships
with growing businesses at an early stage
in their development. According to a recent
O2/Telefonica report, the number of start-up
programmes has increased by 110% from
2011-2014.
27
21 Go ON UK ?gures
22 PayPal ?gures
23 eBay ?gures
24 BIS Small Business Survey 2012 and Business Population
Estimates
25https://www.gov.uk/government/publications/the-home-
business-guide
26https://www.gov.uk/government/news/backing-for-home-
based-business-boom
27 The Rise of the UK Accelerator and Incubator Ecosystem,
O2/Telefonica, December 2014
See Case
Study of
Allied
Ventura
on page 40
THE REPORT ON
SMALL FIRMS
2010-2015
23
Incubators and accelerators provide premises
and advice to help businesses establish
themselves and grow providing, in many
cases, much more than just a desk. For
example, some incubators offer wet-lab
space or access to tools for product testing.
Sometimes they are sector-speci?c, so
businesses bene?t from making connections
with future clients and other start-ups.
Social Enterprises
One change that is driving the increased
aspiration to start a business, particularly
amongst young people, is the option to start
a social enterprise. The National Association
of College and University Entrepreneurs
(NACUE) say that interest from their members
in starting a social enterprise is noticeably
increasing, and last year 19% of their members
were involved in founding a social enterprise.
28
These are businesses that are set up to address
a need or improve the lives of people, and
reinvest their pro?ts back in to this social
mission. They are different from charities in
that they are businesses and do not rely on
donations but generate revenue that is invested
back in to the business. Since 2010, there
has been an increase in the number of social
enterprises, from 240,000 to 300,000 and they
now account for nearly 6% of small ?rms,
29
although 15% of SMEs report they have a social
mission.
30
They are increasingly disrupting
traditional markets by providing innovative
models in sectors such as energy, transport,
health, education, and consumer products.
In Make Business Your Business,
I reviewed the support that
Government was providing
for social enterprises. I found
that they often reported
being unable to access ?nance, yet there is
increasing diversity in the ?nance available
for social enterprises. For example, Big Society
Capital has invested £150 million, unlocking
£50 million from other investors so far,
creating 30 intermediaries specialising in
lending to social enterprises.
31
In April 2014 we
introduced a Social Investment Tax Relief to
encourage further investment. The UK social
investment market is worth over £200 million,
growing by c.25% annually.
32
Looking ahead
As the barriers to starting a business continue
to fall, running a business will become more
and more mainstream. Over the last ?ve
years, I have met many entrepreneurs and
business owners that would struggle to get
a business off the ground or remain viable,
without the opportunities available to them
today through technology.
Small businesses have the potential to become
even more sophisticated in the way they
operate and interact with customers but this
will require them to develop their digital skills
and capability. Employing the right people will
continue to be critical, and small ?rms will
need to ?nd ways to target and attract college-
leavers and graduates with specialist skills.
At the same time, ?rms will be smarter about
when they need to take on employees and
when they can outsource particular pieces
of work – to other small ?rms set up to take
advantage of this type of opportunity.
The other area where I can see further
growth opportunities is by increasing the
export potential of small and micro ?rms. I
described earlier, the rise of the ‘inadvertent
exporter’ and how this is made possible by
the availability of trading platforms like ebay.
These traders are responding to overseas
demand in a reactive way; I would like to
see them thinking more strategically about
reaching customers overseas and this means
further encouragement and investment
in their export skills including further
advancement in their digital capability.
See Case
Study of
Rotunda
on page 41
28 NACUE ?gures
29 BIS Small Business Survey 2012 and Business Population
Estimates
30 Cabinet Of?ce (2013) Social enterprise: market trends.
Based on data from the BIS Small Business Survey
2013, there are an estimated 180,000 Small and Medium
Enterprise (SME) social enterprise employers in the UK,
making up 15% of all SMEs
31 Big Society Capital (2014) Annual Report 2013
32 City of London (2013) Growing the Social Investment
Market: The Landscape and Economic Impact
THE REPORT ON
SMALL FIRMS
2010-2015
24
PUBLIC PROCUREMENT:
A QUARTER OF A TRILLION
POUND OPPORTUNITY
33 See Cabinet Of?ce: Making Government business more
accessible to SMEs (July 2011), page 7
34 See National Audit Of?ce (NAO): Managing Government
suppliers (8 November 2013), page 8.
Opening up public
procurement to innovative and
competitive small ?rms has been one of
my priorities in supporting both economic
growth and ef?ciency for the taxpayer.
This chapter sets out how new public
procurement reforms taken this Parliament
will transform the way small businesses
can gain better and more direct access to
the public sector market.
A lack of access to public sector contracts
has been a perennial problem for small
businesses. The public sector spends nearly
a quarter of a trillion pounds each year on
goods and services, and offers huge growth
opportunities for small businesses, voluntary
and community providers and social
enterprises. Yet in 2010 only 6.5% of the value
of central government procurement spend
went to SMEs;
33
along with a very mixed
picture across the wider public sector in terms
of engagement with and procurement from
small suppliers.
Visibility, bureaucracy and payment
In Growing Your Business, I looked in detail
at what shuts small suppliers out of public
procurement. Small ?rms told us that
excessive bureaucracy through the use of
Pre-Quali?cation Questionnaires (PQQs) had
made access almost impenetrable; contract
opportunities were too hard to ?nd; and
late payment not only impaired a supplier’s
access to working capital but also discouraged
them and others from competing for and
delivering future public sector business. These
impediments also pointed to a fourth issue, that
small ?rms reported little means of recourse
available to them when they were treated poorly
by a public procurer or as a sub-contractor in a
public procurement supply chain.
Central Government has already taken
positive action to improve its procurement
practices and it is likely to achieve its 2015
target of 25% spending (for both direct and
indirect procurement) going to SMEs. This has
been assisted by G-cloud which establishes
framework agreements with a large number
of providers of cloud computing services, and
lists those services on a publicly accessible
portal known as the digital marketplace. Public
sector organisations can call on the services
listed on the Digital Marketplace without
needing to go through a full tender process.
This development in central
Government is welcome news
but procurement at this level
represents a relatively small
proportion of the procurement
opportunity available to small
businesses – about 20% of
overall public sector business
won by small ?rms. It is in local government
and the NHS where the vast opportunities
for these businesses lie – some 70% of small
suppliers supplying the public sector sell to
these markets alone.
34
I have come across some
See Case
Studies of
Andrew
Francis
Butchers and
Austin Hayes
on pages 43
and 44
THE REPORT ON
SMALL FIRMS
2010-2015
25
very good examples where small ?rms are
actively courted for the quality and innovation
they deliver to the NHS and local government.
However, these two areas of the public sector
receive the majority of complaints, in particular
about their use of PQQs.
A ‘single market’ for procurement
It has been my intention to deal with the
problems faced by small businesses in
procurement across the entire public sector.
In 2013, I recommended a set of ‘single
market’ principles to be put into legislation,
to provide a more simple, consistent and
accessible approach to procurement across all
Government and public bodies including local
government, NHS hospitals and providers,
Police, Fire Service and parts of the education
sector. Government is making this happen
through a package of reforms delivered via the
transposition of EU Procurement Directives
and the fourth session Small Business,
Enterprise and Employment Bill.
Changes to PQQs
PQQs have been found to be onerous by small
businesses, often imposing more than 40
pages of pre-quali?cation questions before
they can be considered for bidding for a
contract. Every procurement opportunity has
a different PQQ, thus requiring a bespoke
response from the supplier. Often, PQQs
contain questions about the public body’s
wider objectives that are completely unrelated
to the procurement itself. This puts small
businesses at a distinct disadvantage when
bidding against larger ?rms that have the
resources to respond to the number, size and
requirements of PQQs.
Legislation will take effect this month
and deal with this in two ways: ?rstly by
abolishing all PQQ requirements across the
whole public sector for contracts below the
EU thresholds for goods and services; and
secondly, for larger contracts, providing a
standard PQQ for ?rms to complete once and
use for all contracts. I am expecting that this
will dramatically reduce the red tape involved
in tendering for public sector contracts.
Making all procurements opportunities
accessible in one place
Central Government already uses
Contracts Finder to advertise all Whitehall
departments’ procurement opportunities.
From February 2015 this site will be expanded
and dramatically improved to host all
public contracts above £10,000 in central
Government and £25,000 across the wider
public sector. This will be a world ?rst,
creating a single, authoritative repository for
all public contracts, and to enable suppliers to
search for public sector business on the basis
of price, location and sector.
Contracts Finder will deliver additional
features and functions that will make it
easier for small ?rms to access contract
opportunities. It will publish the award
of all procurements so that suppliers can
identify who won, at what price and use
this information to make approaches to the
successful bidders for potential sub-contract
opportunities. It will also share APIs to enable
business champions and representatives like
trade bodies and Local Enterprise Partnerships
to target their small business members
about procurement opportunities relevant to
their sectors and it will be made compatible
with smart phones and tablets so that these
suppliers can have quick and easy access.
For public bodies, the use of Contracts Finder
will not take away their autonomy to run
their own procurements including the use
of their own procurement portals or local
and sector channels to advertise contract
opportunities. But it will bring all of their
procurements along with all other public
bodies’ procurements into one place and into
the view of many thousands of potential
suppliers. This offers these public bodies the
opportunity to engage the best suppliers,
and drive competition and value in the
procurement of goods and services they offer
to their customers and communities.
THE REPORT ON
SMALL FIRMS
2010-2015
26
Paying on time
There is a clear leadership role at stake for
Government and the wider public sector to
pay its suppliers on time. In 2008, central
government set an ambition that it would
pay at least 80% of invoices within ?ve days.
Meanwhile, it was not untypical for prime
contractors to push their sub-contractors out
to over 90-plus days for payment. In other
parts of the public sector, Mystery Shopper,
the Government’s complaint service for
suppliers about procurement practice, has
received cases where 100 days were still
common in 2010.
A recent National Audit Of?ce (NAO) report
said that small and medium enterprises
(SMEs) were paid more quickly by the
government than the private sector, but
in a third of cases, public sector clients
took more than 30 days to settle up.
35
From
February 2015 all public bodies will have
a legal duty to pay invoices within 30 days
and to ensure that 30 day payment terms
?ow down all public sector supply chains,
bene?tting sub-contractors. To enhance the
process for administering payment in the
public sector, the Small Business, Enterprise
and Employment Bill proposes provision for
Government to accept electronic invoices to
reduce bureaucracy and speed up payment.
Enforcement and accountability
Small ?rms and their representatives rightly
point out that the reforms will only work
if public bodies are made accountable for
enforcing compliance amongst their procurers
and if there is recourse when things go wrong.
Transparency and peer pressure are often the
best drivers of change, and as a ?rst step to
achieving this, the imminent procurement
reforms will compel all public bodies to
publish annual statistics on the time they take
to pay invoices. The Small Business, Enterprise
and Employment Bill, when enacted, will allow
government to impose duties on contracting
authorities in relation to their procurement
functions. These may include timescales for
pre-procurement, the contracting stage, and
payment, as well as ensuring that procurement
documents can be accessed free of charge.
My review of public procurement also looked
at the existing complaints procedure through
Mystery Shopper and some key developments
to this service will strengthen the way small
?rms’ interests are protected when engaging
public procurers or prime contractors.
Mystery Shopper’s focus had been primarily
to react to complaints coming forward but
often suppliers report a reluctance to do this
when it threatens to jeopardise an existing
commercial relationship with a public
procurer or prime contractor. This has been
addressed by adding a proactive function
to Mystery Shopper where it is able to make
spot-checks on any procurement process
to determine whether it complies with
procurement rules and correct practice.
Mystery Shopper also relies on the goodwill
and cooperation of public bodies to carry
out its investigations. The Small Business,
Enterprise and Employment Bill proposes
to strengthen its hand by giving it a
statutory power to summon documents
and information from the procurers. The
results are published on GOV.UK, in line with
government’s commitment to transparency,
as well as being publicised on social media
to ensure that malpractice and remedial
action taken by procurers and contractors are
identi?ed and accounted for in full view of the
public and the wider business community.
Looking ahead
It will be for government to monitor the
implementation and impact of these
procurement reforms closely, and react
quickly to improve its measures where they
can deliver further transformation to enable
small ?rms to make winning bids for public
sector business. In particular, I do not want to
see the super?uous questions, once contained
in PQQs, to resurface in Invitation to Tender
documents.
35 Paying Suppliers on Time, NAO, January 2015
THE REPORT ON
SMALL FIRMS
2010-2015
27
I would also expect government to keep a close
eye on payment performance of undisputed
invoices across the public sector. If the reforms
do not deliver demonstrable progress in
the timeliness of supplier payment, I would
propose that government goes further and
considers automatic payment of interest on
late payment.
There are some additional areas where
I see potential to maximise the value
small businesses can offer to public sector
procurement.
I would like to see a second phase of
development on Contracts Finder, so that
small suppliers can increase their exposure
to more contract opportunities, in particular
by expanding its functionality to enable
prime contractors to advertise supply chain
opportunities on the site. This would give
small suppliers access to a share of some of
the biggest multi billion pound procurement
programmes in the UK including High Speed 2,
the Strategic Road Network and Crossrail.
It should also be possible to use Contracts
Finder to share insights about the
procurement market based on data gathered
from the procurements advertised on the
platform, to enable small ?rms to bene?t
from the repository of data. This can offer
powerful market intelligence to suppliers
about what the public sector purchases,
who is winning contracts and at what price.
Another potential option worth investigating
could be how best to include a mechanism for
engaging feedback on procurement authorities
and prime contractors, which incorporates
much closer integration of Mystery Shopper
within the Contracts Finder site. Ultimately, I
would like to see Contracts Finder spun out of
government through mutualisation, as I see
this as a signi?cant opportunity for this portal
to reach its full potential.
As well as creating more visibility of contract
opportunities for small suppliers, I want
commissioners and procurers to have much
more sight and understanding of what the
market of small ?rms can offer. The Small
Business Research Initiative is already in
place to connect public sector challenges with
innovative ideas from industry but I would like
us to go much further so that this kind of pre-
procurement engagement can routinely capture
the solutions and ideas from some of our most
exciting and disruptive small businesses.
Finally, I would like government to revisit
the issue of contract size and the optimal
circumstances for procuring on a large
scale versus purchasing through smaller
procurements. Contract size continues to be
a key determinant of whether small suppliers
win procurement contracts, and this leaves
them up against bulk buying and aggregated
procurement which aim to generate cost
savings but often at the expense of the
innovation and greater value that small ?rms
can offer. I propose that a full review of contract
size needs to be made a priority in any future
small business procurement programme.
THE REPORT ON
SMALL FIRMS
2010-2015
28
36 SME Finance Monitor 37 BBA Statistics
ACCESSING FINANCE
The debate around small
business ?nance has focused
almost exclusively on the availability of
bank lending. The issues have ranged from
affordability, banks’ risk appetite for lending
to start-ups and growing small ?rms, and
the quality of funding proposals put forward
by these ?rms for bank ?nance. My reviews
on start-ups and growing small ?rms
focused on highlighting sources of non-bank
?nance available to entrepreneurs and small
businesses and how they can access them.
The data shows small businesses’ reliance
on their banks for funding – over 90% of
loan or overdraft applications are made to
a small ?rm’s main bank.
36
In Growing Your
Business, I highlighted the removal of bank
managers from branches, and the damaging
effect this has had on lending decisions
to small businesses, based primarily on
the personal credit rating of individuals
within a business and not on that business’s
performance or viability.
While it is encouraging that gross lending to
SMEs is a third higher in 2014 when compared
to the same period in 2011, issues still remain.
Net lending to SMEs remains near zero as
small ?rms continue to pay down their debts.
37
Government has continued to work with
banks to address these issues. In December
2014, the Bank of England and HM Treasury
announced a one-year extension to the
Funding for Lending Scheme, targeted at the
availability of credit for small ?rms. This will
provide lenders with continued certainty over
the availability of cheap funding to support
lending to SMEs during 2015, even in the event
of stress in bank funding markets.
Additionally, government has put in place new
measures to support banking reform including
in areas of transparency and accountability as
well as a more rigorous process for overseeing
lending appeals. A measure in the Small
Business, Enterprise and Employment Bill
will require large banks to share data on
their small business customers. Despite these
measures, my concern has remained that
an unsuccessful application for bank ?nance
should not be seen as discouragement for an
entrepreneur to start or grow a business. I have
proposed that a key role for Government in this
area should be to help stimulate and promote
new and diverse sources of ?nance available to
smaller businesses.
In 2012 the Government announced Start Up
Loans, featured earlier in this report, which
has helped to fund the creation of over 25,000
new enterprises in all parts of the country,
and these are backing viable business
propositions to get the venture off the ground.
Start Up Loans sit alongside other sources of
small loan ?nance like loans provided by
Community Development Finance Institutions
which have supplied essential capital to many
small ?rms and entrepreneurs unable to get
funds from high street banks.
THE REPORT ON
SMALL FIRMS
2010-2015
29
A new British Business Bank
In 2014, Government announced a new British
Business Bank, designed to unlock ?nance
to small business, from a greater number of
providers, through a wider range of products.
I am impressed by its early progress including
the way in which it has been able to attract
additional private sector investment alongside
public funds to increase ?nance available to
small businesses. This has generated £890
million of new lending and investment to
smaller businesses in the 12 months to end
September 2014 and 71% of support is being
channelled through new, emerging or smaller
?nance providers.
38
Peer-to-peer lending and crowdfunding
The provision of new sources of
?nance to small businesses is
emerging in part through the
rise of digital platforms, offering
peer-to-peer lending and
crowdfunding. I highlighted these in my earlier
reports and these platforms are beginning
to play an increasing role in micro and small
?rms’ ability to access working capital, invoice
?nance and equity-based funding.
There has been a cumulative rise in
alternative ?nance originated through online
platforms in recent years. AltFi estimate that
£0.7 billion worth of transactions occurred in
2013 with values at the end of October 2014
doubling to £1.3 billion despite only being part
way through the year.
39
The other interesting development has been
the emergence of reward-based crowdfunding
for entrepreneurs and new small businesses
looking to fundraise, develop new ideas and
pre-sell exciting new projects.
The Government is supporting new and
emerging sources of ?nance through
the British Business Bank’s Investment
Programme, which is making investments
into a range of different ?nance providers
including peer-to-peer lending platforms.
Government provided the Investment
Programme with a further £100 million of
funding, bringing its total investment capacity
38 British Business Bank data 39 Liberum AltFi Volume Index
See Case
Study of
Market
Invoice on
page 45
Source: AltFi, www.alt?data.com
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
0.50
0
1.00
1.50
2.00
2.50
3.00
Liberum AltFi Volume Index (Cumulative Financing Volumes)
£
B
n
THE REPORT ON
SMALL FIRMS
2010-2015
30
to £400 million, which it is using to increase
the supply and range of ?nance available to
smaller businesses.
I am beginning to see these funding platforms
strengthen their credibility amongst
businesses and potential investors. This has
been apparent through the emergence of
associations that represent UK Crowdfunding
and Peer to Peer Finance. I have also been
keen to ensure that any regulation of the
peer to peer sector strikes the right balance
between protecting investors and enabling
the sector to grow. This will be overseen by
the UK’s new market regulator, the Financial
Conduct Authority. I took part in a thorough
appraisal of the regulations before they came
into force, as part of the Challenger Business
Star Chamber, and I see this as a key step to
increasing consumer and business con?dence
in using these alternative ?nance platforms.
London is the world leader for raising capital
through crowdfunding platforms, beating
cities like New York and San Francisco.
40
Business angels
My review on Growing Your Business focused
on small micro businesses, often low cost and
low tech companies where relatively small
amounts of debt or equity funding have been
essential to their ?nance needs. Other parts of
Government have focused on early stage, high
technology and innovative companies where
venture capital has been more appropriate.
However, it remains important to recognise
the importance that business angels have
played in the period since 2010 and during
the economic downturn, where their role has
been pivotal in helping small ?rms secure
the investment they need to scale up and
grow. Each year private investors account for
between £800 million and £1 billion of early
stage investment in the UK.
41
Small business and their champions have
often described business angel ?nance as the
‘only game in town’ in particular where banks
have reduced their investment activity and
venture capitalists have tended to invest in
higher value and later stage deals. Business
angels’ investment has been equalled by their
knowledge of markets and sectors and the
contacts they can bring to the small ?rms
they invest in.
