The FSB-ICM - Federation of Small Businesses

The FSB-ICM ‘Voice of Small Business’ Annual Survey Report of Key Findings

Report prepared for the Federation of Small Businesses by Guided Insight & ICM Research

www.guidedinsight.co.uk www.icmresearch.co.uk February 2010

Contents

Contents Foreword by John Walker

5

Executive Summary

6

Summary of Key Policy Recommendations

10

1. Introduction

11

1.1 The Federation of Small Businesses

11

1.2 Background and objectives

11

1.3 Methodology

12

1.4 Interpretation of the data

13

1.5 Acknowledgements

13

2. Business Profile

14

2.1 Geographical distribution

14

2.2 Business sector

15

2.3 Number of businesses owned and length of ownership

16

2.4 Legal form of business and type of ownership

17

2.5 Business rates

19

2.6 Business premises

21

2.7 Gender, age and health

22

3. Customers and Markets

23

3.1 Client base

23

3.2 Internet use

28

4. Business Financial Performance

31

4.1 Turnover

31

4.2 Profitability and sales volume

34

4.3 Expectations for next 12 months

39

5. Finance

42

5.1 Sources of finance

42

5.2 Borrowing

45

The FSB-ICM ‘Voice of Small Business’ Annual Survey

6. Employment

www.fsb.org.uk

48

6.1 Workforce

48

6.2 Working arrangements

49

6.3 Employment tribunals

51

7. Business Advice and Services

53

7.1 Sources of support

53

7.2 Government “Real Help for Business” Initiatives

56

8. Environment and a Low Carbon Economy

58

8.1 Business opportunities created by climate change

58

8.2 Changes to business as a result of climate change

59

9. Innovation

61

9.1 Innovation: past and future

61

9.2 Innovation: who is most innovative?

61

10. Plans for the Future

65

10.1 Objectives: now and in the past

65

10.2 Obstacles to achieving business objectives

67

Appendices:

72

Appendix 1: Sample Profile

72

Appendix 2: Guide to Statistical Reliability

74

5

Foreword

Foreword The Federation of Small Businesses (FSB) is delighted to be working with ICM Research to deliver the new FSB–ICM ‘Voice of Small Business’ Annual Survey. Despite what has been a difficult economic climate for businesses over the past year, the survey results show the resilience of the small-business sector over recent months as well as a healthy dose of optimism for the year ahead. The business outlook is very good, with just under half more businesses saying that they expect the business climate in which they operate to improve rather than deteriorate (28% versus 22%); a realistic, yet optimistic, sounding in the current circumstances. In respect of employment, despite a dip in employee numbers compared with 12 months ago, businesses expect to be employing more staff, particularly temporary staff, over the next year. The most positive story is that of the huge contribution that small businesses make in the field of innovation – a contribution that is often underplayed. Not only do small businesses deliver more than half of UK GDP, but a significant half (53%) of businesses say that their business has introduced new or improved products or services in the last 12 months. A similar number (51%) believe that they will do so over the next 12 months, which makes it all the more important that the Government should target its innovation spending and business support to small and micro businesses. The most negative story comes in the form of a shocking saga of late payments, confirming what we know to have been a big problem for small businesses for some time now. A third (34%) of businesses have experienced late payment from the private sector over the past year, with the public sector faring badly too. The figures show that cases of late payment from the public sector involved EU institutions (30%), UK central government (31%), government agencies/’quangos’ (30%) and the National Health Service (29%). This simply cannot continue. In the absence of fair lending from the banks and with only 13 per cent of members who have borrowed new finance in the last year seeing interest rates decrease (in line with the Bank of England base rate), businesses have resorted to using bank overdrafts (28%) and their own savings (24%) to stay afloat. There are also strikingly low levels of awareness of the existence of government schemes such as the Enterprise Finance Guarantee, Trade Credit Insurance and the Working Capital Scheme, among others. Businesses continue to embrace technology, putting the Internet to a variety of uses in their day-to – day operations. With the roll-out of high-speed broadband, E-commerce is an area in which there are clear opportunities for future growth, and businesses will be able to maximise the opportunities provided by the challenge of climate change and a low-carbon economy. Finally, and not surprisingly, the majority of businesses (72%) view ‘the economy/recession’ as the single biggest obstacle to achieving their business objectives , while half (50%) per cent see it as essential for the Government to keep business taxes as stable, or low, as possible. Through the ‘Voice of Small Business’ survey panel recruited via the Annual Survey, we will be bringing further updates to small businesses on the key issues affecting them over the course of the coming year.

John Walker Policy Chairman


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Executive Summary This executive summary presents the key findings from the Annual Small Business Survey conducted among members of the Federation of Small Businesses (FSB). The research was undertaken using a selfcompletion methodology (postal and online) between September and October 2009, and 9,761 responses were received. The study was carried out by Guided Insight and ICM Research on behalf of the FSB.

