Supporting micro businesses

Councils have a key role to play in helping local small businesses recover from the pandemic.

Micro businesses of up to nine employees have been a strong and growing part of our economy in the UK for decades. 

They represent more than 2.1 million businesses in England with growth of nearly 550,000 individual businesses between 2010 and 2020. They have outpaced the growth of larger companies, representing an increasing proportion of the total business base.

Micros are diverse, spread across the country and represent all sectors to differing levels. They differ in terms of their aspirations, with many set up for individuals to simply earn a living, while others crave growth – taking on employees or seeking investment in their product or service. 

If we are to learn from history then we must look at the last recession of 2008. The period immediately following the financial crash saw record numbers of new businesses being formed and an appetite for business start-ups. 

During the pandemic, however, research from the Office for National Statistics has shown that micro businesses have been more affected than businesses of any other size. The data shows that 28 per cent of micro businesses temporarily or permanently ceased trading, compared with 19.3 per cent of all larger businesses. 

The impact on unemployment could be significant. If this large proportion of micros is not supported effectively, there will inevitably be an overreliance in the labour market on larger companies, which themselves are shedding jobs. 

Our current research, commissioned by the LGA, is intended to explore three broad questions:

  • What are the current challenges facing micro businesses?
  • What support is available to them and who is providing it?
  • What is the role of local government in supporting micro businesses?

Many councils channel their support through other organisations, such as growth hubs, and during the pandemic councils have provided direct support through business grants. 

So far, our research shows that micros have reached out to councils during the pandemic more than before. This raises two key questions: once discretionary grants have been allocated, what is the future offer? And how can councils work with partners to deliver support for micro businesses that is relevant and current? 

It has also highlighted a range of challenges faced by micros before and during the pandemic. 

For example, the funding landscape is fragmented and inconsistent with a number of different organisations providing support, with limited focus on micros.

Micro businesses have limited networks and connections from which to find, recruit and retain talented employees. 

During the pandemic, a lack of online presence was a particular barrier for many who were unable to trade online, which also highlighted a lack of digital skills among business owners. 

Meanwhile, poor digital infrastructure and a lack of accessible incubator and accelerator space outside London and the South East are negative factors.

With the economy increasingly on the agenda of councils from a regeneration, skills and business growth perspective, now is the time to review the business support landscape, identify the gaps in provision and develop the role of council as an anchor organisation, a regulator, a convenor of partners and by using their extensive buying power. 

Our research is now extending to explore that role further. You have no doubt heard of ‘health in all policies’ – now consider ‘economy in all policies’.

Lisa McCance is a Director at Shared Intelligence and is leading research into micro businesses on behalf of the LGA. Contact lisa.mccance@sharedintelligence.net for more information and/or visit www.local.gov.uk/events to sign up for the LGA’s micro business webinar on 28 April.

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