In business....alone.

The majority of the UK's small businesses have no employees according to the Small Business Service's annual survey 2003.

Despite the Government's continued desire to encourage small businesses to grow, its own survey through the SBS has said that perhaps the dominant characteristic of small businesses in the UK is the numerical dominance of businesses which have no, or very few, employees.

The survey looked at UK businesses with a headcount of up to 250 people and found that 69.5 per cent of them have no employees at all, and 25.3 per cent have fewer than ten (micro businesses); 4.5 per cent have between 10 and 49 (small businesses) and only 0.7 per cent have between 50 and 250 employees.

Clear distinction

In the detail of the 150-page report, it made a clear distinction between 'small businesses with employees' and 'small businesses without employees', saying: since such businesses (no employees) significantly outnumber those with employees, we have excluded them from much of this report in order to secure a clearer view of how small businesses with employees behave and perceive their environment.

It then dedicated a chapter (Chapter 3) specifically looking at them and looked briefly at them at the beginning of each of the analyses presented in other chapters as it said it would not do to ignore such a large section of the small firm universe entirely.

The survey also classes the owner-managed business as 'sole traders'. It says:because.....most small businesses have no employees, the survey necessarily covers such sole traders, however the proprietors described themselves (self employed, sole proprietorships, business's only employee, etc.)

This distinction and the findings of the survey could have relevance to the Treasury research currently being undertaken on owner/managed businesses. That report, which has been criticised for a lack of consultation, is due to be published at the Pre-Budget Report in November.

Businesses with no employees

The survey looked at why these businesses had no employees. It found that nearly half of these businesses (47.7 per cent) felt that they could not, or were not, attracting enough work to require taking on any staff.

Another 27.1 per cent said that they actively preferred to work alone, and so had no wish to employ staff. Even among businesses proposing to grow in the coming year, still a fifth (20.5 per cent) of them cited this preference as a reason for not employing staff.

The expense of employing labour (11.9 per cent) and employment regulations (7.4 per cent) were much less widely cited.

Among this latter group, the dominant factor (cited by 56.9 per cent) was a generalised wariness of paperwork and perceived 'red tape', not specifically attached to a particular regulation or issue.

Specific regulations were much less often cited as constraints on employment, but health and safety, and employee protection regulations were each cited by about a fifth of businesses with no employees (20.6 and 18.6 per cent respectively). Minimum wage regulations and working time rules were only cited infrequently, by about three per cent of these businesses each. Some 12.5 per cent said that they preferred to use casual staff rather than have any regular employees, and this preference was rather more widespread in construction.

The survey says, that 'we can see that':

• there is an enormous preponderance of businesses which employ nobody except the owner or partners. Thus, almost 70 per cent of the businesses covered have no employees or are sole traders.
  
• even where there are employees, the number employed in most of the businesses is very modest. Thus, just over one-quarter of them have between one and nine employees, and fewer than five per cent have between ten and 49.
  
• the proportion of small businesses employing 50 or more staff is minute in comparison to the achieved sample as a whole, with just 0.7 per cent of businesses falling into this category.