A. Key Findings Customers and markets • The majority of members conduct trade within close proximity to their business. Over half (56%) of annual sales are with customers in their local area while a quarter (25%) are with customers in another part of their region. A further quarter (26%) of annual sales is with customers in the rest of the UK. Irrespective of the location of the sales, 12 per cent of members’ trade is from e-commerce • The private sector has accounted for three-quarters (75%) of members’ sales during the last 12 months. Two in five (41%) members state that their business has recently supplied goods and/or services to the public sector: local authorities (27%) and schools/universities/colleges (24%) are the most likely destinations followed by the National Health Service (12%) • As many as a third of businesses report late payment for goods/service supplied to the private sector (34%). EU institutions (30%) UK central government (31%) and government agencies/“quangos” (30%). Irrespective of whether a member is selling to an organisation in the private or public sector, the majority say they have received payment on time • The bulk of members (90%) say they use the internet when running their main business. The most popular day-to-day functions are emailing, finding advice/guidance/information, downloading information/documents, paying bills online and maintaining a business website.

Business financial performance • As befits an organisation that represents small business owners and the self-employed, the mean turnover for FSB members’ main business in the last financial year is approximately £525,000. At the extremes, a quarter (23%) turned over less than £50,000 while one in ten (10%) turned over more than £1 million • While, unsurprisingly, half (52%) of members have seen their profitability decrease in the last financial year, encouragingly, a significant minority (27%) have witnessed profits grow. A similar pattern can be observed when members are asked about sales volume (30%, increased; 48% decreased) • More members believe the business climate in which their business operates will improve rather than get worse over the next 12 months (28% versus 22%). Four in ten (46%) think it will remain stable.

Finance • Members have used a wide variety of major sources to finance their business in the last 12 months. The most frequently used are a bank overdraft (28%), their own savings (24%) and the retained profits from the business (24%). In addition, seven per cent have used a personal credit card, a further seven per cent have used a company credit card, while one in ten (11%) mention an overdraft. The fact that such a high percentage of members are resorting to self-financing suggests that small businesses are struggling to get access to credit from commercial sources

7

Executive Summary

• Approximately half (48%) of members have not borrowed from any of the sources listed in the last 12 months. Of those who have, most have borrowed under £50,000 • Despite the Bank of England base rate being at an all time low at the time of writing, a third (32%) of members state that they have experienced changes in the overall interest rate charged for these products compared to previous years. Just 13 per cent believe rates have decreased. This finding may go some way to explaining why many members have not secured credit recently from the financial services industry.

Employment • Across all staffing categories, there has been a slight dip in employee numbers compared with 12 months ago although members expect some recovery over the year to come. In particular, they expect to be employing more temporary staff than they were 12 months ago which may reflect an intention to recruit staff on temporary contracts because of a reluctance or inability to take on permanent staff in the current economic climate • Members’ businesses employ a variety of flexible working practices. The most prevalent – over and above part time work – are flexible working hours (29%) and the opportunity to work from home (27%). However, a significant minority of members do not have any of the prompted flexible working practices • As would be expected, just a small proportion of members (3%) have been summoned before an employment tribunal (or Northern Ireland Fair Employment Tribunal) in the past five years. In the great majority of instances the case has been settled (83%). Specifically, those who have been before an employment tribunal have seen their case resolved in court (35%), out of court (29%) or by arbitration/ mediation (19%).

Business advice and services • When considering the overall health of their business, members use a wide variety of sources of support. Accountants are the most frequently used form of assistance in the last year, cited by seven in ten (72%) members, while customers, suppliers, banks and the FSB itself are all mentioned by around half of members. Few say they have sought advice from their local authority, universities/ colleges, “Big Business” or the EU • Accountants are also the most positively rated source of advice for the overall health of businesses: (85%) of members who have used an accountant in the last 12 months describe them as helpful. In addition, customers, the FSB, family and suppliers are all highly regarded by at least two-thirds of those who have used them. In contrast, local government funded support (36% unhelpful), EU funded help (30%) and Big Business (29%) are deemed to be the least effective.

Environment and low carbon economy • There is a strong feeling among members that energy efficiency can provide their business with cost savings (57% agree with this statement compared to 11% who disagree). In contrast, there is less of a consensus that environmental awareness can provide their business with new commercial opportunities (28% agree versus 20% disagree) • Close to six in ten (57%) members have changed the way their business operates because of concerns relating to climate change. The biggest change has been the recycling of waste (47%) followed by a reduction in energy use (32%). A quarter have reduced the amount of landfill/rubbish they are responsible for, bought energy efficient appliances and raised awareness of waste with employees.


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Innovation • Over half (53%) of members say their business has introduced new or improved products or services in the last 12 months. A similar proportion (51%) believes they will do so in the next 12 months although a quarter say they do not know (24%) • The percentage of members’ revenue deriving from new products or services that have been introduced in the last three years varies considerably. Around a third (35%) say up to 20 per cent of revenue comes from new products or services while 14 per cent state between 21 per cent and 50 per cent. However, substantial minorities say none/it is not applicable (30%) and do not know (14%).

