Success of the UK economy depends on small businesses suggests new report

Credit: Shutterstock.com/ Ian Johnston
Stats released ahead of the Chancellors budget seem to confirm the success of the UK economy depends on small businesses, says the FSB.

New figures from the Office for National Statistics (ONS) show the contribution of non-financial businesses to the UK economy grew to £1.2 trillion last year – a growth of 3.9 per cent.

Interestingly, 99.6% of these firms are small businesses and the number of small non-financial firms grew 9 per cent to 2.4 million over the year.

Main points

  • In 2016, the approximate gross value added at basic prices (aGVA) of the UK non-financial business economy was estimated to be £1,201.1 billion; this was an increase of 3.9% (£44.6 billion) compared with the previous year.
  • The estimate of aGVA represents the income (turnover) of UK businesses, less the cost of goods and services consumed in the production process (purchases); all four of the main sectors of the non-financial business economy (production, construction, distribution and non-financial services) saw a continuation in growth .
  • The non-financial services sector, which accounted for over half (56.0%) of total aGVA, saw an increase of 3.3% (£21.6 billion); professional, scientific and technical services continued to provide the highest levels of aGVA within this sector contributing just under a quarter of the total (23.5%).
  • The level of total turnover increased between 2015 and 2016 by 2.3% (£77.5 billion) following a fall of 1.2% (£40.8 billion) between 2014 and 2015.
  • All four sectors showed growth in turnover, with non-financial services experiencing the largest increase of £41.4 billion (3.4%); within this sector, information and communication services saw the largest level growth increasing by £12.8 billion (5.9%).
  • Within purchases the level increased by 1.5% (£32.5 billion); production, construction and non-financial services all saw increased growth, though, there was a fall of 1.1% (£11.6 billion) within distribution.
  • Commenting on the data, Mike Cherry, Federation of Small Businesses (FSB) National Chairman, says: “Ahead of the Autumn Budget, these stats serve as a timely reminder that the success of the UK economy depends on its small businesses.

    “The Chancellor needs to consider how he’ll help further increase the staggering contribution of small firms. Against a backdrop of rising prices, flagging consumer demand and Brexit uncertainty, small business owners are in need of lifelines at the Budget.

    “Small firms are looking for an end to the business rates chaos that’s engulfed them over the last seven months. That starts with bringing forward CPI-indexation to 2018 and ending the ridiculous staircase tax.

    “Off the back of a delay to the abolition of Class II National Insurance contributions, we need a Budget that works for the self-employed. An extension of public sector IR35 tax legislation to the private sphere will make an already challenging environment worse.

    “The last thing small firms need is new tax grabs and loss of entrepreneurial reliefs at the Budget. No doubt the Treasury will avoid biting the hand that feeds it.”