I am pleased that the Government has been
proactive in supporting the business angel
market, and in 2011 capitalised the Angel
CoFund. The Angel CoFund aims to improve
the quantity and quality of business angels
investing in the UK by co-investing with
syndicates, increasing both ?nance and other
forms of support. The Angel CoFund is a
British Business Bank programme with £100
million investment capacity, which to date has
facilitated over £90 million of investment into
smaller businesses.
42
In Growing Your Business, I also looked at the
Seed Enterprise Investment Scheme (SEIS),
which aims to encourage investment in small
?rms by offering tax relief to the investor.
This has proved to be a popular investment
programme for small businesses and investors
and I fully support Government’s decision to
make SEIS permanent. By July 2014, over 2,000
companies had raised over £175 million of
SEIS investment since the scheme launched in
2012.
43
This sits alongside the more established
Enterprise Investment Scheme (EIS). A recent
Centre for Entrepreneurs and UK Business
Angels Association report found that 9 out of
10 angel investors use the SEIS/EIS schemes,
and almost 80% of all investments were made
using EIS (55%) or SEIS (24%).
44
Looking ahead
I see the establishment of the British Business
Bank as a strong addition to Government’s
commitment to increasing small businesses’
ability to access ?nance. The next step in its
development should be for it to embed its
40 Crowdfunding Centre
41 UK Business Angels Association ?gures
42 British Business Bank data
43https://www.gov.uk/government/collections/enterprise-
investment-scheme-and-seed-enterprise-investment-
scheme-statistics
44 Nation of Angels, Centre for Entrepreneurs and UK
Business Angels Association, January 2015
THE REPORT ON
SMALL FIRMS
2010-2015
31
position as a long term institution that can
not only increase the supply of ?nance to
these businesses but also expand the choice
of funding options and the number of ?nance
providers available to small ?rms.
I also want the British Business Bank to play
a stronger role in helping to raise awareness
of these alternative sources of non-bank
?nance amongst small ?rms. This requires
not only contact with small ?rms but also the
intermediaries and advisers that they rely on
for ?nance and business advice.
This emphasis on awareness should also
extend to SEIS, in particular to potential
and existing investors into small start-up
business. I am concerned that the ability
for ?nancial advisers to promote SEIS is
restricted because of current regulations
that specify a ‘professional’ investor’s status
based on a requisite number of investments
required by the individual in every quarter of
the preceding ?nancial year. This prohibits
investors that invest less frequently but are
still able to understand the risks and bene?ts
involved in investing in small ?rms. I would
like to see this changed.
Tackling late payment across public and
private sector is another crucial element
of small ?rms ability to access ?nance for
working capital and to use as funds for
investment. Around 80% of business to
business transactions are undertaken on
credit terms of some form, and trade credit
constitutes about 37% of total business assets.
Most companies in the UK supply goods and
services on credit, agreeing to defer payment
for a period after delivery rather than
demanding immediate payment. This system
is an essential element of business practice
in the UK. However, BACS’s most recent data
(July 2014) showed that £46.1 billion of overdue
payment was owed to all businesses, of this
£39.4 billion was owed to SMEs.
Late payment can have a damaging effect
on small companies. This is why the
Government is taking forward a package of
measures to tackle late and prompt payment.
Through the Small Business, Enterprise and
Employment Bill, a measure will be introduced
to require large ?rms to publish information
on their payment policies and practices.
Increased transparency, through a tough
and transparent new reporting requirement
on all the UK’s largest companies, will take
signi?cant steps to addressing the current
imbalance in economic power between
small and large contracting parties. This will
complement the measures to improve public
sector procurement outlined in the previous
chapter. Overall, measures outlined in the Bill
will provide suppliers with better information
on their customers’ payment practices and
I would expect this to create a competitive
pressure on them to improve.
THE REPORT ON
SMALL FIRMS
2010-2015
32
BUSINESS SUPPORT
45 Research to understand the barriers to take up and use of
business support CEEDR (2011)
46 Growth vouchers academic panel
My reports on small
business have highlighted an
abundance of advice and resources available
to small ?rms to help them start and grow.
This has ranged from online tools to enable
an entrepreneur to get an enterprise started,
advice about regulation, mentoring and
coaching, and a plethora of schemes designed
to help small ?rms to innovate, raise ?nance
and expand into new markets.
Government and its private sector partners
have had good reason to commit funds and
resources into business support: the evidence
demonstrates that small ?rms that take
external help and advice are most likely to
grow and maximise their contribution to
the economy. The challenge for Government
has been to get the right support to the right
businesses at the right time.
Encouraging small ?rms to take advice
Despite the obvious bene?ts of small ?rms
seeking help, these businesses are not always
inclined to actively engage business support.
Data tells us that only 30% of small businesses
take external advice and this is because most
of these ?rms say that they don’t understand
the bene?t of the help on offer.
45
This makes
them less likely to seek or pay for help.
Small ?rms also report that the market for
accessing help is fragmented, which affects
the trustworthiness of advice and the ability
of businesses to navigate what’s on offer.
In Growing Your Business, I looked at how to
stimulate demand among small ?rms to take
advice and what areas of help business most
need. Government has responded with the
Growth Vouchers programme which provides
a subsidy of 50% of the cost of strategic advice
to small and micro ?rms that have not taken
this advice before. These target specialist
areas of growth including ?nance, marketing,
recruitment, digital capability and leadership
and management.
Those that apply for a Growth Voucher will
complete a business advice assessment and
this will provide these ?rms with robust
diagnostic help about the growth needs of
their business. Businesses can then use a new
online marketplace powered by Enterprise
Nation to access over 7,000 providers of
business advice, including 3,000 that are
accredited to be Growth Voucher Advisers. To
date there have been 20,000 applications for
Growth Vouchers.
A key feature of this
programme is to test a variety
of innovative approaches to
help small ?rms overcome the
growth barriers that hold them
back. This is a ground-breaking
programme which will be the largest trial ever
in the western world
46
and enable us to see
and quantify the impact of business support,
in particular which ?rms to target, and in
what form to offer support.
See Case
Study of
Giant Leap
Childcare
on page 46
THE REPORT ON
SMALL FIRMS
2010-2015
33
Improving Government’s support offer
to business
Small business and their representatives
have also reported that the landscape of
business support schemes is too confusing
to understand and navigate. Most of all they
want simpler access – and this means better
awareness of what’s out there and easier
referral between schemes and providers.
This was the catalyst for a high-level review
of all Government support, led by Ministers
from key departments, to which I brought
my understanding of what support small
?rms need to grow. We examined how
Government’s offer to small business could
improve by being clear, simple, effectively
targeted and properly evaluated. Government
is seeking to deliver this in two ways.
The Government had already begun to look
at how it could simplify and streamline its
online advice to small business from all
parts of Government. This has produced
www.GOV.UK which provides accurate
information on legal compliance and
regulation. This is important information for
small ?rms and GOV.UK delivers it in a clear
manner. However, those who are about to or
have just started a business will look online
for more than just legal information; they
seek advice and inspiration. My review on
Growing Your Business highlighted how this
move to GOV.UK had left a gap in the way
we encourage people to create and develop a
business idea.
Government has responded with
www.GREATbusiness.gov.uk where all
Government advice, guidance and support
are brought together into one place. It is
written in business friendly language and
provides a simple and straightforward way for
businesses to get help to start-up, grow and
?nd sources of ?nance. This is supported by
an online tool that helps businesses identify
the right support for them and a national
helpline for businesses that want to talk to
an adviser. We also know that entrepreneurs
and small ?rms are increasingly turning
to social media platforms to seek guidance
and encouragement and this provides
Government, through its GREAT twitter
coverage, a means to deliver practical advice
to large numbers of small businesses in an
ef?cient and targeted way.
Targeted support for growth potential
businesses
A second key issue for small ?rms about their
take up of business support is duplication.
Small businesses ?nd it unreasonable and
discouraging to have to make several separate
approaches to providers of business support
before they can establish what help they need
and where they can access it. Small ?rms want
the provision of help to be coordinated better,
so that one approach can bring together all
support available in a simpler and quicker way.
Government has put in place a new Business
Growth Service to make this happen for
businesses with the right level of ambition,
capability and capacity to improve and grow.
It is a personalised service, for up to 20,000
businesses a year, with advisers agreeing
packages of support tailored to a businesses’
need – from developing a business plan or
new products to help with different funding
options or breaking into new markets. From
now on Government’s ?agship business
support schemes such as Growth Accelerator
and the Manufacturing Advisory Service and
schemes from the Intellectual Property Of?ce
(IP Audits) and the Design Council (Design
Leadership) will be consolidated into the single
service. Export support is provided by UKTI
and UKEF and the service is closely linked
to support from InnovateUK and the British
Business Bank.
What should this mean for growing small
businesses? The key for them is that they
will have a single point of contact, be referred
seamlessly to experts within the service and
never have to give the same information twice.
Enabling small ?rms to access help on
the ground
The Government can fund and offer all kinds
of business support programmes but it must
also ensure that it has the reach to enable
THE REPORT ON
SMALL FIRMS
2010-2015
34
small ?rms to access these schemes. This
requires advisers and providers which are close
to and trusted by small ?rms in their local
business communities and sectors of business.
The closure of Regional Development Agencies
and Government Regional Of?ces has made
that contact between government business
support programmes and the businesses they
target that much more dif?cult to achieve
and it has taken time for the Local Enterprise
Partnerships to establish a footing with
their local small business interests. I see the
development of growth hubs as a step in the
right direction and these will bring together
local, national, public and private sector
business support so that there is one access
point for business support in each area. I expect
this to offer the Local Enterprise Partnerships
a clearly de?ned role in helping to bring
together public and private sector partnerships
including local authorities, Chambers of
Commerce, enterprise networks and other local
business interests.
My review on Growing Your Business also
explored the role that university business
schools could play if they were to extend
their reach into their local small business
communities. There are around 138 business
school, focused on management and business
studies and concentrating their effort
primarily on research outputs and preparing
students for futures in large companies.
As this report and others before it have
reported the world of work and business is
changing rapidly – increasingly fewer large
?rms are being surpassed by the rise of many
more small businesses including people
wanting to work for themselves. Business
schools will need to adapt quickly if they are to
respond effectively to this shift in the business
population and labour market, and more
importantly for them to retain any relevance
for undergraduate and postgraduate students.
There are a number of business schools
that are seizing that opportunity to refocus
what they do and to play a more prominent
role in the promotion of enterprise and
entrepreneurship, not only within their
institutions and for the bene?t of their
students but also within their local economy.
Business schools are well placed to do this;
they have students, staff and facilities such
as incubator space which can offer local
businesses specialist help they need to drive
their growth; and, expertise in enterprise,
new venture creation, leadership and growth
strategies that small ?rms can bene?t from.
This makes them natural allies of small ?rms
and identi?able places where entrepreneurs
can go for help.
I have spent the last year working with the
Association of Business Schools to develop a
Small Business Charter to provide recognition
to the business schools leading the change
towards small ?rms, and an incentive to the
rest. Business schools that prioritise supporting
entrepreneurship and the growth of local small
?rms can become members of what will soon
become a Royal Charter, following a rigorous
assessment by a panel that includes small ?rm
owners. The initial cohort was 20; many more
are in the process of applying.
This Charter group are also taking an active
role in business support. For example,
some are delivering a programme of peer
group learning under the Growth Vouchers
programme, while others have combined
their expertise to design a leadership and
management skills programme for clients
of the Business Growth Service. Many are
cementing their places in the local landscape
by being part of a growth hub, including by
locating advisers in the business school site.
Looking ahead
It will take some time for us to do a full
assessment of the impact of Growth Vouchers
and the effect Government’s changes to the
delivery of business support will have on its
small business customers. One lesson we have
learnt from promoting Growth Vouchers is
that HMRC can have a powerful role in the
way Government uses its business customer
data and contact with many thousands
of businesses, to target support and key
messages to small business.
35
THE REPORT ON
SMALL FIRMS
2010-2015
Another lesson from my review of small
business is that the role of the private sector
is a key element to helping small ?rms to
?nd and receive the right kind of support
they need to drive their growth. This makes
the role of Local Enterprise Partnerships
and the intermediaries that small ?rms use
like accountants and lawyers, increasing
important, in particular during the coming
years when public ?nances for business
support will remain tight. It also makes it
imperative that the results from the Growth
Vouchers programme are fully evaluated so
that we can prove where business support can
be used to best effect and enable Government
to use the evidence to demonstrate to small
?rms that getting advice makes sound
?nancial investment in their business.
I also expect more to come from business
schools, and I have high hopes that they
will become focal points for business advice
as part of growth hubs. I can see more
opportunity for Charter award business
schools to integrate with future business
support and this should include a stronger
relationship with Start Up Loans and potential
to do more in areas where small ?rms can
grow by breaking into markets such as exports
and procurement.
THE REPORT ON
SMALL FIRMS
2010-2015
36
CASE STUDIES
CASE STUDY
G John Surveys Ltd
Gareth John, Surveyor
After six years with the Royal Engineers,
Gareth John now runs his own business,
G John Surveys Ltd., performing Land
and Topographical Surveys, Measured
Building Surveys, Engineering Surveys,
Setting-Out, and Asbestos Surveys.
What made you decide to leave the
Forces?
I joined the Royal Engineers in 2008
to gain trade skills, after 5 years in
the Territorial Army and two tours in
Afghanistan, the redundancies within
the Forces changed the way I felt about
serving. I wanted to try my hand at
being my own boss, and be in control of
my own journey. At the same time the
improvements in the UK economy made
leaving service a more appealing option.
How did you come to start your own
business?
After leaving the Forces in October 2014
I explored employment opportunities in
the survey and construction industry.
None of these accurately re?ected the
level of role I was quali?ed for through my
training and experience in the military.
This led me to consider self-employment.
I applied for business funding through the
Start Up Loans Company website, and got
a call from X-Forces the next day. With
their support I was able to set up my own
business, G John Surveys Ltd.
How did X-Forces help you?
X-Forces helped me put together my
business plan, making sure that I had
thoroughly researched my industry, and
that it was the right time to start this
business, economically and personally.
They have assigned me a business mentor
and the funding I accessed through
X-Forces has allowed me to transfer
smoothly from the army into running my
own company. The loan helped me buy
the equipment I need, fund the various
insurances and establish a website and
reputable brand identity to give my
business the foundation I needed.
How have the skills you learnt in the
army transferred to your business?
I am using my extensive survey
experience within the Army to support
myself. I am now a small business owner
and I hope to, as the business grows, be
able to expand and hire employees.
www.gjohnsurveys.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
37
CASE STUDY
3fPT
Catherine Ko, Personal Trainer
3fPT is a holistic personal training service
run under the ethos of ‘Functional,
Flexible, Fun.’ Clients can bene?t from
the wealth of experience, knowledge and
passion through the dedication of helping
people from its owner, Catherine Ko.
Why did you join the Forces?
I wanted to join the army when I left school,
but I took a different path, which was to
attend university for a course in jewellery
design, and then went into full time
employment in the retail catering sector.
There I found myself in an abusive
environment, under unhealthy
circumstances, and decided to change my
life. At ?rst when I tried to join the Army,
I failed the ?tness test. This was a big set-
back but I began exercising regularly and
getting myself healthy to a standard so
that I could join Military Intelligence.
Why did you leave the Army?
Early in 2014 I felt that I had done my
bit, and the time had come for me to
enter the next phase of my life. Joining
the Army pulled me out of a bad
environment and was a fresh start for
me. It gave me a passion for what I have
made into a business.
How did you come to start your own
business?
In April 2014, having left the military, I
found another job but after a career in the
services, I could not do something that
didn’t ful?l me. So I considered starting
my own business, and found out about
X-Forces while researching for possible
funding sources. With their help, I was
able to start-up my own ?tness studio and
do something every day that I am truly
passionate about.
How did X-Forces help you?
Working with my Business Advisor
from X-Forces, I built up a business plan
that was viable. For me, the support on
determining how the cash ?ow would
work, and making sure the company was
viable, was really important.
Even continuing our relationship, the
support from X-Forces has really worked
for me. I quickly connected with my
business advisor who helped me get loan
funding from the Start Up Loans Company
and they are continuing to provide the
support that my business needs.
How have the skills you learnt in the
army transferred to your business?
In order to join the Army, I had to change
my life and get healthy. My ?tness,
organisation skills and discipline were
honed throughout my time in the military,
and I have been able to put them to use in
my business. Now I seek to improve on my
weaknesses, and build on my strengths so
as to provide the best quality of service to
help my clients develop their true potential.
www.3fpt.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
38
CASE STUDY
Prosper 4 Group
Michael Corrigan, Chief Executive
Prosper was founded in 2014 with the
help of a Start Up Loan. Its mission
is to support every aspect of ?nding
work, employment, training and
other opportunities for marginalised
individuals, speci?cally serving prisoners
and ex-offenders.
Where did the idea to found Prosper
come from?
I met my co-founder, Steve Newell, while
we were both serving sentences in Brixton
Prison. While there we led on a project,
reporting directly to the Governor, to get
serving prisoners in to work while still
serving their sentences, where they were
able to leave the prison on daily release.
Over 200 men found work, and many
developed careers as a result. This is what
led to the formation of Prosper: being able
to implement employment services for
offenders and ex-offenders in the real world.
What are your experiences of working
in prisons to support ex-offenders in
to self-employment?
We work with individuals hoping to
?nd employment and those who would
like to start a business upon release.
Prosper has introduced unique new
concepts for would-be entrepreneurs.
We deliver courses and programmes for
ex-offenders – ‘Seize the Day’ – which
focus, absolutely, on the challenges of
people with convictions setting up their
own businesses. From business plans to
insurance, and banking to book-keeping,
and applying for business Start Up loans,
our programme is unique. With quite
modest skills, that we had always taken for
granted, we can offer real help and make
a lasting impact on ex-offenders futures,
their families and ultimately society.
What next?
We are currently developing a career
portal providing state of the art
employability, personal development, CV
building and e-learning for life. We are
also looking to expand our ‘Seize the Day’
programme for entrepreneurs to build on
its initial success.
www.prosper4.com
THE REPORT ON
SMALL FIRMS
2010-2015
39
CASE STUDY
Winner of the Fiver Challenge 9-11 Years:
Best Community Engagement
Bits & Bobs, Grasby All Saints CE Primary,
Lincolnshire
Holly Bateson, Fiver Manager, Young Enterprise
The Fiver Challenge, which ran for the ?rst
time during June 2014, provides children
with £5 and challenges them to see what
they can turn it in to. Prizes are awarded
in both the 5-8 and 9-11 age groups for
Most Pro?t, Most Inspiring Individual and
Best Community Engagement.
Why did Bits & Bobs grab the judge’s
attention?
We were particularly impressed with
the originality of the team’s handmade
and sewn gift ideas, especially the way
that they were developed and adapted
to suit the needs of their customer base.
In a wonderful bid to operate as an eco-
friendly company, the Grasby All Saints
students also used recycled materials in
the making of their items which included
scented bags, natural lemon hand scrub,
bracelets, phone cases and decorations.
How did the team reach out to their
target market?
Before they began their task, Bits & Bobs
completed their market research. By
positioning themselves at the school gate
for a week, they were able to offer samples
and taster sessions of their merchandise
to a wide range of customers. From the
feedback received the children were able
to act on the helpful tips they were given
ensuring customer satisfaction.
What measures did they take to
engage with the community?
Bits & Bobs reached out to local gardeners
with their ideas, who responded and
offered their expertise. They wrote to the
village hall and were thrilled to be offered
the use of the venue for the trade fair for
free. The team designed posters that were
displayed within the local communities,
posted ?yers through peoples’ doors
and their week at the school gates, with
samples of their work, created a real buzz.
How successful was the project?
With sales to a range of people within
the local community, Bits & Bobs made
a total income of £83.31 and a pro?t of
£63.31. They donated 25% of their pro?ts
to charity and used the rest of the money
to organise a disco to raise funds for their
next project. The biggest lessons that the
children felt they learnt was con?dence,
resilience, innovation, self-belief and the
importance of a unique selling point!
www.?verchallenge.org.uk
THE REPORT ON
SMALL FIRMS
2010-2015
40
CASE STUDY
GROWTH VOUCHER RECIPIENTS
Allied Ventura Ltd David Whitehead, Director
Ascensor Limited Andrew Firth, Owner
Allied Ventura, based in West Yorkshire, is
a specialist vehicle leasing ?rm for business
users whose needs range from single
vehicles to entire ?eets of cars and vans.
