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Fears of getting tangled in the red tape of taking on staff are why the number of one-person traders has grown every year for almost a decade, new figures suggest. Thanks also to the steely determination of individuals to truly ‘go it alone,’ the prospect of becoming an employer has grown less appealing each year since 1999. More positively, however, the official figures also show that since 1994, the number of new businesses has increased steadily, to a record high in 2007. In fact, over the 12 months of last year, the UK’s business stock went up by 212,000 (4%) to 4.68m, representing a 970,000 increase on the number of firms 10 years ago. Business observers partly expected the rise, following the bedding down of pushed thousands of workers into setting up their companies. The biggest rise in 2007 was among sole traders, up 6%, taking the number of one-man bands to 3.5m, meaning that three-quarters (74%) of all firms are non-employers, like freelancers. In 1999, there were 3.7m firms, of which 62% (2.3m) were non-employers, compared with 2003 and 2005, when the figure rose to 70% and 72.8% respectively. In 2006, there were 3.3m sole operators, meaning 73% of businesses were trading without having any staff on the company’s payroll other than the owner-manager. Although ministers welcomed the rise in the total number of firms, the Federation of Small Businesses said it was a “worry” that more of them were not creating jobs. The cause was explained by the “huge jump” self-employed people still have to make to become an employer, including getting to grips with new legal, financial, tax and commercial responsibilities. However the official figures should hearten the business group - and the government’s business department, which late last year said it wanted to challenge the mindset of ‘non-growth’ firms. The figures show that out of those small and medium-sized enterprises already employing, the number of people they hired full-time leapt in 2007 by 0.3m (2%) to 13.5m. Even more positively, these firms’ turnover rose 6.1% to £1,440billion, meaning they made £83bn more than in 2006, about eight months before the onset of the economic slowdown and the drying up of credit. Exactly how much the faltering economy has hurt smaller enterprise, or how firms might have prospered without the financial pressures, depends on which poll you believe. Commissioned last month by the Forum of Private Business, the Small Enterprise Research team found sales expectations of smaller companies have sunk to their lowest in six years. In mid-July private equity firm Bowmark said its Optimism Index, which tracks how owner-managers feel about their prospects, dropped nearly 10 points since the last survey in January. Days later Lloyds TSB’s Business Barometer showed that while 62% of firms were pessimistic about the economy, half expected their sales to rise, a third expected no change and only 17% forecasted a decline. Each of the 200 respondents had a minimum turnover of £1m. Meanwhile, the second quarter this year saw a rise in insolvencies with more than 1,500 companies placed in administration in the first six months than in the same period a year ago. However, the actual sight of an economic downturn would not deter individuals from forming a company, according to a study of 1,000 current business owners from BT. Just under half of the firms quizzed said the macro-economic risks were not a barrier to setting up a company, as they said key enabler was having the know-how to do so. This week, the government set about doing more to encourage small companies to set up and flourish by proposing to cap the amount of red tape, an age-old deterrent to company growth, it creates from Whitehall. Under the plan, which if achieved would be a world-first; each central department would be given a budget for imposing new regulations which could not be broken unless in an emergency. If approved the proposals would mean that from the start of the next financial year, all businesses, irrespective of size, would not see any rise in the costs of red tape pertaining to them. Business secretary John Hutton reflected: “Good regulation should drive competition and boost our productivity. But too many new rules can stifle enterprise and blunt our competitive edge. “If the UK is to remain a respected place to do business, we must not expect business simply to absorb the costs of a stream of new Government initiatives.” Politicians, the minister later told reporters, were prone to exaggeration, “but it will be impossible to exaggerate the significance of this change,” but only, the government’s doubters will say, if it is actually enshrined in law. Aug 8, 2008 Email this article Printer friendly page Previous Page
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