Continuing my series summarising and analysing the UK government's Enterprise white paper, let's look at some of the statistics they present that give an insight into the current picture of enterprise in Britain...

Data on early stage businesses is thin on the ground, so it should be noted that the government relies heavily on the statistics for VAT registrations and de-registrations. These statistics give a more rosy picture than reality (convenient for the government of course!) because VAT registration isn't required until the turnover of a business exceeds £67,000 - and of course the majority of business failure's occur before this point.

They state that there are now 4.5million businesses in the UK - a growth of 740,000 in the last 10 years.

Other statistics:

  • Employment in small and medium sized businesses (SMEs) has grown by 1.2 million (ten per cent) since 1997.
  • Productivity growth in small firms has exceeded that in large firms since 1998.
  • More SMEs have ambition to grow. In 2006, 65 per cent of SMEs had aspirations to grow over the next two or three years – a nine percentage point increase
    on 2005.
  • There has been a 16 percentage point increase in the proportion of SME employers reporting that they had undertaken either product or service innovation in the
    past 12 months: 48 per cent in 2006 compared to 32 per cent in 2005.
  • On average around 180,000 businesses have registered for VAT each year since 2000 and VAT registrations have exceeded de-registrations for twelve years in
    a row.
  • Business survival rates are higher than a decade ago – 92 per cent of new VAT registered firms are still registered after one year; 71 per cent after three years.
  • There has been an increase in levels of enterprise in deprived areas, with self-employment rates now almost one percentage point higher than in 2000. The gap between VAT registration rates in the most and least deprived areas has been narrowing since 2000.
  • There are now more than a million self-employed women, a 17 per cent increase on 2000.

However, productivity (measured as output per hour worked) still lags behind the USA, Germany and France (yes, France!), and is below the average in the G7 nations - although the gap has been narrowing.

Growing the UK's businesses is vital to our economy, but the research here isn't promising:

• Although there has been some improvement, large numbers of businesses still have no ambition to grow. Only 65 per cent of all UK businesses with employees report that they intend to grow in the coming two
to three years.

• Even amongst those businesses that aspire to grow, a large number are not successful in their ambition. Only one in five of all businesses achieve employment growth in any given year and less than ten per cent achieve
sustained growth.

• Less than one half of businesses introduced some kind of new or improved product or service in 2006 and only 12 per cent introduced an entirely new product or service.

• A quarter of businesses with employees are exporters and only a further five per cent plan to start exporting in the future.

• Two-thirds of businesses provide any staff training in a given year and only a quarter of managers receive any training.

• Once established, the average new business in the UK is likely to grow more slowly than its equivalent in the US, with 40 per cent more US businesses achieving high growth than businesses in the UK.

So the challenge is twofold:
1. To encourage new entrepreneurship.
2. To drive the growth of existing businesses.