What made you decide to use a
Growth Voucher?
Over a number of months, I had become
increasingly aware that our online presence
was not leading to new clients – and
that we did not properly understand the
opportunities to use our website and search
engines to drive our business. I applied for
a Growth Voucher and selected Ascensor
Ltd from the online marketplace as they are
specialists in growing businesses online.
What did Ascensor help you with?
Ascensor helped us to understand the
onsite expectations of the search engines,
which meant an analysis of website page
structures, how to create new website pages
that meet good quality standards and how to
safely make website changes without risking
losing any authority within the rankings.
They also provided training in how to
analyse a website’s external footprint, build
up a back-link pro?le and disassociate the
website from any link toxicity.
Ascensor then worked on strategy
development for future content production,
both on and offsite to ensure the website
remains healthy, regardless of future
algorithm changes, through good quality,
natural SEO.
What effect has the advice had on
your business?
We still have some work to do but are
de?nitely heading in the right direction.
The traf?c to our website has increased
and we have better engagement online
with potential clients. We are getting
positive responses to search terms in
and around our industry where before
we weren’t getting any at all. We will be
recommending Growth Vouchers to other
businesses in the future.
The internet presents a huge opportunity
for businesses to grow and when used
properly can have a huge effect on their
success. This means it is important for
businesses to have an understanding of
the online world. Even in the UK today
many businesses don’t have a grasp of their
online potential and people still refer to
some practices as a ‘dark art’. This is not
the case – digital marketing is not only very
effective but is also very measureable. It
is important that businesses take advice
to ensure that if they pay for services they
understand what they are getting and
when they have received a service they can
properly evaluate it.
What has the bene?t of the Growth
Voucher scheme been to you and your
clients?
The Growth Voucher scheme has presented
a win win opportunity for our contacts to
bene?t from strategic support and gain a
better understanding of where they sit in
the digital space. This has in turn raised
our pro?le, it has helped to strengthen
relationships with our clients and has also
helped us to build new relationships as a
result of the referrals that we have gained.
www.avc-contracthire.co.uk
www.ascensor.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
41
CASE STUDY
Rotunda Living
Gemma Roe, Founder
Rotunda Living was founded in June 2012
by Gemma Roe, when her baby was just
two weeks old. The company makes
buildings exclusively in the round.
Where did the idea for Rotunda Living
come from?
Rotunda Living CIC is set-up in a similar
way to an Environmental Charity, whereby
we invest our pro?ts into the British
Woodlands and Community Projects. We
are passionate about creating beautiful,
ethical Roundhouses that are unsurpassed
in quality and craftsmanship; driven
by our belief that a garden building is
not only a very special investment but
is a unique purchase; one which should
continue to make you happy year after
year, decade after decade.
Why did you decide to set up as a
social enterprise?
It allows us to put our pro?ts into
woodland regeneration and conservation
projects in the UK – in keeping with our
enthusiasm for human wellbeing and
the natural world, we have a very strong
environmental philosophy and are striving
to provide a much needed boost to our
British woodlands.
How has the support from Start Up
Loans helped?
The support from Start Up Loans was
invaluable as a means to kick-start our
marketing and not only offered excellent
follow-on support such as a mentor and
start-up resource material but also offered
a greatly reduced repayment schedule
for the ?rst 12 months so as not to over-
burden our cash-?ow.
Tell us about your successes so far.
Rotunda Living has been awarded a
unique commission, to build the country’s
?rst completely round modular eco-
classroom for a primary school in the
region. Due to be completed this month,
the building will be used by the school for
lessons and for events such as parents’
evenings.
We recently sold our ?rst three module
home and are in talks with TV series
George Clarkes Amazing Spaces about
featuring the build in a future episode.
I currently employ 11 people and hope to
expand further.
What next for Rotunda Living?
Our next focus is on the UK holiday and
tourism lettings market in particular. We
are currently working on a commission
for a rural landowner for circular holiday
lodges and this could be a fertile market
for the future.http://rotunda-living.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
42
CASE STUDY
Appear Here
Ross Bailey, Founder, CEO
Where did the idea for Appear Here
come from?
The initial spark came in the summer of 2012.
It was the Queen’s Diamond Jubilee and there
was such a great atmosphere, I wanted to
do something to be part of it. A friend and I
decided to launch a t-shirt brand called Rock
and Rule featuring images of the Queen, with
a rebellious twist, in a three-day store in an
empty shop we’d spotted on Carnaby Street.
Of all the aspects of setting up a brand in a
short time frame, securing retail space was
the hardest part. Eventually we managed to
acquire the space for the Jubilee weekend.
Following the shop’s success, we invited other
young designers and brands into our store.
Everyone wanted to know how we’d secured
the space. That’s when I realised there were
lots of people like me, who wanted to rent
shop space for ?exible periods and found it
a struggle. I couldn’t believe there wasn’t an
easier way to do it.
I used the pro?t I made from Rock and Rule
to launch Appear Here, our mission being
to make booking space as easy as booking a
hotel room – quick, ef?cient and easy.
What is the bene?t to businesses from
short term/?exible locations?
Previously to launch a shop in a good retail
location you’d need to commit to at least a
?ve year lease, normally with a three year
break clause, and prove you had the funds
to pay the rent in advance. In a prime retail
location that could be in excess of £2M.
Appear Here is changing this. By making
retail spaces available to rent for short term
periods, we help more brands and retailers
get a foothold in prime retail location without
the large ?nancial commitments. This gives
businesses a boost to their brand exposure
and creates great PR opportunities to test the
Market. We’ve introduced a pay-as-you-go
service so brands can pay rent on a month-
by-month basis, rather than all upfront.
To illustrate, one of our most in-demand
spaces, 36 South Molton Street, has a weekly
list price of £4,000. While not affordable for
everyone, previously brands would have
to make a large ?nancial commitment, but
through our platform, we’ve been able to place
a stream of young brands and independent
retailers on the UK’s busiest High Street.
An example of a business who used a
pop-up shop then went on to greater
success?
One of our favourite examples is PRESS
London, the Californian-derived cold pressed
juice bar chain. Transport for London agreed to
open up an old broom cupboard in Old Street
Station so that we could turn it into a market
stall. PRESS London leapt at the opportunity
to take this space over. Ed Foy, the founder
of PRESS London noted, “the best part was
selling out within two hours of opening.” This
persuaded Ed, that he was onto something
good. They now have several market stalls
across London, a permanent juice store in
Soho and a concession space in Selfridges.
Do you think pop-up shops/spaces will
take over the high street?
I think pop-up spaces will become a
permanent ?xture on our high streets,
although “taking over” might be an
overstatement. I think there’ll still be a role
for permanent stores. Retail has changed
and today’s consumers are buying into
experiences more than products. Pop-up
shops are a great way for brands to offer
their users an experience. High Streets
will become a place for socialising and
entertainment. Pop-up shops will play a
part in this new social fabric.
www. appearhere.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
43
CASE STUDY
Andrew Francis Butchers
Andrew Francis, Owner
Andrew Francis runs a traditional
butchery based in Ludlow, and has
used the business he has secured with
Shropshire Council as a solid foundation
for growing his business.
Why were you able to bid for the
contract?
As a small business, we wouldn’t have
been able to provide meat to all schools
in Shropshire. When Shropshire’s Shire
Services, the in-house catering service for
Shropshire Council, split the business into
several smaller contracts, it opened up the
marketplace to local small and medium
sized businesses. We tendered to supply
a small area of Shropshire as part of a
larger contract for Shropshire Council, and
now provide fresh meat and sausages for
schools in the south of the county.
What is it like working for Shropshire
Council?
It has been an excellent and very
straightforward experience, and very
rewarding to be able to provide a product
that is both healthy and that the county’s
school kids enjoy. As a customer they
are excellent too – payment is always
prompt and religiously on time, and as
a client they are a pleasure to deal with.
I’m glad to have taken the opportunity to
work with the public sector, and would
recommend it to others.
What is the bene?t to your business?
The contract has been fantastic for the
business, increasing turnover year-on-
year. I have increased my staff from
?ve people to eleven. We have also had
extra business from word-of-mouth
recommendations, with parents coming
into the shop having seen what they
provide for children’s school meals.
The quality and value for money that we
provide have allowed us to retain and
expand the business that we do with
the council. In 2010, we were successful
in widening our contract to include the
supply of free range eggs, we retained the
council’s business after it was re-tendered
in 2011, and Shropshire Council has also
recently taken up extension options which
will take our supply up to the end of 2015.
www.andrewfrancisbutchers.co.uk/
index.html
THE REPORT ON
SMALL FIRMS
2010-2015
44
CASE STUDY
Austin Hayes Ltd
Nik Vjestica, Managing Director
Established in 1953, Austin Hayes has
developed an unrivalled knowledge of
ammunition containers and associated
parts. The company has become the
UK’s leading refurbishment specialist
and has evolved techniques enabling
larger proportions of used ammunition
packaging to either be recycled or
refurbished year on year.
Tell us about your contract with the
Ministry of Defence (MOD).
In 2010 we secured a 10 year partnering
agreement with Defence Equipment and
Supplies, with 5 years ?rm and options
to extend for up to a further 5 years
based on contract performance. By use of
innovative techniques, we have developed
to become a key supplier, demonstrating
skills that are dif?cult to source
worldwide, and providing signi?cant
environmental bene?ts.
We also dedicated to driving down costs,
both as a company and for the MOD as
our main customer, and are constantly
working to understand their requirements.
As a result, the contract is estimated
to save the taxpayer £11 million per
year by avoiding the cost of buying new
packaging, when compared to cost of
refurbished packaging to an equivalent
standard.
How has the work with the
government helped you to grow?
Working with the MOD has provided our
company with a robust platform to plan
for the future. It has provided us with a
clear pathway for strategic investment in
new equipment and the training of staff.
Through continuous improvement and
innovation we have generated important
contract bene?ts and cost savings. At
the same time and pace, the company
has strengthened overall capability
and is better prepared to meet any new
challenges ahead.
The MOD business has also allowed us
to diversify and expand our range of
surface preparation and protective coating
application services for UK engineering
companies supplying steel fabrications,
valves and equipment to oil and gas
industries worldwide.
www.austinhayes.com
THE REPORT ON
SMALL FIRMS
2010-2015
45
CASE STUDY
MarketInvoice
Anil Stocker, Founder
Founded in 2011 by two university friends,
MarketInvoice helps companies raise working
capital by lending against unpaid invoices via
its online peer to peer ?nancing platform.
What gave you the idea to set up
MarketInvoice?
In my previous career in private equity, I
spent a lot of time with ?nancial directors
and really saw the problems that companies
were experiencing ?rst hand in obtaining
?nance to grow. I thought there must be
a way of using technology to disrupt this
market in much the same way that music
or retail have been. For example, who would
have thought ?fteen years ago that HMV,
then the dominant player, would have been
competing today with the likes of Spotify?
Why is your model important to
small ?rms?
Small ?rms typically have to wait 30, 60, 90
days for payment but they need cash to grow
and pitch for new business. Our business
model offers small ?rms the much needed
working capital, for example, to produce
their products while they wait for invoices
to get paid. We’re working with some of the
UK’s most exciting high-growth businesses,
helping them to really push down on the
accelerator and take advantage of new
opportunities that arise.
How is it different to other peer-to-
peer lending?
Both the lender and borrower sides are
slightly different to other peer-to-peer
lenders, but the basic model is the same.
The main difference is that we’re offering
short-term ?nance, typically our loans last
about 45 days. On the lending side, investors
are buying invoices which they have a legal
right to claim on. The average rate of return
in 2014 was 11.62%, well above the 7% or 8%
typically offered by stock markets, and we
have a waiting list of sophisticated investors
wanting access.
What has been the impact of the
British Business Bank?
One of my proudest moments was the
Government’s British Business Bank signing
up in 2013, after eight months of due
diligence. The bank allocated £5 million to
be lent through the platform, which, because
most invoices pay out in an average of 45
days, equates to £40 million in funding
annually. I think the bank is very happy with
the returns we’re generating for them. It was
reported in the press that we’ve given them a
14% return in a year. That’s pretty good.
How have you seen the alternative
?nance market grow?
Since we founded in 2011, 800 businesses
have signed up to MarketInvoice, and we
have sold over 4500 invoices, which is more
than £300 million in working capital that
has been lent, £200 million of that was in
2014. As the peer-to-peer sector matures,
we’re seeing funding milestones accelerate,
and now we’re setting our sights on half a
billion and a billion. It’s speeding up.
What’s next?
We raised £5 million in November, our ?rst
round of fundraising since we launched.
We are planning to roll-out new products as
well as considering launching MarketInvoice
in new countries. The alternative ?nance
market is only going to grow – banks need to
get used to a world where they can co-exist
with new online lenders.
www.marketinvoice.com
THE REPORT ON
SMALL FIRMS
2010-2015
46
CASE STUDY
GROWTH VOUCHER RECIPIENTS
Giant Leap Childcare Rafael Schiel, co-owner
AskAskew Maureen Askew, Owner
Giant Leap Childcare and Learning
Centre, located in Burnley, decided to
take a Growth Voucher to improve their
marketing strategy.
What attracted you to take a Growth
Voucher?
After being open for 18 months, we
weren’t happy with our occupancy ?gures.
We decided to take some advice and
chose AskAskew as they have specialised
expertise for businesses operating in the
early years and childcare sector.
What difference has the advice made
to your business?
Maureen Askew created a detailed
marketing plan and worked with us to
put it in place. Working with Maureen has
brought great bene?ts to our business and
our marketing output has been completely
transformed – I can’t thank her enough.
I would recommend all small business
explore Growth Vouchers – it’s a fantastic
way to improve aspects of your business
with the aid of an expert adviser.
Maureen Askew, Owner, AskAskew
Why is Growth Vouchers so important
to your clients?
I think the great thing about Growth
Vouchers is that it gives small businesses
the chance to have an ‘outsider’ looking
in and that’s really important. You can
see things as an outsider that they miss
and can help them focus on seeing the
bigger picture and getting to where they
want to be.
www.giantleapchildcare.co.uk
www.askaskew.co.uk
NOTES
47
THE REPORT ON
SMALL FIRMS
2010-2015
1 Bolton Report 1971: The Report of the
Committee of Enquiry into Small Firms
2 BIS Business Population Estimates
2010-2014
3 BIS Business Population Estimates
2010-2014
4 ONS Labour Market Statistics 2010-2014
5 BIS Business Population Estimates 2014
6 Salvation in a start-up? The origins and nature
of the self-employment boom, RSA, May 2014
7 Global Entrepreneurship and Development
Index 2014
8 StartUp Britain ?gures
9 Start Up Loan Company ?gures
10 Ministry of Justice, Analysis of the impact
of employment on reoffending following
release from custody using Propensity
Score Matching, March 2013
11 Young Enterprise ?gures
12https://www.gov.uk/government/news/
new-careers-and-enterprise-company-for-
schools
13http://www.cbi.org.uk/media/2807987/
gateway-to-growth.pdf
14 The Annual Population Survey, Of?ce for
National Statistics (ONS), 2012
15 Higher Education Statistics Agency –
Destinations of Leavers from Higher
Education Survey 2012/13
16 BIS Small Business Survey 2012 and
Business Population Estimates
17 Booz & Co 2012
18 IMRG CapGemini e-Retail Sales Index 2014
19 BIS Small Business Survey 2012
20 Broadband Delivery UK ?gures at end
December 2014
21 Go ON UK ?gures
22 PayPal ?gures
23 eBay ?gures
24 BIS Small Business Survey 2012 and
Business Population Estimates
25https://www.gov.uk/government/
publications/the-home-business-guide
26https://www.gov.uk/government/news/
backing-for-home-based-business-boom
27 The Rise of the UK Accelerator and
Incubator Ecosystem, O2/Telefonica,
December 2014
28 NACUE ?gures
29 BIS Small Business Survey 2012 and
Business Population Estimates
30 Cabinet Of?ce (2013) Social enterprise:
market trends. Based on data from the
BIS Small Business Survey 2013, there
are an estimated 180,000 Small and
Medium Enterprise (SME) social enterprise
employers in the UK, making up 15% of
all SMEs.
31 Big Society Capital (2014) Annual Report
2013
32 City of London (2013) Growing the Social
Investment Market: The Landscape and
Economic Impact
33 See Cabinet Of?ce: Making Government
business more accessible to SMEs (July
2011), page 7
34 See National Audit Of?ce (NAO): Managing
Government suppliers (8 November 2013),
page 8
THE REPORT ON
SMALL FIRMS
2010-2015
48
NOTES CONTINUED
35 Paying Suppliers on Time, NAO,
January 2015
36 SME Finance Monitor
37 BBA Statistics
38 British Business Bank data
39 Liberum AltFi Volume Index
40 Crowdfunding Centre
41 UK Business Angels Association ?gures
42 British Business Bank data
43https://www.gov.uk/government/
collections/enterprise-investment-scheme-
and-seed-enterprise-investment-scheme-
statistics
44 Nation of Angels, Centre for Entrepreneurs
and UK Business Angels Association,
January 2015
45 Research to understand the barriers to
take up and use of business support CEEDR
(2011)
46 Growth vouchers academic panel
The Report on Small Firms 2010-2015
© Crown copyright 2015
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,
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THE REPORT ON
SMALL FIRMS
2010-2015
A
THE REPORT ON
SMALL FIRMS
2010-2015
BY THE PRIME MINISTER’S
ADVISOR ON ENTERPRISE
Lord Young
February 2015
Publication copyright notice
© Crown copyright 2015
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]
THE REPORT ON
SMALL FIRMS
2010-2015
1
CONTENTS
Foreword 3
Executive Summary 5
Summary of key developments for small business 7
The Golden Age for Small Firms 9
Opportunity rather than necessity 11
There has never been a better time to start a business 12
Start Up Loans 13
Enterprise for everyone, whatever their background 13
Looking ahead 15
Enterprise in Education 16
Embedding enterprise into education 16
Making education captive and relevant – Enterprise Advisers 17
Closing the gap between employers and young people – an Enterprise Passport 17
Future Earnings and Employment Record 17
Supporting young people to start a business 18
Modern businesses require employees with relevant digital skills 19
Teachers 20
Looking ahead 20
New ways of doing business 21
Technology is making it easier to start a business 21
Home-based businesses 22
Incubation and acceleration 22
Social Enterprises 23
Looking ahead 23
THE REPORT ON
SMALL FIRMS
2010-2015
2
Public Procurement: a £0.25 trillion opportunity 24
Visibility, bureaucracy and payment 24
A ‘single market’ for procurement 25
Changes to PQQs 25
Making all procurement opportunities accessible in one place 25
Paying on time 26
Enforcement and accountability 26
Looking ahead 26
Accessing Finance 28
The new British Business Bank 29
Peer-to-peer lending and crowd-funding 29
Business angels 30
Looking ahead 30
Business Support 32
Encouraging small ?rms to take advice 32
Improving Government’s support offer to business 33
Targeted support for growth potential businesses 33
Enabling small ?rms to access help on the ground 33
Looking ahead 34
Case Studies 36
G John Surveys Ltd 36
3fPT 37
Prosper 4 Group 38
Fiver Challenge 39
Allied Ventura Ltd 40
Rotunda Living 41
Appear Here 42
Andrew Francis Butchers 43
Austin Hayes Ltd 44
MarketInvoice 45
Giant Leap Childcare 46
Notes 47
THE REPORT ON
SMALL FIRMS
2010-2015
3
FOREWORD
I have been involved
with small ?rms for a very long
time. After qualifying as a lawyer, practicing
for about a year, I joined a large quoted mail
order and retail company and, after ?ve years
of frustration as an executive, decided to take
the plunge and start my own business. That
was back in 1961, a very different world
from today.
Since then, of course, I’ve had many other
occupations from executive chairman of
one of the largest FTSE companies, ?ve
years in the civil service followed by ?ve
years in the Cabinet, been both a banker
and an investment banker, and an investor
and developer of technology companies, but
always I would return to my ?rst love, starting
businesses and indeed started quite a few
over the decades. Even to this day I have
never forgotten the excitement, the sense of
achievement and the feeling of self-worth that
I experienced when I started and ran my ?rst
company. That is why my interest throughout
the eighties and during the last ?ve years, has
been to encourage more and more people to
experience what I experienced.
I found, when I returned to government, that
the public sector was just as closed to small
?rms as it was back in the 80s and I’m delighted
that as a result of a great deal of work amongst
a large number of people the public sector is
being opened up to small ?rms. I expect this
will substantially reduce public expenditure
(although I am sure ways will be found to
spend the savings) but even more importantly
it will introduce a degree of innovation that is
today sorely lacking and will lay the foundation
for many large ?rms of the next decade.
I also developed an abiding interest in
education, although my interest was always
for those who were low achievers. Back in the
early 80s I discovered, whilst introducing the
Youth Training Scheme, that far too many
young people were condemned to the bottom
quartile when they were only 12 or 13 by not
being shown the relevance of their lessons, so
switching off and ?nding that once they were
off the train there was no way back.
I’m very grateful to the Prime Minister who
has given me this opportunity, somewhat
late in life, to deal with a number of these
issues. I believe that if we give young people
the opportunity to meet role models who can
show them the relevance of their lessons, and
take advantage of opportunities that will be
opened up by the Enterprise Passport, we will
create a very different environment for many
hundreds of thousands of young people to live
a more meaningful and satisfying life.
These last four years have, in many ways,
been some of the most productive of my life.
I have been very fortunate in the of?cials
who have worked with me during that time.
When I retired back in 1989 I left 10 years of
government life with a high regard for the
numerous civil servants I’d worked with over
those years. My experiences over the last few
years have, if anything only increased that
regard and I owe a great debt to those who
have, by convention, to be nameless.
David Young
February 2015
THE REPORT ON
SMALL FIRMS
2010-2015
4
LORD YOUNG:
BIOGRAPHY
The Rt Hon Lord Young of Graffham CH DL
graduated from University College London
before becoming a solicitor. He spent
a year in the profession before moving
on to establish a number of successful
businesses. He became Chairman of the
Manpower Services Commission in 1982,
entered the Cabinet in 1984, became
Secretary of State for Employment in 1985
and in 1987 became Secretary of State
for Trade and Industry and President of
the Board of Trade. He was Executive
Chairman of Cable and Wireless plc from
1990 to 1995 and thereafter Chairman of
Young Associates Ltd, which invests in new
technologies. In October 2010 he published
a report on Health and Safety, Common
Sense Common Safety.
Lord Young was appointed as an advisor to
the Prime Minister on Enterprise in October
2011. He has delivered a three-part review
to the Prime Minister on enterprise and
small business.
Make Business Your Business, published
in May 2012, was the ?rst comprehensive
review for Government on small business
since the Bolton Report of 1971. This
highlighted the record number of start-up
businesses as part of a growing culture of
enterprise and entrepreneurship in the UK.
This report introduced a new Government
programme, Start Up Loans, providing
loans and mentoring to get a business
venture started.
Growing Your Business, published in May
2013, looked at how new and developing
small ?rms can grow, and expand into
new markets. This paved the way for major
Government reforms of public procurement
to make it easier for small suppliers to
win public sector contracts, a new Small
Business Charter to extend the reach of
university business schools into their local
small business communities, and a Growth
Voucher programme to enable small ?rms
to gain the help they need to grow and
scale-up.
Enterprise for All, published in June 2014,
reviews the relevance of enterprise in
education. In December 2014 Government
accepted the recommendations in this
report and this has led to the creation of
a new company, focused on leadership
and engagement between employers and
educators, to do more to better inspire and
motivate young people in their education
and choices for their futures. The company
will develop a new Enterprise Passport and
Enterprise Advisers.
Lord Young was appointed Member of the
Order of the Companions of Honour (CH) in
the 2015 New Year Honours.
THE REPORT ON
SMALL FIRMS
2010-2015
5
EXECUTIVE SUMMARY
When the Prime Minister
asked me to report on small ?rms in 2011
the only other report was the 1971 Bolton
Report. Bolton’s conclusion seems scarcely
credible today: that the small ?rms sector
was in a state of terminal decline in both
number and in contribution to output and
employment and in a few years would cease
to exist. Economies of scale would make the
remaining 800,000 small ?rms uncompetitive
and doomed to extinction.
1
Today, I am pleased to report almost the
exact opposite. There are now 5.2 million
small ?rms in the UK and they account for
48% of employment and 33% of private sector
turnover. Indeed over nineteen out of twenty
?rms in the land today employ fewer than
ten people. This shift in the number and
importance of small businesses has not been
simply a linear trend over 40 years; within this
Parliament alone I have seen a transformation.
The business population has increased by 17%
since 2010. In 2011 we saw a record number
of start-ups, and the beginning of 2014 saw a
record increase in the number of ?rms.
2
Many factors have affected the environment
for small ?rms including tax and regulation,
but the biggest difference has been the
accessibility and mass adoption of new
technology. Technology has lowered
the barriers to entry for people from all
backgrounds and ages to make a business
idea happen, and to use mobile and digital
devices to ?nd customers, make sales and
fund new ventures. While the internet had
arguably reached critical mass in 1997, it
has really been within the last ?ve years
that smartphones and tablets have become
relatively cheap enough to become commonly
used by people to go and work for themselves.
At the same time, there has been a
complete culture change in our attitude to
entrepreneurship and small ?rms. In the last
?ve years I have met countless numbers of
inspiring entrepreneurs and small ?rms –
from all ages and backgrounds and all
reporting that starting a business is the most
exciting and challenging thing they have
ever done. When you think back to before
this Parliament, there was little effort to
inspire and encourage people to consider
entrepreneurship as a viable career choice;
public sector procurement was virtually
closed to small suppliers; small ?rms reported
that the landscape of business support was
too confusing and inaccessible, including very
few sources of ?nance to start and grow a
business; and there was very little recognition
within our education system about the skills
and attitudes that enterprise can offer young
people to prepare for their futures, including
the opportunity to be their own boss.
These were just some of the priorities I have
looked at since my appointment as the Prime
1 Bolton Report 1971: The Report of the Committee of Enquiry
into Small Firms
2 BIS Business Population Estimates 2010-2014
THE REPORT ON
SMALL FIRMS
2010-2015
6
Minister’s Enterprise Advisor earlier in this
Parliament, when he asked me to write a report
on how the Government supports enterprise
and small ?rms and what needs to change.
There have been other reports in this time
that have highlighted the development of
fast growing, high tech, early stage ?rms
and we are seeing the emergence of exciting
new clusters like the ‘Silicon Roundabout’
in East London where the private sector and
Government are collaborating to help these
start-ups innovate and raise equity capital. Yet
the vast majority of businesses are very small
low-tech and low-cost enterprises that employ
fewer than 10 people. This has been the focus
of my reviews on small business and my aim
to look at those areas of Government policy
where small ?rms are not being heard and not
being supported.
This report draws together the
recommendations and outputs from my three
papers on small ?rms and enterprise and
some of the wider developments that have
raised ambition about enterprise and enabled
entrepreneurs to build successful businesses.
The Government has continued to support
small ?rms by improving the environment
around regulation, tax, exports as well as a
new British Business Bank. We have also seen
new initiatives come about in this Parliament
which will become world ?rsts – Start Up
Loans, Growth Vouchers, a single procurement
market-place through Contracts Finder, and a
new company responsible for enterprise and
careers for young people. Her Majesty has also
approved a Royal Charter to be granted to the
Association of Business Schools re?ecting the
work business schools do to help small ?rms,
and this will take effect shortly.
Put these together and you can see the
transformative effect on enterprise
opportunities in the UK today. This is the golden
age for small ?rms – there has never been a
better time to start and grow a business.
THE REPORT ON
SMALL FIRMS
2010-2015
7
Summary of key developments for small businesses
This is the Golden Age for
Small Firms
• A record number of small ?rms in the
UK: some 5.2 million, an increase of
760,000 since 2010.
• A record number of people in work – 30.8
million – and small ?rms accounting for
48% of private sector employment.
• Global Entrepreneurship and
Development Institute rank the UK the
most entrepreneurial country in Europe
and 4th in the world
• Start Up Loans Company have lent £131
million to 25,000 businesses and created
33,000 jobs.
We have created a more supportive
environment for small ?rms
• The Employment Allowance gives
businesses and charities a £2,000
tax cut off their National Insurance
Contributions. Bene?ting up to 1.25
million businesses, this will result in
around 450,000 small businesses being
taken out of paying National Insurance
Contributions altogether.
• A £1.1 billion package of business rates
measures, with extra relief for small
businesses through the extended
doubling of the Small Business Rate
Relief.
• The Apprenticeship Grant for Employers
provides £1,500 to ?rms taking on their
?rst apprentice. In the ?rst year, 80% of
grants went to ?rms employing 25 people
or fewer, helping small ?rms train up
their future workforce.
• Since the start of 2011, the Government
has reduced the annual net cost to
business of domestic regulation by £2.2
billion.
• By the end of 2014, 500,000 businesses
had signed up for a ‘Your Tax Account’ to
manage their tax affairs more easily and
cheaply and, from the 2013/14 tax year,
small self-employed businesses have
been able to submit tax returns to HMRC
on a cash basis, reducing bureaucracy.
Education is opening up to enterprise
and the modern world of work
• A new company will bring coherence
and leadership to enterprise learning
in education, backed with £20m in the
?rst year. The company will develop an
Enterprise Passport and a network of
Enterprise Advisers.
• The publication of the Future Earnings
and Employability Record will enable
young people to make better informed
choices about their education options
and decisions for their futures.
• A new set of industry-designed short
digital courses will enable small ?rms to
hire skilled employees to enable them to
take advantage of digital opportunities.
The barriers to starting a business
are disappearing
• Technology is having a transformative
effect on small businesses to trade, raise
?nance, export, market and network.
This includes a record rise in the
numbers of home-based businesses.
• The internet represents a £19 billion
business opportunity for small ?rms
in the UK. Government’s £100 million
Broadband Connection Vouchers are
enabling small ?rms to get connected.
• Government has 80 sites that are
available for start-ups and charities to
use ?exibly, reducing their need to take
on long rents.
• The number of businesses with a social
mission is increasing – social enterprises
now account for 6% of ?rms and the UK’s
social investment market is worth over
£200 million.
THE REPORT ON
SMALL FIRMS
2010-2015
8
Government is opening up a quarter
of a trillion pound public sector
procurement market to small ?rms
• Abolishing Pre-Quali?cation
Questionnaires for all low value
contracts. For all other contracts, a more
simpli?ed, standard questionnaire will
be developed – dramatically reducing the
red tape involved in tendering for public
sector contracts.
• Public sector contracts will be advertised
on a new Contracts Finder portal.
• All public bodies and their supply chains
will have a legal duty to pay invoices
within 30 days.
• Mystery Shopper will have more powers
to enforce good procurement practice.
Small ?rms now have more ways of
accessing ?nance for growth
• The new British Business Bank is making
business ?nance markets work more
effectively for small ?rms. It generated
£890 million of new lending and
investment in the 12 months to the end
of September 2014.
• Encouraging banks to lend to small ?rms
via the Funding for Lending scheme.
Participants will be able to earn further
allowances by lending to small or
medium sized enterprises (SME) in 2015,
by drawing £5 in the scheme for every £1
of net lending to SMEs.
• Peer to peer and crowdfunding ?nance
continues to rise, with £1.3bn of
transactions occurring in the ?rst half
of 2014.
• The Seed Enterprise Investment Scheme
is now permanent, and has already
helped over 2,000 companies to raise
more than £175 million of investment.
An easier way to ?nd and access
business support
• The world-?rst Growth Vouchers
programme is subsidising small and
micro ?rms to take their ?rst form of
strategic advice, from an accredited
adviser, and test what works.
• An improved offer for all businesses
provides inspiration and advice from
www.GREATbusiness.gov.uk, backed up
by legal information on GOV.UK
• The Business Growth Service brings
together all targeted advice for small
?rms with high growth potential, so
businesse s will be referred seamlessly to
experts in different areas.
• A new Small Business Charter will
encourage business schools to support
small ?rms, alongside local growth
hubs dedicated to helping small
businesses grow.
THE REPORT ON
SMALL FIRMS
2010-2015
9
THE GOLDEN AGE
FOR SMALL FIRMS
3 BIS Business Population Estimates 2010-2014
4 ONS Labour Market Statistics 2010-2014
5 BIS Business Population Estimates 2014
Record increases in the number of small businesses, self-employment and employment
Source: ONS Labour Force Survey, Employment and self-employment
& BIS Business Population Estimates for the UK and Regions
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9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
1
9
8
4
20 0
1
2
3
4
5
6
25
30
Employment Self-employment Number of businesses
S
e
l
f
-
e
m
p
l
o
y
m
e
n
t
a
n
d
n
u
m
b
e
r
o
f
b
u
s
i
n
e
s
s
e
s
(
m
i
l
l
i
o
n
)
There are a record
number of small ?rms in the UK: some
5.2 million, an increase of 760,000 since 2010.
In the last year alone the business population
increased by 330,000,
3
another record for
small businesses and further evidence that
these ?rms have shown themselves to be
incredibly resilient in the face of dif?cult
economic conditions over recent years.
The labour market has performed well beyond
expectations. There are 30.8 million people in
employment – more than ever before and self-
employment has played a major role. There
are over 4.5 million self-employed people in
the UK, an increase of 500,000 since 2010.
4
As well as the rise in self-employment,
small ?rms have become more important
in providing employment and now account
for 48% of private sector employment.
5
This
re?ects the dynamism and ?exibility that
is becoming increasingly present in the
economy, with people less likely to work for
a large employer for their entire career than
thirty years ago.
THE REPORT ON
SMALL FIRMS
2010-2015
10
The chart immediately below shows that
small ?rms now account for nearly half
of private sector employment, large ?rms
contribute less than 40%.
Micro entrepreneurs and very small ?rms
dominate the business landscape. Most of
these will remain as sole traders and self-
employed enterprises, often described as
Small ?rms dominate the business population
Source: BIS Population Estimates for the UK and Regions 2014
80%
60%
40%
20%
0%
100%
99.3%
53.2%
39.9%
0.1%
13.5%
12.2%
0.6%
33.2%
47.9%
0-49 employees 50-249 employees 250 and over employees
Businesses Employment Turnover
Source: BIS Business Population Estimates for the UK and Regions 2014
B
a
s
e
y
e
a
r
2
0
0
0
=
1
0
0
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
168
120
118
114
94
90
80
100
110
120
130
140
150
160
170
Zero employees 1-9 (micros) 10-49 (small) 50-249 (medium) 250+ (large)
Non-employing businesses continue to grow
THE REPORT ON
SMALL FIRMS
2010-2015
11
‘lifestyle businesses’. However, many of
these ?rms will have a strong ambition to
grow and will look at ways in which they
can invest in their business to scale-up. We
are already seeing a number of Start Up
Loan businesses taking on new staff and
expanding into new markets.
Opportunity rather than necessity
The increase in start-ups and self-employment
is not driven by necessity but by desire. Those
who choose to start a business or enter self-
employment are doing so because they want
to, they view it as an opportunity rather than
feeling they have no other alternative (see the
graph Most entrepreneurs start a business because
they want to on page 12). Last year a RSA/
populous survey of business owners found
that 84% agreed that being self-employed
meant they were more content in their
working lives and that only 27% of those who
started up in the recessionary period of 2008-
2012 did so to escape unemployment.
6
Self-employment is a vital part of the labour
market. As well as business owners, self-
employed people are referred to as freelancers,
consultants and contractors. These are
independent professionals who provide
important services to a wide range of businesses
in different sectors. For them, and the clients
they work with, self-employment is the model
they are actively choosing as the best way of
using their skills and earning an income. Self-
employment provides ?exibility and a varied
career; it is not the poor cousin of employment.
Source: BIS Population Estimates for the UK and Regions 2014
50%
40%
30%
20%
10%
0%
60%
70%
80%
76%
20%
4%
0.6%
0.1%
0 1-9 10-49 50-249 250 or more
P
e
r
c
e
n
t
a
g
e
o
f
U
K
p
r
i
v
a
t
e
s
e
c
t
o
r
b
u
s
i
n
e
s
s
e
s
a
t
t
h
e
s
t
a
r
t
o
f
2
0
1
4
Micro ?rms dominate small businesses
Number of employees in addition to business owner
6 Salvation in a start-up? The origins and nature of the self-
employment boom, RSA, May 2014
THE REPORT ON
SMALL FIRMS
2010-2015
12
There has never been a better time to
start a business
The UK is one of the best places in the world
to run a business. The UK is ranked in the top
10 in the world for doing business by the World
Economic Forum and World Bank. In addition
the Global Entrepreneurship and Development
Institute rank the UK as an entrepreneurial
country 1st in Europe and 4th in the world.
This represents a signi?cant improvement in
recent years rising from as low as 14th in 2012.
7
Perhaps then it is not surprising that the
aspiration to run a business is increasing.
Particularly encouraging is the incredible
entrepreneurial spirit amongst young people.
This has been intensifying since 2010 and it is
now the case that those aged 18 -24 are almost
twice as likely as older age groups to say they
intend to start a business in the next 3 years.
Over the last ?ve years, the Government and
the private sector have done a lot to increase
the number of start-ups. In early 2011 StartUp
Britain, a national campaign by entrepreneurs
to celebrate enterprise in the UK was launched
to inspire the next generation of small ?rms.
StartUp Britain bus tours have reached 20,000
people
8
and from early 2012 the Government-
backed Business in You campaign used
successful entrepreneurs’ stories to illustrate
how an idea can become a business.
Small businesses are capturing the public
imagination. While shows like Dragon’s Den
and The Apprentice have been around since
2005, their ‘high-drama’ formats do not always
give a realistic view of what it means to be an
entrepreneur. The real world of small business
is now reaching a large audience through
Small Business Saturday and the Government’s
Business is GREAT campaign. I hope that these
initiatives will continue to break down the
7 Global Entrepreneurship and Development Index 2014 8 StartUp Britain ?gures
Most entrepreneurs start a business because they want to
TEA: Proportion of the working-age population involved in starting or running a business under 42 months old
Source: GEM UK report 2013 – G7 countries
12.7%
12.2%
5.0%
4.6%
3.4%
3.7%
2.7%
1.8%
1.2%
0.9%
0.7%
0.6%
0.9%
7.3%
0% 0%
5%
10%
15%
20%
25%
30%
2%
4%
6%
8%
10%
12%
14%
Total TEA Necessity TEA % of TEA which is necessity
Necessity TEA: Those starting a business to escape unemployment
US Canada UK Germany France Italy Japan
%
o
f
T
E
A
w
h
i
c
h
i
s
n
e
c
e
s
s
i
t
y
-
d
r
i
v
e
T
E
A
THE REPORT ON
SMALL FIRMS
2010-2015
13
myths and highlight the opportunity about
what it means to run a small ?rm.
Start Up Loans
The ?ndings from my ?rst report, Make
Business Your Business, showed that there was
no lack of aspiration amongst people to start
a business, particularly for young people.
The problem they were reporting was a lack
of start-up capital. For many years, start-up
businesses have found it very dif?cult to
obtain funding from banks, as banks have
focused their lending on more established
businesses where there is less risk of default.
This weakness was exacerbated by the
?nancial crisis, when banks became more risk
adverse with respect to their credit decisions.
To overcome this, in 2012 we launched the
Start Up Loans Company. Initially working
with 18-24 year olds, it offers small loans of
around £5,000 to people with viable business
plans. The initial demand for this was
extraordinary – 6,500 loans with a total value
of £39.2 million drawn down in the ?rst year.
Start Up Loans does more
than provide funding. The
crucial thing for start-ups
is not only the ?nance;
it is access to advice and
support. Organisations that
deliver Start Up Loans also
provide access to a mentor for the ?rst year
of a business, along with other events and
seminars that support the managers of new
ventures to make their businesses successful.
Enterprise for everyone, whatever their
background
The early success of Start Up Loans convinced
the Government to remove the existing
age cap and increase funding to enable it to
produce more loans. This enabled a broader
range of delivery and referral partners to join.
By the end of 2014, we had lent £131 million
to 25,000 businesses. When you take in to
account the employees of these businesses,
Start Up Loans has supported 33,000 jobs
in under three years. The businesses are
2
0
0
8
-
1
0
2
0
0
9
-
1
1
2
0
1
0
-
1
2
2
0
0
1
1
-
1
3
More and more people say they intend to start a business soon
Source: GEM APS 2002-2013, rolling average
Adults aged 18-65
0%
1%
2%
3%
4%
5%
6%
7%
8%
See Case
Studies of G
John Surveys
and 3fPT on
pages 36 and
37
4.2%
4.6%
6.3%
7.0%
THE REPORT ON
SMALL FIRMS
2010-2015
14
incredibly diverse; as are the people who run
them. 37% are female-led, compared to 20% of
all businesses. The age range of loan recipients
range from 18 to 75. 45% were unemployed
before they obtained their loan.
9
I was particularly keen that this universal
programme could also be focused at areas
of particular need. Those leaving our armed
forces are in many cases highly-skilled in risk
management, decision making, team working
and specialist technical skills. Yet self-
employment for ex-military personnel is not
always thought of as a viable option; indeed it
may not even occur to those who have spent
years in a chain of command. In 2013 I was
pleased to launch X-Forces, a Start Up Loan
delivery partner that focuses exclusively on
the ex-military community. The businesses
they have helped to launch are proving that
military training equips many people with the
right skills for self-employment. In their ?rst
18 months, they have offered 250 loans and
these applicants are proving to be some of the
most successful Start Up Loan businesses.
I also wanted, to test whether enterprise
could have similar results in supporting ex-
offenders who have completed their sentence.
Since April 2014, The Department for Business,
Innovation and Skills and the National Offender
Management Service have been working with
the Start Up Loans Company to pilot targeted
enterprise learning and business planning
support at prisoners in the last few months
of custody. This pilot involves two existing
Start Up Loan delivery partners: Bright Ideas
Trust and Pinetree Trust. For those that have a
business idea, they can then bene?t from group
and one-on-one business planning support and
apply for a Start Up Loan. If their application is
successful, the loan will be drawn down once
they are released.
Enterprise is for everyone, at all ages
Source: BIS ED analysis of ONS Labour Force Survey, average Q1 2013 to Q4 2013
0%
5%
10%
15%
20%
25%
30%
35%
Newly self-employed Self-employed population
21%
23%
17%
6%
1%
10%
20%
27%
18%
16-19 20-29 30-39 40-49 50-59 60+
29%
24%
4%
9 Start Up Loan Company ?gures
See Case
Study of
Prosper 4
Group on
page 17
THE REPORT ON
SMALL FIRMS
2010-2015
15
It is early days and too early to know if the
scheme is a success – the full evaluation will
follow in due course. I do not want to pre-
empt the results but, given that re-offending
rates on sentences over one year, fall from
24% to 19% if the individual feels re-engaged
with society through employment,
10
I expect
enterprise support to also play an important
role in supporting offenders to re-engage in
society. Separately, I would like to see the
Ministry of Justice consider what provision
can be made for those in transition between
prison and release – for example in the two
open units in the female estate – to start a
business and begin test-trading.
As well as these examples,
there are many others for
whom starting a business
might be the best option, for
example: people with caring
responsibilities, long-term
conditions that make it hard to work from
anywhere but home, or people who frequently
relocate for their spouse’s job.
Looking ahead
In the last ?ve years, government and
the private sector have done a great deal
to change the attitude towards starting
a business and the support for start-ups,
particularly through Start Up Loans. While I
am certain that there are more start-ups to
come, as more people realise their aspiration
to work for themselves, the challenge for
growth is how we can support these small
?rms to be productive, ?nd the skilled
employees they need, and win contracts.
This attention to growth should be the focus
of future enterprise policy but this must
not be at the expense of making it easy to
start a business, particularly for those who
?nd it harder to access employment or other
sorts of start-up capital. I would like to see
Start Up Loans increasingly measured as an
employment programme that has a social
bene?t, rather than purely on the growth and
turnover of the businesses.
As the number of loan recipients increases,
we might look ahead to a model where
repayments for Start Up Loans, which are
personal loans, can be collected via the
tax system in a similar way to the student
loan repayment model. This would reduce
the bureaucracy involved for collecting
repayments and chasing defaults –
substantially reducing costs which bene?ts
both government and the individuals. I would
hope it would also have an impact on the
default rate as people whose business fails
would ?nd it easier to make repayments if
they enter employment.
10 Ministry of Justice, Analysis of the impact of employment
on reoffending following release from custody using
Propensity Score Matching, March 2013
See Case
Study of
Prosper 4
Group on
page 38
See Case
Study of
Prosper 4
Group on
page 17
THE REPORT ON
SMALL FIRMS
2010-2015
16
ENTERPRISE
IN EDUCATION
The changing world
of work and the increasing aspiration
towards starting a business poses a
challenge for our education system to
which some still have to recognise. Schools,
colleges and universities are responsible
for equipping young people with the skills
they need to succeed in life. At one time this
meant the ability to work as part of a team
in a large organisation; today working in a
small company or for yourself requires quite
different skills. More small ?rms mean that
there is greater churn in the labour market,
leading to portfolio careers.
With self-employment on the rise, young
people need to leave education with skills like
creativity, resilience, perseverance and self-
belief, summed up by the word ‘enterprise’. It
is now well over 30 years since I introduced
the Youth Training Scheme. The challenges
we faced then are similar to those we have
today, namely the number of young people
demotivated with few or no quali?cations, and
only convinced that they are failures. On the
other end of the spectrum, our academically
gifted are offered narrow career options
and lack the core skills that enterprise can
encourage. This was a key focus of my third
review on Enterprise for All.
Embedding enterprise into education
Enterprise in education is much more than the
creation of entrepreneurs. It is about motivating
young people to succeed and supporting them
to develop a more positive attitude to life.
This is important in any future profession
or vocational activity, and will enable them
to make better choices throughout their
education, professional and personal lives.
In 2014 I reviewed enterprise in the entire
education system. In Enterprise for All
I highlighted many good examples of
education institutions and their staff creating
enterprise experiences for their pupils and
students. This should begin at the earliest
age and I have seen this work in pioneering
schools like Herringthorpe Infant School in
Rotherham, where enterprise is embedded
into everything they do.
I am keen to replicate this across
more schools throughout the
country and in 2014 we introduced
Fiver (with Young Enterprise and
Virgin Money), to give children
£5 for the month of June to see what they could
turn it in to. The ?rst year was a spectacular
success with 31,000 children taking part
11
and
at the award ceremony it was duly revealed that
Flutter?ys, the most pro?table business in the
9-11 age group, made £495.23 in just four weeks
by making and selling bookmarks and bracelets.
Clearly young entrepreneurs to watch!
I have also seen the impact that enterprise
learning can have in further and higher
education including Barking and Dagenham
College and Leeds University where I was
able to visit and see ?rst-hand how they
share a common approach to enterprise and
engagement with business and employers across
all of the areas that their students study. This
emphasis on enterprise learning is happening in
other areas of education but it is not the norm.
See Case
Study of
Fiver on
page 39
11 Young Enterprise ?gures
THE REPORT ON
SMALL FIRMS
2010-2015
17
The offer from education institutions supported
by government and the private sector needs to
be managed with greater coherence to allow all
young people to bene?t as a lifelong experience
of enterprise throughout their education.
The government and the employers I have
engaged have recognised this need for
change. The recommendations I made (where
responsibility lies with government) will
be enacted in full. In December 2014 we
announced the creation of a new enterprise
and education company, to be chaired by
Christine Hodgson, Executive Chairman of
Capgemini UK. This company will be focused
on leadership and engagement between
employers and educators, to do more to better
inspire and motivate young people in their
education and choices for their futures.
12
Making education captive and relevant –
Enterprise Advisers
The disconnection between education and
businesses has made it dif?cult for young
people to plan their future. Imagine entering a
profession when you do not understand what
it means to work in an of?ce and interact with
customers, let alone how business works. The
new company will break down the barriers
between work and school. This means private
sector organisations taking the responsibility
to work with the education sector to improve
the skills of their future workforce.
The new company is proposing to work with
the Local Enterprise Partnerships and other
local intermediaries to put in place a network
of Enterprise Advisers, who will often be local
business people, providing advice to head
teachers on developing an enterprise offer for
their pupils as part of their duty under the
Careers Statutory Guidance. The two areas I
would like Enterprise Advisers to focus on are
getting speakers in to schools that can enthuse
and motivate young people with the reason for
their study and programmes that give young
people a taste of what their future holds for
them, not just in business but also in the public
sector and their professions. For many young
people the fourth R is relevance and we must
keep education relevant to their life to come.
Traditional careers advice has focused its
attention on young people when they are about to
leave school. That is too late. The age that I think
is most important, and where Enterprise Advisers
can play a key role, is with 11-13 year olds and
when children are being introduced to academic
education. This is the age when they can be
inspired and motivated to excel in their studies
but also be switched off education entirely.
Closing the gap between employers and
young people – an Enterprise Passport
The changes in the world of work mean that
employers are looking for different skills when
recruiting. Smaller businesses in particular
need to know more about an individual than
exam results can show, such as how they
can work in a team or their ability to come
up with new ideas and challenge the status
quo. According to this year’s CBI/Pearson
Education and Skills survey, over half (61%) of
?rms are concerned about the resilience and
self-management of school leavers and a third
(33%) with their attitude to work.
13
To develop these work and life skills, young
people must have rich, rewarding and
stretching enterprise experiences at school,
college and university. Through the creation
of an Enterprise Passport, employers will be
able to see what activities their prospective
employee has undertaken outside of his or
her core lessons, and the impact of these on
the individual, enabling them to form a better
picture of what they might bring to the ?rm.
Once this is in place, those schools and colleges
that embrace and encourage enterprise
and extra-curricular learning will have a
mechanism for chronicling their achievements
and for having these recognised by Ofsted.
Future Earnings and Employment Record
Within higher education, it is the students
themselves that must be convinced of the
value of enterprise to drive change. Since 1970
there has been a great change in the funding
of universities and eighteen year olds are now
12https://www.gov.uk/government/news/new-careers-and-
enterprise-company-for-schools
13http://www.cbi.org.uk/media/2807987/gateway-to-growth.pdf
THE REPORT ON
SMALL FIRMS
2010-2015
18
making the choice to invest large sums of
money in their future. In Enterprise for All, I
recommended that the government publishes
the Future Earnings and Employment Record
(FEER), to enable young people to make informed
decisions about education choices based on the
bene?ts and future prospects they stand to gain.
From this year, work on FEER will begin and
this will show the types of occupation and the
salaries that graduates from different courses
and institutions can expect and enable potential
undergraduates to compare one university with
another. This will also apply to colleges.
I would expect FEER to be a catalyst for
these education institutions to adopt more
focus on enterprise. There are an increasing
number of young people who want to work for
themselves and FEER will create an accurate
record of the number of graduates who start a
business upon graduation.
This will provide important evidence
for us to judge universities’ enterprise
and entrepreneurship credentials. In the
meantime, universities’ commitment to
student entrepreneurship will be judged by
a new Duke of York Award for University
Entrepreneurship and I hope this illustrates
good practice and help to improve the
collective enterprise offer across the higher
education sector. I am pleased that the
National Business Awards are going to run the
award and look forward to the ?rst winner to
be announced in November.
Supporting young people to start a
business
It is clear that there is an incredible
entrepreneurial spirit amongst young people.
This has been intensifying since 2010 and it is
now the case that those aged 18-24 are almost
twice as likely as older age groups to say they
intend to start a business in the next 3 years.
This spirit should be encouraged.
The option to start a business should not
be con?ned to those studying business or
high-tech subjects. In the 2000s, there was
a move in universities to support science
and digital ‘spin-outs’ but enterprise wasn’t
seen as something for arts or humanities
students. In the last ?ve years, universities
have recognised that low-tech and no-tech
businesses can be successful and provide
Young people are more likely to want to start a business
Source: GEM APS 2002-2013, rolling average
2
0
0
2
-
0
4
2
0
0
3
-
0
5
2
0
0
4
-
0
6
2
0
0
5
-
0
7
2
0
0
6
-
0
8
2
0
0
7
-
0
9
2
0
0
8
-
1
0
2
0
0
9
-
1
1
2
0
1
0
-
1
2
2
0
1
1
-
1
3
0%
2%
4%
6%
8%
10%
12%
14%
18-24 years 25-65 years
7.6%
8.4%
8.3%
8.1%
7.6%
7.1%
6.5%
6.8%
11.1%
12.1%
4.6%
5.1%
5.0%
4.7%
4.4%
4.1%
3.8%
4.2%
5.5%
6.0%
THE REPORT ON
SMALL FIRMS
2010-2015
19
their students with a way of supporting
themselves. In the same period, universities
have placed greater importance on student
enterprise as opposed to just focusing
on generating intellectual property, tech
transfer and businesses started by their
academic community.
The best mechanisms that I have seen
for universities to reach all students are
enterprise societies to spark their interest and
elective modules to equip them with a basic
understanding of new venture creation. In
Enterprise for All, I set out some of the good
examples of these modules I have seen during
visits to universities across the country. I
would like all students to have the chance
to take one of these modules as part of their
undergraduate studies. Taking a module in
enterprise or entrepreneurship should be
about more than just learning enterprising
skills; it should also equip students with
a basic understanding of how to start and
run their own business as a part of their
quali?cation, including business planning,
pitching to investors and doing a cash?ow.
One of the bene?ts of these modules, where
they are cross-faculty, is that by bringing
together students of different disciplines, they
will learn how to build constructive teams
with individuals from different backgrounds
with different interests and skill sets. I have
seen how this builds their communication
skills and con?dence that will stand them in
good stead when applying for a job or seeking
customers in the future.
Further education students must be given the
same opportunities to learn how to work for
themselves as their peers. Students taking
vocational courses are not only learning
employable skills; in many cases they are
preparing to enter sectors where being self-
employed or freelancing is increasingly
common. This makes it very important they
know how to either start a business or to
manage their affairs as a freelancer.
In Enterprise for All, I was pleased to announce
that City and Guilds had decided to move to
include a business start-up offer as a companion
to level 3 quali?cations, and that Pearson was
intending to take steps in this direction. This is
a good start but needs to go further. I would like
every vocational course at all levels to include
this module, and for it to be compulsory.
Modern businesses require employees
with relevant digital skills
In Growing Your Business, I looked at the
reasons that more small ?rms were not
trading online, and found that they did not
all have the capability to make effective use
of digital tools and opportunities. A constant
challenge for small ?rms is keeping up with
the high pace of technological change. Most
?rms report that they cannot ?nd people with
the right skills to recruit. Yet computer science
degrees have the highest unemployment
rate six months after graduation,
14
whilst
Information and Communications Technology
courses have the highest unemployment rate
of all vocational subjects.
15
I made this a priority in my role on the
Government’s Digital Taskforce. Over the
next decade it is estimated that the economy
will create an additional 1 million new digital
roles that need ?lling so we must make sure
that courses are equipping people with the
skills that businesses want. In November 2014
we announced a set of new government and
industry-backed digital quali?cations. Degree
Apprenticeships will allow young people
to complete a degree at the same time as
working for a business – earning a salary
which is two thirds funded by Government,
whilst learning how to use their newly
acquired skills in a business environment.
The fast-moving nature of the digital economy
means that even those who have digital
skills need to keep these up to date. A new
set of industry-designed and accredited short
courses will provide intensive training in the
areas that employers need immediately, and
will be delivered ?exibly so that they can
14 The Annual Population Survey, Of?ce for National Statistics
(ONS), 2012
15 Higher Education Statistics Agency – Destinations of
Leavers from Higher Education Survey 2012/13
THE REPORT ON
SMALL FIRMS
2010-2015
20
be studied alongside a full-time job. Small
businesses looking to hire people for digital
jobs will have con?dence that applicants who
have completed these courses will have the
skills they are looking for.
Part of the problem is that not all courses
teach the skills that businesses need. To train
the digital innovators of the future and to set
the standard for higher vocational provision,
we are creating a National College for Digital
Skills with industry and education providers.
The ?rst phase of the National College, with its
hub in London, will start developing the new
curriculum and working with students in 2015
before scaling up in terms of student numbers
and potential new locations in other parts of
the country in future years.
Teachers
I want to increase emphasis on the important
part teachers have to play in the delivery of
enterprise in education. The role of businesses
and employers is key to providing teachers
and lecturers with both the tools to bring
enterprise in to the classroom and in providing
the incentive for them to do so. Teachers and
lecturers who have not recently worked in
business may naturally ?nd it harder to inspire
their students about their future work choices,
including the possibility of setting up a business.
The world of work is changing so fast that we
need to make it easy for teachers to convey a
positive attitude to work to their charges.
During my work on Enterprise for All, I worked
with the Confederation of British Industry (CBI)
on the concept of a programme for teachers
to gain insight into the principles of running
a business and the skills looked for by today’s
employers. I want to repeat my call to all
businesses and business groups to take this
forward. As well as being useful for teachers
to update their knowledge, I would like this
to be incorporated into every teacher training
programme so that new recruits to the profession
have the chance to apply their understanding of
business to their lesson plans straight away.
Looking ahead
The creation of the new enterprise and
education company marks a crucial moment
in the relationship between government,
employers and the education sector to improve
young people’s skills and their readiness
for the future. The time where government
knew best and could set the agenda alone has
gone. I proposed this company as a genuine
partnership to help break the disconnection
between education and work. Once the
company is in place, the private sector will be
equally responsible for saying what skills are
needed and making the Enterprise Passport
and Advisers relevant to them and a success.
I want us to ensure that the Careers Statutory
Guidance increases its traction with head
teachers and their responsibility to inspire
and engage their pupils about enterprise
opportunities for their futures. Whilst the
enterprise offer takes different forms in
different schools, both the Enterprise Passport
and Advisers provide critical tools to support
headteachers in achieving this, whilst the
teacher training programme will improve
support for teachers. A key part of this will be
about how the new company and its partners
can support headteachers in resolving the
correlation between enterprise learning and
delivering their priorities around attainment,
behaviour and participation. The role of Ofsted
is also pivotal in how schools demonstrate the
impact of their enterprise offer.
Finally, the FEER will provide a critical
backdrop and is something that universities
and colleges must plan for. Now more
than ever, colleges and universities
must demonstrate their added value, the
uniqueness of their institutions as well as
the richness of their student experience.
Enterprise and entrepreneurship is a point
of differentiation. I have spoken to young
people who have selected a university on
the sole reason that the institution provides
a good entrepreneurship programme. The
FEER will also present young people with
the opportunity to compare courses and
university and college. I believe we have a
duty to encourage conscious decision-making
and provide young people with the tools and
information to choose a course that will best
enable them to realise their potential.
THE REPORT ON
SMALL FIRMS
2010-2015
21
16 BIS Small Business Survey 2012 and Business Population
Estimates
17 Booz & Co 2012
18 IMRG CapGemini e-Retail Sales Index 2014
19 BIS Small Business Survey 2012
20 Broadband Delivery UK ?gures at end December 2014
NEW WAYS OF
DOING BUSINESS
A number of factors are
driving the increased aspiration to work
for yourself, and the ease of doing business
in the UK. In 1971, technology meant the
three T s – typewriter, telephone and telex.
Businesses needed premises for their clients
to reach them, employees to take customer
orders and write invoices. Economies of scale
meant that larger businesses were more
ef?cient and so ?ourished. There was little
support available for small ?rms.
In 2015, you can start a business with
nothing more than a smart phone. Effective
use of social media allows you to reach
customers. Goods can be sold online, with
PayPal handling the payment. Even without
your own website, you can sell products
via eBay, Amazon or specialist sites like
notonthehighstreet.com. You can start a
business from home, or from ?exible premises
that also provide support.
Technology is making it easier to start a
business
Technology is having a transformative effect
on small business to trade, raise ?nance,
export, market and network. Effective use of
technology and the internet can lower business
costs by making processes more ef?cient and
automated, and allow businesses to reach
more customers. Yet only 1.6 million (less than
a third) of small ?rms actively trade online.
16
Recent research suggested the internet
represents a £19 billion opportunity for small
?rms and the UK.
17
A clear illustration of how
quickly habits are changing is that in the run
up to Christmas in 2014, high-street shops
reported a decline in sales from previous
years, while throughout 2014 online sales grew
by 14% to £104 billion, according to ‘e-tail’
trade association the IMRG.
18
One barrier is the infrastructure. Not all
businesses have fast connections to the
internet, and in 2012 8% of businesses had no
internet connection at all.
19
In Growing Your
Business, I looked at the importance of access
to broadband for business practices, and since
then have been part of the cross-Government
effort to drive change. In 2013, Government
launched a £100 million Broadband Connection
Vouchers scheme to offer small ?rms a grant of
up to £3000 to cover the cost of getting super-
fast broadband installed in their premises. So
far, 7000 small ?rms have bene?tted but this
is just the tip of the iceberg so we are widening
the areas this year so more can apply.
20
Another barrier is simply whether small ?rms
understand the opportunity. Go ON UK, in
partnership with the Department for Business
Innovation and Skills, is running a SME Digital
Capability Programme, to ensure that small
businesses have the opportunity and ability
to build their basic online skills and presence.
During its ?rst year it is estimated that the
THE REPORT ON
SMALL FIRMS
2010-2015
22
programme has inspired 30,000 SMEs and
educated 5,500 of them to a greater level
leading them to take further action.
21
Those ?rms that are trading online can
become ‘inadvertent exporters’ by overseas
customers accessing their site and becoming
customers. In Growing Your Business, I
reported that 25% of PayPal’s activity in
the UK comes from overseas trading.
22
81%
of SMEs on eBay export to ?ve or more
countries.
23
Last year, eBay launched a new
initiative to support UK businesses to sell
overseas by allowing them to create a shop for
other eBay sites across Europe.
This ‘e-exporting’ needed more support from
Government. In 2013, as part of our Digital
Taskforce, we worked with businesses to
identify the barriers and obstacles faced
trading online in Europe. Issues identi?ed
ranged from regulatory barriers caused by
the absence of a harmonised EU regulatory
framework to differences in language and
cultural preferences. Government intends to
make changes to the regulations to remove
what barriers we can, and to do more to
support businesses to adapt their websites
through UKTI’s Passport to Export scheme.
Another signi?cant change that
technology has enabled is the
rise of the sharing economy,
through many platforms and
apps. For consumers, it means
cheaper taxis and more places
to stay. For small ?rms, it can mean no longer
having to buy expensive assets such as tools
or vans and instead using these on a per hour
basis as needed.
Home-based businesses
The physical barriers to starting a business
are also falling away. In 1980, we found that
there were not enough garage sized workshops
available for small businesses to start and to
encourage the building of more, we had to use
tax incentives. That problem is no longer with us
for today, knowledge based or service businesses
do not require large amounts of space, and even
small, artisan craft or food businesses can be
run from a well-equipped kitchen. Once you
might have been concerned about presenting
a professional image or worried about giving
customers your home address, today there are
now many ‘virtual of?ces’ that provide these
home-based businesses with a credible business
identity. In 2013 there were 2.9 million home-
based businesses; an increase of nearly half a
million since 2010. They contribute £300 billion
to the economy.
24
In Make Business Your Business, I looked
at the guidance available for entrepreneurs
thinking of starting their business at home,
and found it to be confusing. To make things
simpler, we published a Home Business
Guide which set out the legal position.
25
In
August 2014, the Prime Minister went further
and announced a package of measures,
including updated business rates and planning
guidance, to make it even easier to start and
run a business from home.
26
Incubation and acceleration
For those who are either unable or choose
not to run their business from home, it no
longer means taking out a long, in?exible rent
on a property. Often a hot desk in a shared
of?ce provides enough space for most new
start-ups. At any one time, small ?rms can
apply to use one of 80 Government sites with
1000 desk spaces available, under the Space
for Growth programme. Large businesses
are following suit, in particular banks that
recognise the bene?ts of forming relationships
with growing businesses at an early stage
in their development. According to a recent
O2/Telefonica report, the number of start-up
programmes has increased by 110% from
2011-2014.
27
21 Go ON UK ?gures
22 PayPal ?gures
23 eBay ?gures
24 BIS Small Business Survey 2012 and Business Population
Estimates
25https://www.gov.uk/government/publications/the-home-
business-guide
26https://www.gov.uk/government/news/backing-for-home-
based-business-boom
27 The Rise of the UK Accelerator and Incubator Ecosystem,
O2/Telefonica, December 2014
See Case
Study of
Allied
Ventura
on page 40
THE REPORT ON
SMALL FIRMS
2010-2015
23
Incubators and accelerators provide premises
and advice to help businesses establish
themselves and grow providing, in many
cases, much more than just a desk. For
example, some incubators offer wet-lab
space or access to tools for product testing.
Sometimes they are sector-speci?c, so
businesses bene?t from making connections
with future clients and other start-ups.
Social Enterprises
One change that is driving the increased
aspiration to start a business, particularly
amongst young people, is the option to start
a social enterprise. The National Association
of College and University Entrepreneurs
(NACUE) say that interest from their members
in starting a social enterprise is noticeably
increasing, and last year 19% of their members
were involved in founding a social enterprise.
28
These are businesses that are set up to address
a need or improve the lives of people, and
reinvest their pro?ts back in to this social
mission. They are different from charities in
that they are businesses and do not rely on
donations but generate revenue that is invested
back in to the business. Since 2010, there
has been an increase in the number of social
enterprises, from 240,000 to 300,000 and they
now account for nearly 6% of small ?rms,
29
although 15% of SMEs report they have a social
mission.
30
They are increasingly disrupting
traditional markets by providing innovative
models in sectors such as energy, transport,
health, education, and consumer products.
In Make Business Your Business,
I reviewed the support that
Government was providing
for social enterprises. I found
that they often reported
being unable to access ?nance, yet there is
increasing diversity in the ?nance available
for social enterprises. For example, Big Society
Capital has invested £150 million, unlocking
£50 million from other investors so far,
creating 30 intermediaries specialising in
lending to social enterprises.
31
In April 2014 we
introduced a Social Investment Tax Relief to
encourage further investment. The UK social
investment market is worth over £200 million,
growing by c.25% annually.
32
Looking ahead
As the barriers to starting a business continue
to fall, running a business will become more
and more mainstream. Over the last ?ve
years, I have met many entrepreneurs and
business owners that would struggle to get
a business off the ground or remain viable,
without the opportunities available to them
today through technology.
Small businesses have the potential to become
even more sophisticated in the way they
operate and interact with customers but this
will require them to develop their digital skills
and capability. Employing the right people will
continue to be critical, and small ?rms will
need to ?nd ways to target and attract college-
leavers and graduates with specialist skills.
At the same time, ?rms will be smarter about
when they need to take on employees and
when they can outsource particular pieces
of work – to other small ?rms set up to take
advantage of this type of opportunity.
The other area where I can see further
growth opportunities is by increasing the
export potential of small and micro ?rms. I
described earlier, the rise of the ‘inadvertent
exporter’ and how this is made possible by
the availability of trading platforms like ebay.
These traders are responding to overseas
demand in a reactive way; I would like to
see them thinking more strategically about
reaching customers overseas and this means
further encouragement and investment
in their export skills including further
advancement in their digital capability.
See Case
Study of
Rotunda
on page 41
28 NACUE ?gures
29 BIS Small Business Survey 2012 and Business Population
Estimates
30 Cabinet Of?ce (2013) Social enterprise: market trends.
Based on data from the BIS Small Business Survey
2013, there are an estimated 180,000 Small and Medium
Enterprise (SME) social enterprise employers in the UK,
making up 15% of all SMEs
31 Big Society Capital (2014) Annual Report 2013
32 City of London (2013) Growing the Social Investment
Market: The Landscape and Economic Impact
THE REPORT ON
SMALL FIRMS
2010-2015
24
PUBLIC PROCUREMENT:
A QUARTER OF A TRILLION
POUND OPPORTUNITY
33 See Cabinet Of?ce: Making Government business more
accessible to SMEs (July 2011), page 7
34 See National Audit Of?ce (NAO): Managing Government
suppliers (8 November 2013), page 8.
Opening up public
procurement to innovative and
competitive small ?rms has been one of
my priorities in supporting both economic
growth and ef?ciency for the taxpayer.
This chapter sets out how new public
procurement reforms taken this Parliament
will transform the way small businesses
can gain better and more direct access to
the public sector market.
A lack of access to public sector contracts
has been a perennial problem for small
businesses. The public sector spends nearly
a quarter of a trillion pounds each year on
goods and services, and offers huge growth
opportunities for small businesses, voluntary
and community providers and social
enterprises. Yet in 2010 only 6.5% of the value
of central government procurement spend
went to SMEs;
33
along with a very mixed
picture across the wider public sector in terms
of engagement with and procurement from
small suppliers.
Visibility, bureaucracy and payment
In Growing Your Business, I looked in detail
at what shuts small suppliers out of public
procurement. Small ?rms told us that
excessive bureaucracy through the use of
Pre-Quali?cation Questionnaires (PQQs) had
made access almost impenetrable; contract
opportunities were too hard to ?nd; and
late payment not only impaired a supplier’s
access to working capital but also discouraged
them and others from competing for and
delivering future public sector business. These
impediments also pointed to a fourth issue, that
small ?rms reported little means of recourse
available to them when they were treated poorly
by a public procurer or as a sub-contractor in a
public procurement supply chain.
Central Government has already taken
positive action to improve its procurement
practices and it is likely to achieve its 2015
target of 25% spending (for both direct and
indirect procurement) going to SMEs. This has
been assisted by G-cloud which establishes
framework agreements with a large number
of providers of cloud computing services, and
lists those services on a publicly accessible
portal known as the digital marketplace. Public
sector organisations can call on the services
listed on the Digital Marketplace without
needing to go through a full tender process.
This development in central
Government is welcome news
but procurement at this level
represents a relatively small
proportion of the procurement
opportunity available to small
businesses – about 20% of
overall public sector business
won by small ?rms. It is in local government
and the NHS where the vast opportunities
for these businesses lie – some 70% of small
suppliers supplying the public sector sell to
these markets alone.
34
I have come across some
See Case
Studies of
Andrew
Francis
Butchers and
Austin Hayes
on pages 43
and 44
THE REPORT ON
SMALL FIRMS
2010-2015
25
very good examples where small ?rms are
actively courted for the quality and innovation
they deliver to the NHS and local government.
However, these two areas of the public sector
receive the majority of complaints, in particular
about their use of PQQs.
A ‘single market’ for procurement
It has been my intention to deal with the
problems faced by small businesses in
procurement across the entire public sector.
In 2013, I recommended a set of ‘single
market’ principles to be put into legislation,
to provide a more simple, consistent and
accessible approach to procurement across all
Government and public bodies including local
government, NHS hospitals and providers,
Police, Fire Service and parts of the education
sector. Government is making this happen
through a package of reforms delivered via the
transposition of EU Procurement Directives
and the fourth session Small Business,
Enterprise and Employment Bill.
Changes to PQQs
PQQs have been found to be onerous by small
businesses, often imposing more than 40
pages of pre-quali?cation questions before
they can be considered for bidding for a
contract. Every procurement opportunity has
a different PQQ, thus requiring a bespoke
response from the supplier. Often, PQQs
contain questions about the public body’s
wider objectives that are completely unrelated
to the procurement itself. This puts small
businesses at a distinct disadvantage when
bidding against larger ?rms that have the
resources to respond to the number, size and
requirements of PQQs.
Legislation will take effect this month
and deal with this in two ways: ?rstly by
abolishing all PQQ requirements across the
whole public sector for contracts below the
EU thresholds for goods and services; and
secondly, for larger contracts, providing a
standard PQQ for ?rms to complete once and
use for all contracts. I am expecting that this
will dramatically reduce the red tape involved
in tendering for public sector contracts.
Making all procurements opportunities
accessible in one place
Central Government already uses
Contracts Finder to advertise all Whitehall
departments’ procurement opportunities.
From February 2015 this site will be expanded
and dramatically improved to host all
public contracts above £10,000 in central
Government and £25,000 across the wider
public sector. This will be a world ?rst,
creating a single, authoritative repository for
all public contracts, and to enable suppliers to
search for public sector business on the basis
of price, location and sector.
Contracts Finder will deliver additional
features and functions that will make it
easier for small ?rms to access contract
opportunities. It will publish the award
of all procurements so that suppliers can
identify who won, at what price and use
this information to make approaches to the
successful bidders for potential sub-contract
opportunities. It will also share APIs to enable
business champions and representatives like
trade bodies and Local Enterprise Partnerships
to target their small business members
about procurement opportunities relevant to
their sectors and it will be made compatible
with smart phones and tablets so that these
suppliers can have quick and easy access.
For public bodies, the use of Contracts Finder
will not take away their autonomy to run
their own procurements including the use
of their own procurement portals or local
and sector channels to advertise contract
opportunities. But it will bring all of their
procurements along with all other public
bodies’ procurements into one place and into
the view of many thousands of potential
suppliers. This offers these public bodies the
opportunity to engage the best suppliers,
and drive competition and value in the
procurement of goods and services they offer
to their customers and communities.
THE REPORT ON
SMALL FIRMS
2010-2015
26
Paying on time
There is a clear leadership role at stake for
Government and the wider public sector to
pay its suppliers on time. In 2008, central
government set an ambition that it would
pay at least 80% of invoices within ?ve days.
Meanwhile, it was not untypical for prime
contractors to push their sub-contractors out
to over 90-plus days for payment. In other
parts of the public sector, Mystery Shopper,
the Government’s complaint service for
suppliers about procurement practice, has
received cases where 100 days were still
common in 2010.
A recent National Audit Of?ce (NAO) report
said that small and medium enterprises
(SMEs) were paid more quickly by the
government than the private sector, but
in a third of cases, public sector clients
took more than 30 days to settle up.
35
From
February 2015 all public bodies will have
a legal duty to pay invoices within 30 days
and to ensure that 30 day payment terms
?ow down all public sector supply chains,
bene?tting sub-contractors. To enhance the
process for administering payment in the
public sector, the Small Business, Enterprise
and Employment Bill proposes provision for
Government to accept electronic invoices to
reduce bureaucracy and speed up payment.
Enforcement and accountability
Small ?rms and their representatives rightly
point out that the reforms will only work
if public bodies are made accountable for
enforcing compliance amongst their procurers
and if there is recourse when things go wrong.
Transparency and peer pressure are often the
best drivers of change, and as a ?rst step to
achieving this, the imminent procurement
reforms will compel all public bodies to
publish annual statistics on the time they take
to pay invoices. The Small Business, Enterprise
and Employment Bill, when enacted, will allow
government to impose duties on contracting
authorities in relation to their procurement
functions. These may include timescales for
pre-procurement, the contracting stage, and
payment, as well as ensuring that procurement
documents can be accessed free of charge.
My review of public procurement also looked
at the existing complaints procedure through
Mystery Shopper and some key developments
to this service will strengthen the way small
?rms’ interests are protected when engaging
public procurers or prime contractors.
Mystery Shopper’s focus had been primarily
to react to complaints coming forward but
often suppliers report a reluctance to do this
when it threatens to jeopardise an existing
commercial relationship with a public
procurer or prime contractor. This has been
addressed by adding a proactive function
to Mystery Shopper where it is able to make
spot-checks on any procurement process
to determine whether it complies with
procurement rules and correct practice.
Mystery Shopper also relies on the goodwill
and cooperation of public bodies to carry
out its investigations. The Small Business,
Enterprise and Employment Bill proposes
to strengthen its hand by giving it a
statutory power to summon documents
and information from the procurers. The
results are published on GOV.UK, in line with
government’s commitment to transparency,
as well as being publicised on social media
to ensure that malpractice and remedial
action taken by procurers and contractors are
identi?ed and accounted for in full view of the
public and the wider business community.
Looking ahead
It will be for government to monitor the
implementation and impact of these
procurement reforms closely, and react
quickly to improve its measures where they
can deliver further transformation to enable
small ?rms to make winning bids for public
sector business. In particular, I do not want to
see the super?uous questions, once contained
in PQQs, to resurface in Invitation to Tender
documents.
35 Paying Suppliers on Time, NAO, January 2015
THE REPORT ON
SMALL FIRMS
2010-2015
27
I would also expect government to keep a close
eye on payment performance of undisputed
invoices across the public sector. If the reforms
do not deliver demonstrable progress in
the timeliness of supplier payment, I would
propose that government goes further and
considers automatic payment of interest on
late payment.
There are some additional areas where
I see potential to maximise the value
small businesses can offer to public sector
procurement.
I would like to see a second phase of
development on Contracts Finder, so that
small suppliers can increase their exposure
to more contract opportunities, in particular
by expanding its functionality to enable
prime contractors to advertise supply chain
opportunities on the site. This would give
small suppliers access to a share of some of
the biggest multi billion pound procurement
programmes in the UK including High Speed 2,
the Strategic Road Network and Crossrail.
It should also be possible to use Contracts
Finder to share insights about the
procurement market based on data gathered
from the procurements advertised on the
platform, to enable small ?rms to bene?t
from the repository of data. This can offer
powerful market intelligence to suppliers
about what the public sector purchases,
who is winning contracts and at what price.
Another potential option worth investigating
could be how best to include a mechanism for
engaging feedback on procurement authorities
and prime contractors, which incorporates
much closer integration of Mystery Shopper
within the Contracts Finder site. Ultimately, I
would like to see Contracts Finder spun out of
government through mutualisation, as I see
this as a signi?cant opportunity for this portal
to reach its full potential.
As well as creating more visibility of contract
opportunities for small suppliers, I want
commissioners and procurers to have much
more sight and understanding of what the
market of small ?rms can offer. The Small
Business Research Initiative is already in
place to connect public sector challenges with
innovative ideas from industry but I would like
us to go much further so that this kind of pre-
procurement engagement can routinely capture
the solutions and ideas from some of our most
exciting and disruptive small businesses.
Finally, I would like government to revisit
the issue of contract size and the optimal
circumstances for procuring on a large
scale versus purchasing through smaller
procurements. Contract size continues to be
a key determinant of whether small suppliers
win procurement contracts, and this leaves
them up against bulk buying and aggregated
procurement which aim to generate cost
savings but often at the expense of the
innovation and greater value that small ?rms
can offer. I propose that a full review of contract
size needs to be made a priority in any future
small business procurement programme.
THE REPORT ON
SMALL FIRMS
2010-2015
28
36 SME Finance Monitor 37 BBA Statistics
ACCESSING FINANCE
The debate around small
business ?nance has focused
almost exclusively on the availability of
bank lending. The issues have ranged from
affordability, banks’ risk appetite for lending
to start-ups and growing small ?rms, and
the quality of funding proposals put forward
by these ?rms for bank ?nance. My reviews
on start-ups and growing small ?rms
focused on highlighting sources of non-bank
?nance available to entrepreneurs and small
businesses and how they can access them.
The data shows small businesses’ reliance
on their banks for funding – over 90% of
loan or overdraft applications are made to
a small ?rm’s main bank.
36
In Growing Your
Business, I highlighted the removal of bank
managers from branches, and the damaging
effect this has had on lending decisions
to small businesses, based primarily on
the personal credit rating of individuals
within a business and not on that business’s
performance or viability.
While it is encouraging that gross lending to
SMEs is a third higher in 2014 when compared
to the same period in 2011, issues still remain.
Net lending to SMEs remains near zero as
small ?rms continue to pay down their debts.
37
Government has continued to work with
banks to address these issues. In December
2014, the Bank of England and HM Treasury
announced a one-year extension to the
Funding for Lending Scheme, targeted at the
availability of credit for small ?rms. This will
provide lenders with continued certainty over
the availability of cheap funding to support
lending to SMEs during 2015, even in the event
of stress in bank funding markets.
Additionally, government has put in place new
measures to support banking reform including
in areas of transparency and accountability as
well as a more rigorous process for overseeing
lending appeals. A measure in the Small
Business, Enterprise and Employment Bill
will require large banks to share data on
their small business customers. Despite these
measures, my concern has remained that
an unsuccessful application for bank ?nance
should not be seen as discouragement for an
entrepreneur to start or grow a business. I have
proposed that a key role for Government in this
area should be to help stimulate and promote
new and diverse sources of ?nance available to
smaller businesses.
In 2012 the Government announced Start Up
Loans, featured earlier in this report, which
has helped to fund the creation of over 25,000
new enterprises in all parts of the country,
and these are backing viable business
propositions to get the venture off the ground.
Start Up Loans sit alongside other sources of
small loan ?nance like loans provided by
Community Development Finance Institutions
which have supplied essential capital to many
small ?rms and entrepreneurs unable to get
funds from high street banks.
THE REPORT ON
SMALL FIRMS
2010-2015
29
A new British Business Bank
In 2014, Government announced a new British
Business Bank, designed to unlock ?nance
to small business, from a greater number of
providers, through a wider range of products.
I am impressed by its early progress including
the way in which it has been able to attract
additional private sector investment alongside
public funds to increase ?nance available to
small businesses. This has generated £890
million of new lending and investment to
smaller businesses in the 12 months to end
September 2014 and 71% of support is being
channelled through new, emerging or smaller
?nance providers.
38
Peer-to-peer lending and crowdfunding
The provision of new sources of
?nance to small businesses is
emerging in part through the
rise of digital platforms, offering
peer-to-peer lending and
crowdfunding. I highlighted these in my earlier
reports and these platforms are beginning
to play an increasing role in micro and small
?rms’ ability to access working capital, invoice
?nance and equity-based funding.
There has been a cumulative rise in
alternative ?nance originated through online
platforms in recent years. AltFi estimate that
£0.7 billion worth of transactions occurred in
2013 with values at the end of October 2014
doubling to £1.3 billion despite only being part
way through the year.
39
The other interesting development has been
the emergence of reward-based crowdfunding
for entrepreneurs and new small businesses
looking to fundraise, develop new ideas and
pre-sell exciting new projects.
The Government is supporting new and
emerging sources of ?nance through
the British Business Bank’s Investment
Programme, which is making investments
into a range of different ?nance providers
including peer-to-peer lending platforms.
Government provided the Investment
Programme with a further £100 million of
funding, bringing its total investment capacity
38 British Business Bank data 39 Liberum AltFi Volume Index
See Case
Study of
Market
Invoice on
page 45
Source: AltFi, www.alt?data.com
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
0.50
0
1.00
1.50
2.00
2.50
3.00
Liberum AltFi Volume Index (Cumulative Financing Volumes)
£
B
n
THE REPORT ON
SMALL FIRMS
2010-2015
30
to £400 million, which it is using to increase
the supply and range of ?nance available to
smaller businesses.
I am beginning to see these funding platforms
strengthen their credibility amongst
businesses and potential investors. This has
been apparent through the emergence of
associations that represent UK Crowdfunding
and Peer to Peer Finance. I have also been
keen to ensure that any regulation of the
peer to peer sector strikes the right balance
between protecting investors and enabling
the sector to grow. This will be overseen by
the UK’s new market regulator, the Financial
Conduct Authority. I took part in a thorough
appraisal of the regulations before they came
into force, as part of the Challenger Business
Star Chamber, and I see this as a key step to
increasing consumer and business con?dence
in using these alternative ?nance platforms.
London is the world leader for raising capital
through crowdfunding platforms, beating
cities like New York and San Francisco.
40
Business angels
My review on Growing Your Business focused
on small micro businesses, often low cost and
low tech companies where relatively small
amounts of debt or equity funding have been
essential to their ?nance needs. Other parts of
Government have focused on early stage, high
technology and innovative companies where
venture capital has been more appropriate.
However, it remains important to recognise
the importance that business angels have
played in the period since 2010 and during
the economic downturn, where their role has
been pivotal in helping small ?rms secure
the investment they need to scale up and
grow. Each year private investors account for
between £800 million and £1 billion of early
stage investment in the UK.
41
Small business and their champions have
often described business angel ?nance as the
‘only game in town’ in particular where banks
have reduced their investment activity and
venture capitalists have tended to invest in
higher value and later stage deals. Business
angels’ investment has been equalled by their
knowledge of markets and sectors and the
contacts they can bring to the small ?rms
they invest in.
I am pleased that the Government has been
proactive in supporting the business angel
market, and in 2011 capitalised the Angel
CoFund. The Angel CoFund aims to improve
the quantity and quality of business angels
investing in the UK by co-investing with
syndicates, increasing both ?nance and other
forms of support. The Angel CoFund is a
British Business Bank programme with £100
million investment capacity, which to date has
facilitated over £90 million of investment into
smaller businesses.
42
In Growing Your Business, I also looked at the
Seed Enterprise Investment Scheme (SEIS),
which aims to encourage investment in small
?rms by offering tax relief to the investor.
This has proved to be a popular investment
programme for small businesses and investors
and I fully support Government’s decision to
make SEIS permanent. By July 2014, over 2,000
companies had raised over £175 million of
SEIS investment since the scheme launched in
2012.
43
This sits alongside the more established
Enterprise Investment Scheme (EIS). A recent
Centre for Entrepreneurs and UK Business
Angels Association report found that 9 out of
10 angel investors use the SEIS/EIS schemes,
and almost 80% of all investments were made
using EIS (55%) or SEIS (24%).
44
Looking ahead
I see the establishment of the British Business
Bank as a strong addition to Government’s
commitment to increasing small businesses’
ability to access ?nance. The next step in its
development should be for it to embed its
40 Crowdfunding Centre
41 UK Business Angels Association ?gures
42 British Business Bank data
43https://www.gov.uk/government/collections/enterprise-
investment-scheme-and-seed-enterprise-investment-
scheme-statistics
44 Nation of Angels, Centre for Entrepreneurs and UK
Business Angels Association, January 2015
THE REPORT ON
SMALL FIRMS
2010-2015
31
position as a long term institution that can
not only increase the supply of ?nance to
these businesses but also expand the choice
of funding options and the number of ?nance
providers available to small ?rms.
I also want the British Business Bank to play
a stronger role in helping to raise awareness
of these alternative sources of non-bank
?nance amongst small ?rms. This requires
not only contact with small ?rms but also the
intermediaries and advisers that they rely on
for ?nance and business advice.
This emphasis on awareness should also
extend to SEIS, in particular to potential
and existing investors into small start-up
business. I am concerned that the ability
for ?nancial advisers to promote SEIS is
restricted because of current regulations
that specify a ‘professional’ investor’s status
based on a requisite number of investments
required by the individual in every quarter of
the preceding ?nancial year. This prohibits
investors that invest less frequently but are
still able to understand the risks and bene?ts
involved in investing in small ?rms. I would
like to see this changed.
Tackling late payment across public and
private sector is another crucial element
of small ?rms ability to access ?nance for
working capital and to use as funds for
investment. Around 80% of business to
business transactions are undertaken on
credit terms of some form, and trade credit
constitutes about 37% of total business assets.
Most companies in the UK supply goods and
services on credit, agreeing to defer payment
for a period after delivery rather than
demanding immediate payment. This system
is an essential element of business practice
in the UK. However, BACS’s most recent data
(July 2014) showed that £46.1 billion of overdue
payment was owed to all businesses, of this
£39.4 billion was owed to SMEs.
Late payment can have a damaging effect
on small companies. This is why the
Government is taking forward a package of
measures to tackle late and prompt payment.
Through the Small Business, Enterprise and
Employment Bill, a measure will be introduced
to require large ?rms to publish information
on their payment policies and practices.
Increased transparency, through a tough
and transparent new reporting requirement
on all the UK’s largest companies, will take
signi?cant steps to addressing the current
imbalance in economic power between
small and large contracting parties. This will
complement the measures to improve public
sector procurement outlined in the previous
chapter. Overall, measures outlined in the Bill
will provide suppliers with better information
on their customers’ payment practices and
I would expect this to create a competitive
pressure on them to improve.
THE REPORT ON
SMALL FIRMS
2010-2015
32
BUSINESS SUPPORT
45 Research to understand the barriers to take up and use of
business support CEEDR (2011)
46 Growth vouchers academic panel
My reports on small
business have highlighted an
abundance of advice and resources available
to small ?rms to help them start and grow.
This has ranged from online tools to enable
an entrepreneur to get an enterprise started,
advice about regulation, mentoring and
coaching, and a plethora of schemes designed
to help small ?rms to innovate, raise ?nance
and expand into new markets.
Government and its private sector partners
have had good reason to commit funds and
resources into business support: the evidence
demonstrates that small ?rms that take
external help and advice are most likely to
grow and maximise their contribution to
the economy. The challenge for Government
has been to get the right support to the right
businesses at the right time.
Encouraging small ?rms to take advice
Despite the obvious bene?ts of small ?rms
seeking help, these businesses are not always
inclined to actively engage business support.
Data tells us that only 30% of small businesses
take external advice and this is because most
of these ?rms say that they don’t understand
the bene?t of the help on offer.
45
This makes
them less likely to seek or pay for help.
Small ?rms also report that the market for
accessing help is fragmented, which affects
the trustworthiness of advice and the ability
of businesses to navigate what’s on offer.
In Growing Your Business, I looked at how to
stimulate demand among small ?rms to take
advice and what areas of help business most
need. Government has responded with the
Growth Vouchers programme which provides
a subsidy of 50% of the cost of strategic advice
to small and micro ?rms that have not taken
this advice before. These target specialist
areas of growth including ?nance, marketing,
recruitment, digital capability and leadership
and management.
Those that apply for a Growth Voucher will
complete a business advice assessment and
this will provide these ?rms with robust
diagnostic help about the growth needs of
their business. Businesses can then use a new
online marketplace powered by Enterprise
Nation to access over 7,000 providers of
business advice, including 3,000 that are
accredited to be Growth Voucher Advisers. To
date there have been 20,000 applications for
Growth Vouchers.
A key feature of this
programme is to test a variety
of innovative approaches to
help small ?rms overcome the
growth barriers that hold them
back. This is a ground-breaking
programme which will be the largest trial ever
in the western world
46
and enable us to see
and quantify the impact of business support,
in particular which ?rms to target, and in
what form to offer support.
See Case
Study of
Giant Leap
Childcare
on page 46
THE REPORT ON
SMALL FIRMS
2010-2015
33
Improving Government’s support offer
to business
Small business and their representatives
have also reported that the landscape of
business support schemes is too confusing
to understand and navigate. Most of all they
want simpler access – and this means better
awareness of what’s out there and easier
referral between schemes and providers.
This was the catalyst for a high-level review
of all Government support, led by Ministers
from key departments, to which I brought
my understanding of what support small
?rms need to grow. We examined how
Government’s offer to small business could
improve by being clear, simple, effectively
targeted and properly evaluated. Government
is seeking to deliver this in two ways.
The Government had already begun to look
at how it could simplify and streamline its
online advice to small business from all
parts of Government. This has produced
www.GOV.UK which provides accurate
information on legal compliance and
regulation. This is important information for
small ?rms and GOV.UK delivers it in a clear
manner. However, those who are about to or
have just started a business will look online
for more than just legal information; they
seek advice and inspiration. My review on
Growing Your Business highlighted how this
move to GOV.UK had left a gap in the way
we encourage people to create and develop a
business idea.
Government has responded with
www.GREATbusiness.gov.uk where all
Government advice, guidance and support
are brought together into one place. It is
written in business friendly language and
provides a simple and straightforward way for
businesses to get help to start-up, grow and
?nd sources of ?nance. This is supported by
an online tool that helps businesses identify
the right support for them and a national
helpline for businesses that want to talk to
an adviser. We also know that entrepreneurs
and small ?rms are increasingly turning
to social media platforms to seek guidance
and encouragement and this provides
Government, through its GREAT twitter
coverage, a means to deliver practical advice
to large numbers of small businesses in an
ef?cient and targeted way.
Targeted support for growth potential
businesses
A second key issue for small ?rms about their
take up of business support is duplication.
Small businesses ?nd it unreasonable and
discouraging to have to make several separate
approaches to providers of business support
before they can establish what help they need
and where they can access it. Small ?rms want
the provision of help to be coordinated better,
so that one approach can bring together all
support available in a simpler and quicker way.
Government has put in place a new Business
Growth Service to make this happen for
businesses with the right level of ambition,
capability and capacity to improve and grow.
It is a personalised service, for up to 20,000
businesses a year, with advisers agreeing
packages of support tailored to a businesses’
need – from developing a business plan or
new products to help with different funding
options or breaking into new markets. From
now on Government’s ?agship business
support schemes such as Growth Accelerator
and the Manufacturing Advisory Service and
schemes from the Intellectual Property Of?ce
(IP Audits) and the Design Council (Design
Leadership) will be consolidated into the single
service. Export support is provided by UKTI
and UKEF and the service is closely linked
to support from InnovateUK and the British
Business Bank.
What should this mean for growing small
businesses? The key for them is that they
will have a single point of contact, be referred
seamlessly to experts within the service and
never have to give the same information twice.
Enabling small ?rms to access help on
the ground
The Government can fund and offer all kinds
of business support programmes but it must
also ensure that it has the reach to enable
THE REPORT ON
SMALL FIRMS
2010-2015
34
small ?rms to access these schemes. This
requires advisers and providers which are close
to and trusted by small ?rms in their local
business communities and sectors of business.
The closure of Regional Development Agencies
and Government Regional Of?ces has made
that contact between government business
support programmes and the businesses they
target that much more dif?cult to achieve
and it has taken time for the Local Enterprise
Partnerships to establish a footing with
their local small business interests. I see the
development of growth hubs as a step in the
right direction and these will bring together
local, national, public and private sector
business support so that there is one access
point for business support in each area. I expect
this to offer the Local Enterprise Partnerships
a clearly de?ned role in helping to bring
together public and private sector partnerships
including local authorities, Chambers of
Commerce, enterprise networks and other local
business interests.
My review on Growing Your Business also
explored the role that university business
schools could play if they were to extend
their reach into their local small business
communities. There are around 138 business
school, focused on management and business
studies and concentrating their effort
primarily on research outputs and preparing
students for futures in large companies.
As this report and others before it have
reported the world of work and business is
changing rapidly – increasingly fewer large
?rms are being surpassed by the rise of many
more small businesses including people
wanting to work for themselves. Business
schools will need to adapt quickly if they are to
respond effectively to this shift in the business
population and labour market, and more
importantly for them to retain any relevance
for undergraduate and postgraduate students.
There are a number of business schools
that are seizing that opportunity to refocus
what they do and to play a more prominent
role in the promotion of enterprise and
entrepreneurship, not only within their
institutions and for the bene?t of their
students but also within their local economy.
Business schools are well placed to do this;
they have students, staff and facilities such
as incubator space which can offer local
businesses specialist help they need to drive
their growth; and, expertise in enterprise,
new venture creation, leadership and growth
strategies that small ?rms can bene?t from.
This makes them natural allies of small ?rms
and identi?able places where entrepreneurs
can go for help.
I have spent the last year working with the
Association of Business Schools to develop a
Small Business Charter to provide recognition
to the business schools leading the change
towards small ?rms, and an incentive to the
rest. Business schools that prioritise supporting
entrepreneurship and the growth of local small
?rms can become members of what will soon
become a Royal Charter, following a rigorous
assessment by a panel that includes small ?rm
owners. The initial cohort was 20; many more
are in the process of applying.
This Charter group are also taking an active
role in business support. For example,
some are delivering a programme of peer
group learning under the Growth Vouchers
programme, while others have combined
their expertise to design a leadership and
management skills programme for clients
of the Business Growth Service. Many are
cementing their places in the local landscape
by being part of a growth hub, including by
locating advisers in the business school site.
Looking ahead
It will take some time for us to do a full
assessment of the impact of Growth Vouchers
and the effect Government’s changes to the
delivery of business support will have on its
small business customers. One lesson we have
learnt from promoting Growth Vouchers is
that HMRC can have a powerful role in the
way Government uses its business customer
data and contact with many thousands
of businesses, to target support and key
messages to small business.
35
THE REPORT ON
SMALL FIRMS
2010-2015
Another lesson from my review of small
business is that the role of the private sector
is a key element to helping small ?rms to
?nd and receive the right kind of support
they need to drive their growth. This makes
the role of Local Enterprise Partnerships
and the intermediaries that small ?rms use
like accountants and lawyers, increasing
important, in particular during the coming
years when public ?nances for business
support will remain tight. It also makes it
imperative that the results from the Growth
Vouchers programme are fully evaluated so
that we can prove where business support can
be used to best effect and enable Government
to use the evidence to demonstrate to small
?rms that getting advice makes sound
?nancial investment in their business.
I also expect more to come from business
schools, and I have high hopes that they
will become focal points for business advice
as part of growth hubs. I can see more
opportunity for Charter award business
schools to integrate with future business
support and this should include a stronger
relationship with Start Up Loans and potential
to do more in areas where small ?rms can
grow by breaking into markets such as exports
and procurement.
THE REPORT ON
SMALL FIRMS
2010-2015
36
CASE STUDIES
CASE STUDY
G John Surveys Ltd
Gareth John, Surveyor
After six years with the Royal Engineers,
Gareth John now runs his own business,
G John Surveys Ltd., performing Land
and Topographical Surveys, Measured
Building Surveys, Engineering Surveys,
Setting-Out, and Asbestos Surveys.
What made you decide to leave the
Forces?
I joined the Royal Engineers in 2008
to gain trade skills, after 5 years in
the Territorial Army and two tours in
Afghanistan, the redundancies within
the Forces changed the way I felt about
serving. I wanted to try my hand at
being my own boss, and be in control of
my own journey. At the same time the
improvements in the UK economy made
leaving service a more appealing option.
How did you come to start your own
business?
After leaving the Forces in October 2014
I explored employment opportunities in
the survey and construction industry.
None of these accurately re?ected the
level of role I was quali?ed for through my
training and experience in the military.
This led me to consider self-employment.
I applied for business funding through the
Start Up Loans Company website, and got
a call from X-Forces the next day. With
their support I was able to set up my own
business, G John Surveys Ltd.
How did X-Forces help you?
X-Forces helped me put together my
business plan, making sure that I had
thoroughly researched my industry, and
that it was the right time to start this
business, economically and personally.
They have assigned me a business mentor
and the funding I accessed through
X-Forces has allowed me to transfer
smoothly from the army into running my
own company. The loan helped me buy
the equipment I need, fund the various
insurances and establish a website and
reputable brand identity to give my
business the foundation I needed.
How have the skills you learnt in the
army transferred to your business?
I am using my extensive survey
experience within the Army to support
myself. I am now a small business owner
and I hope to, as the business grows, be
able to expand and hire employees.
www.gjohnsurveys.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
37
CASE STUDY
3fPT
Catherine Ko, Personal Trainer
3fPT is a holistic personal training service
run under the ethos of ‘Functional,
Flexible, Fun.’ Clients can bene?t from
the wealth of experience, knowledge and
passion through the dedication of helping
people from its owner, Catherine Ko.
Why did you join the Forces?
I wanted to join the army when I left school,
but I took a different path, which was to
attend university for a course in jewellery
design, and then went into full time
employment in the retail catering sector.
There I found myself in an abusive
environment, under unhealthy
circumstances, and decided to change my
life. At ?rst when I tried to join the Army,
I failed the ?tness test. This was a big set-
back but I began exercising regularly and
getting myself healthy to a standard so
that I could join Military Intelligence.
Why did you leave the Army?
Early in 2014 I felt that I had done my
bit, and the time had come for me to
enter the next phase of my life. Joining
the Army pulled me out of a bad
environment and was a fresh start for
me. It gave me a passion for what I have
made into a business.
How did you come to start your own
business?
In April 2014, having left the military, I
found another job but after a career in the
services, I could not do something that
didn’t ful?l me. So I considered starting
my own business, and found out about
X-Forces while researching for possible
funding sources. With their help, I was
able to start-up my own ?tness studio and
do something every day that I am truly
passionate about.
How did X-Forces help you?
Working with my Business Advisor
from X-Forces, I built up a business plan
that was viable. For me, the support on
determining how the cash ?ow would
work, and making sure the company was
viable, was really important.
Even continuing our relationship, the
support from X-Forces has really worked
for me. I quickly connected with my
business advisor who helped me get loan
funding from the Start Up Loans Company
and they are continuing to provide the
support that my business needs.
How have the skills you learnt in the
army transferred to your business?
In order to join the Army, I had to change
my life and get healthy. My ?tness,
organisation skills and discipline were
honed throughout my time in the military,
and I have been able to put them to use in
my business. Now I seek to improve on my
weaknesses, and build on my strengths so
as to provide the best quality of service to
help my clients develop their true potential.
www.3fpt.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
38
CASE STUDY
Prosper 4 Group
Michael Corrigan, Chief Executive
Prosper was founded in 2014 with the
help of a Start Up Loan. Its mission
is to support every aspect of ?nding
work, employment, training and
other opportunities for marginalised
individuals, speci?cally serving prisoners
and ex-offenders.
Where did the idea to found Prosper
come from?
I met my co-founder, Steve Newell, while
we were both serving sentences in Brixton
Prison. While there we led on a project,
reporting directly to the Governor, to get
serving prisoners in to work while still
serving their sentences, where they were
able to leave the prison on daily release.
Over 200 men found work, and many
developed careers as a result. This is what
led to the formation of Prosper: being able
to implement employment services for
offenders and ex-offenders in the real world.
What are your experiences of working
in prisons to support ex-offenders in
to self-employment?
We work with individuals hoping to
?nd employment and those who would
like to start a business upon release.
Prosper has introduced unique new
concepts for would-be entrepreneurs.
We deliver courses and programmes for
ex-offenders – ‘Seize the Day’ – which
focus, absolutely, on the challenges of
people with convictions setting up their
own businesses. From business plans to
insurance, and banking to book-keeping,
and applying for business Start Up loans,
our programme is unique. With quite
modest skills, that we had always taken for
granted, we can offer real help and make
a lasting impact on ex-offenders futures,
their families and ultimately society.
What next?
We are currently developing a career
portal providing state of the art
employability, personal development, CV
building and e-learning for life. We are
also looking to expand our ‘Seize the Day’
programme for entrepreneurs to build on
its initial success.
www.prosper4.com
THE REPORT ON
SMALL FIRMS
2010-2015
39
CASE STUDY
Winner of the Fiver Challenge 9-11 Years:
Best Community Engagement
Bits & Bobs, Grasby All Saints CE Primary,
Lincolnshire
Holly Bateson, Fiver Manager, Young Enterprise
The Fiver Challenge, which ran for the ?rst
time during June 2014, provides children
with £5 and challenges them to see what
they can turn it in to. Prizes are awarded
in both the 5-8 and 9-11 age groups for
Most Pro?t, Most Inspiring Individual and
Best Community Engagement.
Why did Bits & Bobs grab the judge’s
attention?
We were particularly impressed with
the originality of the team’s handmade
and sewn gift ideas, especially the way
that they were developed and adapted
to suit the needs of their customer base.
In a wonderful bid to operate as an eco-
friendly company, the Grasby All Saints
students also used recycled materials in
the making of their items which included
scented bags, natural lemon hand scrub,
bracelets, phone cases and decorations.
How did the team reach out to their
target market?
Before they began their task, Bits & Bobs
completed their market research. By
positioning themselves at the school gate
for a week, they were able to offer samples
and taster sessions of their merchandise
to a wide range of customers. From the
feedback received the children were able
to act on the helpful tips they were given
ensuring customer satisfaction.
What measures did they take to
engage with the community?
Bits & Bobs reached out to local gardeners
with their ideas, who responded and
offered their expertise. They wrote to the
village hall and were thrilled to be offered
the use of the venue for the trade fair for
free. The team designed posters that were
displayed within the local communities,
posted ?yers through peoples’ doors
and their week at the school gates, with
samples of their work, created a real buzz.
How successful was the project?
With sales to a range of people within
the local community, Bits & Bobs made
a total income of £83.31 and a pro?t of
£63.31. They donated 25% of their pro?ts
to charity and used the rest of the money
to organise a disco to raise funds for their
next project. The biggest lessons that the
children felt they learnt was con?dence,
resilience, innovation, self-belief and the
importance of a unique selling point!
www.?verchallenge.org.uk
THE REPORT ON
SMALL FIRMS
2010-2015
40
CASE STUDY
GROWTH VOUCHER RECIPIENTS
Allied Ventura Ltd David Whitehead, Director
Ascensor Limited Andrew Firth, Owner
Allied Ventura, based in West Yorkshire, is
a specialist vehicle leasing ?rm for business
users whose needs range from single
vehicles to entire ?eets of cars and vans.
What made you decide to use a
Growth Voucher?
Over a number of months, I had become
increasingly aware that our online presence
was not leading to new clients – and
that we did not properly understand the
opportunities to use our website and search
engines to drive our business. I applied for
a Growth Voucher and selected Ascensor
Ltd from the online marketplace as they are
specialists in growing businesses online.
What did Ascensor help you with?
Ascensor helped us to understand the
onsite expectations of the search engines,
which meant an analysis of website page
structures, how to create new website pages
that meet good quality standards and how to
safely make website changes without risking
losing any authority within the rankings.
They also provided training in how to
analyse a website’s external footprint, build
up a back-link pro?le and disassociate the
website from any link toxicity.
Ascensor then worked on strategy
development for future content production,
both on and offsite to ensure the website
remains healthy, regardless of future
algorithm changes, through good quality,
natural SEO.
What effect has the advice had on
your business?
We still have some work to do but are
de?nitely heading in the right direction.
The traf?c to our website has increased
and we have better engagement online
with potential clients. We are getting
positive responses to search terms in
and around our industry where before
we weren’t getting any at all. We will be
recommending Growth Vouchers to other
businesses in the future.
The internet presents a huge opportunity
for businesses to grow and when used
properly can have a huge effect on their
success. This means it is important for
businesses to have an understanding of
the online world. Even in the UK today
many businesses don’t have a grasp of their
online potential and people still refer to
some practices as a ‘dark art’. This is not
the case – digital marketing is not only very
effective but is also very measureable. It
is important that businesses take advice
to ensure that if they pay for services they
understand what they are getting and
when they have received a service they can
properly evaluate it.
What has the bene?t of the Growth
Voucher scheme been to you and your
clients?
The Growth Voucher scheme has presented
a win win opportunity for our contacts to
bene?t from strategic support and gain a
better understanding of where they sit in
the digital space. This has in turn raised
our pro?le, it has helped to strengthen
relationships with our clients and has also
helped us to build new relationships as a
result of the referrals that we have gained.
www.avc-contracthire.co.uk
www.ascensor.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
41
CASE STUDY
Rotunda Living
Gemma Roe, Founder
Rotunda Living was founded in June 2012
by Gemma Roe, when her baby was just
two weeks old. The company makes
buildings exclusively in the round.
Where did the idea for Rotunda Living
come from?
Rotunda Living CIC is set-up in a similar
way to an Environmental Charity, whereby
we invest our pro?ts into the British
Woodlands and Community Projects. We
are passionate about creating beautiful,
ethical Roundhouses that are unsurpassed
in quality and craftsmanship; driven
by our belief that a garden building is
not only a very special investment but
is a unique purchase; one which should
continue to make you happy year after
year, decade after decade.
Why did you decide to set up as a
social enterprise?
It allows us to put our pro?ts into
woodland regeneration and conservation
projects in the UK – in keeping with our
enthusiasm for human wellbeing and
the natural world, we have a very strong
environmental philosophy and are striving
to provide a much needed boost to our
British woodlands.
How has the support from Start Up
Loans helped?
The support from Start Up Loans was
invaluable as a means to kick-start our
marketing and not only offered excellent
follow-on support such as a mentor and
start-up resource material but also offered
a greatly reduced repayment schedule
for the ?rst 12 months so as not to over-
burden our cash-?ow.
Tell us about your successes so far.
Rotunda Living has been awarded a
unique commission, to build the country’s
?rst completely round modular eco-
classroom for a primary school in the
region. Due to be completed this month,
the building will be used by the school for
lessons and for events such as parents’
evenings.
We recently sold our ?rst three module
home and are in talks with TV series
George Clarkes Amazing Spaces about
featuring the build in a future episode.
I currently employ 11 people and hope to
expand further.
What next for Rotunda Living?
Our next focus is on the UK holiday and
tourism lettings market in particular. We
are currently working on a commission
for a rural landowner for circular holiday
lodges and this could be a fertile market
for the future.http://rotunda-living.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
42
CASE STUDY
Appear Here
Ross Bailey, Founder, CEO
Where did the idea for Appear Here
come from?
The initial spark came in the summer of 2012.
It was the Queen’s Diamond Jubilee and there
was such a great atmosphere, I wanted to
do something to be part of it. A friend and I
decided to launch a t-shirt brand called Rock
and Rule featuring images of the Queen, with
a rebellious twist, in a three-day store in an
empty shop we’d spotted on Carnaby Street.
Of all the aspects of setting up a brand in a
short time frame, securing retail space was
the hardest part. Eventually we managed to
acquire the space for the Jubilee weekend.
Following the shop’s success, we invited other
young designers and brands into our store.
Everyone wanted to know how we’d secured
the space. That’s when I realised there were
lots of people like me, who wanted to rent
shop space for ?exible periods and found it
a struggle. I couldn’t believe there wasn’t an
easier way to do it.
I used the pro?t I made from Rock and Rule
to launch Appear Here, our mission being
to make booking space as easy as booking a
hotel room – quick, ef?cient and easy.
What is the bene?t to businesses from
short term/?exible locations?
Previously to launch a shop in a good retail
location you’d need to commit to at least a
?ve year lease, normally with a three year
break clause, and prove you had the funds
to pay the rent in advance. In a prime retail
location that could be in excess of £2M.
Appear Here is changing this. By making
retail spaces available to rent for short term
periods, we help more brands and retailers
get a foothold in prime retail location without
the large ?nancial commitments. This gives
businesses a boost to their brand exposure
and creates great PR opportunities to test the
Market. We’ve introduced a pay-as-you-go
service so brands can pay rent on a month-
by-month basis, rather than all upfront.
To illustrate, one of our most in-demand
spaces, 36 South Molton Street, has a weekly
list price of £4,000. While not affordable for
everyone, previously brands would have
to make a large ?nancial commitment, but
through our platform, we’ve been able to place
a stream of young brands and independent
retailers on the UK’s busiest High Street.
An example of a business who used a
pop-up shop then went on to greater
success?
One of our favourite examples is PRESS
London, the Californian-derived cold pressed
juice bar chain. Transport for London agreed to
open up an old broom cupboard in Old Street
Station so that we could turn it into a market
stall. PRESS London leapt at the opportunity
to take this space over. Ed Foy, the founder
of PRESS London noted, “the best part was
selling out within two hours of opening.” This
persuaded Ed, that he was onto something
good. They now have several market stalls
across London, a permanent juice store in
Soho and a concession space in Selfridges.
Do you think pop-up shops/spaces will
take over the high street?
I think pop-up spaces will become a
permanent ?xture on our high streets,
although “taking over” might be an
overstatement. I think there’ll still be a role
for permanent stores. Retail has changed
and today’s consumers are buying into
experiences more than products. Pop-up
shops are a great way for brands to offer
their users an experience. High Streets
will become a place for socialising and
entertainment. Pop-up shops will play a
part in this new social fabric.
www. appearhere.co.uk
THE REPORT ON
SMALL FIRMS
2010-2015
43
CASE STUDY
Andrew Francis Butchers
Andrew Francis, Owner
Andrew Francis runs a traditional
butchery based in Ludlow, and has
used the business he has secured with
Shropshire Council as a solid foundation
for growing his business.
Why were you able to bid for the
contract?
As a small business, we wouldn’t have
been able to provide meat to all schools
in Shropshire. When Shropshire’s Shire
Services, the in-house catering service for
Shropshire Council, split the business into
several smaller contracts, it opened up the
marketplace to local small and medium
sized businesses. We tendered to supply
a small area of Shropshire as part of a
larger contract for Shropshire Council, and
now provide fresh meat and sausages for
schools in the south of the county.
What is it like working for Shropshire
Council?
It has been an excellent and very
straightforward experience, and very
rewarding to be able to provide a product
that is both healthy and that the county’s
school kids enjoy. As a customer they
are excellent too – payment is always
prompt and religiously on time, and as
a client they are a pleasure to deal with.
I’m glad to have taken the opportunity to
work with the public sector, and would
recommend it to others.
What is the bene?t to your business?
The contract has been fantastic for the
business, increasing turnover year-on-
year. I have increased my staff from
?ve people to eleven. We have also had
extra business from word-of-mouth
recommendations, with parents coming
into the shop having seen what they
provide for children’s school meals.
The quality and value for money that we
provide have allowed us to retain and
expand the business that we do with
the council. In 2010, we were successful
in widening our contract to include the
supply of free range eggs, we retained the
council’s business after it was re-tendered
in 2011, and Shropshire Council has also
recently taken up extension options which
will take our supply up to the end of 2015.
www.andrewfrancisbutchers.co.uk/
index.html
THE REPORT ON
SMALL FIRMS
2010-2015
44
CASE STUDY
Austin Hayes Ltd
Nik Vjestica, Managing Director
Established in 1953, Austin Hayes has
developed an unrivalled knowledge of
ammunition containers and associated
parts. The company has become the
UK’s leading refurbishment specialist
and has evolved techniques enabling
larger proportions of used ammunition
packaging to either be recycled or
refurbished year on year.
Tell us about your contract with the
Ministry of Defence (MOD).
In 2010 we secured a 10 year partnering
agreement with Defence Equipment and
Supplies, with 5 years ?rm and options
to extend for up to a further 5 years
based on contract performance. By use of
innovative techniques, we have developed
to become a key supplier, demonstrating
skills that are dif?cult to source
worldwide, and providing signi?cant
environmental bene?ts.
We also dedicated to driving down costs,
both as a company and for the MOD as
our main customer, and are constantly
working to understand their requirements.
As a result, the contract is estimated
to save the taxpayer £11 million per
year by avoiding the cost of buying new
packaging, when compared to cost of
refurbished packaging to an equivalent
standard.
How has the work with the
government helped you to grow?
Working with the MOD has provided our
company with a robust platform to plan
for the future. It has provided us with a
clear pathway for strategic investment in
new equipment and the training of staff.
Through continuous improvement and
innovation we have generated important
contract bene?ts and cost savings. At
the same time and pace, the company
has strengthened overall capability
and is better prepared to meet any new
challenges ahead.
The MOD business has also allowed us
to diversify and expand our range of
surface preparation and protective coating
application services for UK engineering
companies supplying steel fabrications,
valves and equipment to oil and gas
industries worldwide.
www.austinhayes.com
THE REPORT ON
SMALL FIRMS
2010-2015
45
CASE STUDY
MarketInvoice
Anil Stocker, Founder
Founded in 2011 by two university friends,
MarketInvoice helps companies raise working
capital by lending against unpaid invoices via
its online peer to peer ?nancing platform.
What gave you the idea to set up
MarketInvoice?
In my previous career in private equity, I
spent a lot of time with ?nancial directors
and really saw the problems that companies
were experiencing ?rst hand in obtaining
?nance to grow. I thought there must be
a way of using technology to disrupt this
market in much the same way that music
or retail have been. For example, who would
have thought ?fteen years ago that HMV,
then the dominant player, would have been
competing today with the likes of Spotify?
Why is your model important to
small ?rms?
Small ?rms typically have to wait 30, 60, 90
days for payment but they need cash to grow
and pitch for new business. Our business
model offers small ?rms the much needed
working capital, for example, to produce
their products while they wait for invoices
to get paid. We’re working with some of the
UK’s most exciting high-growth businesses,
helping them to really push down on the
accelerator and take advantage of new
opportunities that arise.
How is it different to other peer-to-
peer lending?
Both the lender and borrower sides are
slightly different to other peer-to-peer
lenders, but the basic model is the same.
The main difference is that we’re offering
short-term ?nance, typically our loans last
about 45 days. On the lending side, investors
are buying invoices which they have a legal
right to claim on. The average rate of return
in 2014 was 11.62%, well above the 7% or 8%
typically offered by stock markets, and we
have a waiting list of sophisticated investors
wanting access.
What has been the impact of the
British Business Bank?
One of my proudest moments was the
Government’s British Business Bank signing
up in 2013, after eight months of due
diligence. The bank allocated £5 million to
be lent through the platform, which, because
most invoices pay out in an average of 45
days, equates to £40 million in funding
annually. I think the bank is very happy with
the returns we’re generating for them. It was
reported in the press that we’ve given them a
14% return in a year. That’s pretty good.
How have you seen the alternative
?nance market grow?
Since we founded in 2011, 800 businesses
have signed up to MarketInvoice, and we
have sold over 4500 invoices, which is more
than £300 million in working capital that
has been lent, £200 million of that was in
2014. As the peer-to-peer sector matures,
we’re seeing funding milestones accelerate,
and now we’re setting our sights on half a
billion and a billion. It’s speeding up.
What’s next?
We raised £5 million in November, our ?rst
round of fundraising since we launched.
We are planning to roll-out new products as
well as considering launching MarketInvoice
in new countries. The alternative ?nance
market is only going to grow – banks need to
get used to a world where they can co-exist
with new online lenders.
www.marketinvoice.com
THE REPORT ON
SMALL FIRMS
2010-2015
46
CASE STUDY
GROWTH VOUCHER RECIPIENTS
Giant Leap Childcare Rafael Schiel, co-owner
AskAskew Maureen Askew, Owner
Giant Leap Childcare and Learning
Centre, located in Burnley, decided to
take a Growth Voucher to improve their
marketing strategy.
What attracted you to take a Growth
Voucher?
After being open for 18 months, we
weren’t happy with our occupancy ?gures.
We decided to take some advice and
chose AskAskew as they have specialised
expertise for businesses operating in the
early years and childcare sector.
What difference has the advice made
to your business?
Maureen Askew created a detailed
marketing plan and worked with us to
put it in place. Working with Maureen has
brought great bene?ts to our business and
our marketing output has been completely
transformed – I can’t thank her enough.
I would recommend all small business
explore Growth Vouchers – it’s a fantastic
way to improve aspects of your business
with the aid of an expert adviser.
Maureen Askew, Owner, AskAskew
Why is Growth Vouchers so important
to your clients?
I think the great thing about Growth
Vouchers is that it gives small businesses
the chance to have an ‘outsider’ looking
in and that’s really important. You can
see things as an outsider that they miss
and can help them focus on seeing the
bigger picture and getting to where they
want to be.
www.giantleapchildcare.co.uk
www.askaskew.co.uk
NOTES
47
THE REPORT ON
SMALL FIRMS
2010-2015
1 Bolton Report 1971: The Report of the
Committee of Enquiry into Small Firms
2 BIS Business Population Estimates
2010-2014
3 BIS Business Population Estimates
2010-2014
4 ONS Labour Market Statistics 2010-2014
5 BIS Business Population Estimates 2014
6 Salvation in a start-up? The origins and nature
of the self-employment boom, RSA, May 2014
7 Global Entrepreneurship and Development
Index 2014
8 StartUp Britain ?gures
9 Start Up Loan Company ?gures
10 Ministry of Justice, Analysis of the impact
of employment on reoffending following
release from custody using Propensity
Score Matching, March 2013
11 Young Enterprise ?gures
12https://www.gov.uk/government/news/
new-careers-and-enterprise-company-for-
schools
13http://www.cbi.org.uk/media/2807987/
gateway-to-growth.pdf
14 The Annual Population Survey, Of?ce for
National Statistics (ONS), 2012
15 Higher Education Statistics Agency –
Destinations of Leavers from Higher
Education Survey 2012/13
16 BIS Small Business Survey 2012 and
Business Population Estimates
17 Booz & Co 2012
18 IMRG CapGemini e-Retail Sales Index 2014
19 BIS Small Business Survey 2012
20 Broadband Delivery UK ?gures at end
December 2014
21 Go ON UK ?gures
22 PayPal ?gures
23 eBay ?gures
24 BIS Small Business Survey 2012 and
Business Population Estimates
25https://www.gov.uk/government/
publications/the-home-business-guide
26https://www.gov.uk/government/news/
backing-for-home-based-business-boom
27 The Rise of the UK Accelerator and
Incubator Ecosystem, O2/Telefonica,
December 2014
28 NACUE ?gures
29 BIS Small Business Survey 2012 and
Business Population Estimates
30 Cabinet Of?ce (2013) Social enterprise:
market trends. Based on data from the
BIS Small Business Survey 2013, there
are an estimated 180,000 Small and
Medium Enterprise (SME) social enterprise
employers in the UK, making up 15% of
all SMEs.
31 Big Society Capital (2014) Annual Report
2013
32 City of London (2013) Growing the Social
Investment Market: The Landscape and
Economic Impact
33 See Cabinet Of?ce: Making Government
business more accessible to SMEs (July
2011), page 7
34 See National Audit Of?ce (NAO): Managing
Government suppliers (8 November 2013),
page 8
THE REPORT ON
SMALL FIRMS
2010-2015
48
NOTES CONTINUED
35 Paying Suppliers on Time, NAO,
January 2015
36 SME Finance Monitor
37 BBA Statistics
38 British Business Bank data
39 Liberum AltFi Volume Index
40 Crowdfunding Centre
41 UK Business Angels Association ?gures
42 British Business Bank data
43https://www.gov.uk/government/
collections/enterprise-investment-scheme-
and-seed-enterprise-investment-scheme-
statistics
44 Nation of Angels, Centre for Entrepreneurs
and UK Business Angels Association,
January 2015
45 Research to understand the barriers to
take up and use of business support CEEDR
(2011)
46 Growth vouchers academic panel
The Report on Small Firms 2010-2015
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