Plans for the future • When asked what has been their main business objective for the last 12 months, the top two answers are to remain about the same size (cited by 43%) and to expand moderately (up to 20% per annum), mentioned by 32 per cent • Members identify two clear actions they intend to take to achieve their business objectives over the next 12 months: expanding their client base (48%) and engaging in marketing and advertising (41%). The next most frequently mentioned anticipated actions are; investing in new equipment/machinery and taking on new staff (22% and 19% respectively) • A general reference to “the economy/recession” is perceived to be the single biggest obstacle to achieving their business objectives (mentioned by 72%). However, in a finding underpinning the significance of the “credit-crunch” reported earlier, a substantial number of members identify “cash flow” (42%) and the cost of and/or obtaining finance (29%). Other key barriers to success centre on regulations, competition in the market and myriad business taxes • There is no one single aspect which would improve members’ business economic prospects. The main priorities are to: -- Keep VAT at 15 per cent (36%); -- Maintain low interest rates (35%); -- Cut business rates (34%); -- Cut employers’ National Insurance (31%); -- Ensure banks lend more finance and more fairly (31%); -- Increase personal tax allowances (30%); and -- Cut Corporation Tax (26%).

B. Key themes A number of key themes – positive and negative – emerge from the research which readers may find useful in helping them understand the findings.

Positive issues • Economic optimism – More members think the economic climate in which their business operates will get better rather than worse, consistent with recent economic data from other independent sources. Underpinning this belief are data which show the majority of members reporting their main business as having stayed the same size or grown moderately in the last 12 months.

9

Executive Summary

• No big reduction in staffing levels – Despite the pressure on sales and profits in the last 12 months, members intend to increase – albeit marginally – the size of their workforce over the next 12 months. This reinforces members’ sense of optimism in the business climate and mirrors recent data from the ONS showing a rapid slowdown in the growth in unemployment. • Commitment to innovation – Encouragingly, half of members expect to introduce new products and services in the next 12 months matching the proportion who have done so recently. It is therefore evident that the recession and the struggle for many businesses to access credit is not diminishing members’ ability to design and develop new products. This commitment to innovation may reflect members’ desire to beat the competition – three in ten identify competition in the market as an obstacle to success. • Members continue to embrace technology – The vast majority of members use the internet when running their business and cite a range of day-to-day functions. There are clear advantages for members’ businesses in embracing new technology. Indeed, the FSB should note that online respondents are more positive about their business’s performance across a range of measures than those who completed the survey via post.

Issues to consider • Access to credit/current levels of finance – Members use their own money to finance their business (for example, bank overdraft, savings, personal/company credit cards, retained profits) rather than rely on formal sources of lending. This may be partly due to the fact that a third of those who have borrowed business loans recently have experienced an increase in the overall interest rate charged (against a back-drop of the Bank of England base rate being at an all time low). Taken together, these findings reinforce members’ demand for “banks to lend more finance and to lend more fairly” over the coming years. It is no coincidence that if business taxes were reduced they would be most likely to reinvest the money back into the business to help it grow or as capital investment. • Barriers to growth – Half of members report a decrease in sales and profits in the last financial year and they identify obstacles to the future success of their business such as business taxes, obtaining finance, cash flow and regulations. • Late payment for services – It is well chronicled in the media that private sector organisations are increasingly delaying the payment of invoices. The FSB’s Annual Survey reveals that a third of members have experienced late payment from the private sector. However, as many businesses become dependent on the State for their business during a recession it is concerning that members are reporting late payment from public sector organisations such as local authorities, central government and the education sector. This exacerbates members’ difficulties in funding their business. • Environmental awareness – Not all members are maximising the opportunities and challenges of climate change. While the majority of members have changed the way their business operates because of climate change, a minority have yet to take action. Furthermore, while there is a strong feeling that energy efficiency can provide cost savings, far fewer agree that environmental awareness can provide their business with new commercial opportunities.


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Key Policy Recommendations In the light of the findings in this report, these are the main areas that the Government needs to address:

Employment • With the survey results showing future employment in the balance, it is disappointing that the Government has decided to tax employment through increased National Insurance contributions in 2010. The FSB is calling for a freeze in National Insurance contributions and a National Insurance rebate for small businesses with fewer than 50 members of staff that increase the number of employees during 2010/11, to encourage small firms to grow and take on more employees.

Finance • The FSB is calling for a renewal of the economic stimulus provided to small businesses to help the country along the road to economic recovery. Greater competition needs to be introduced into the banking sector, along with restoring the trust between banks and small businesses. Alternative forms of finance need to be developed through the creation of regional finance houses and developing the Bank of Essex model, along with Regional Stock Exchanges.

Innovation and Entrepreneurship • With a view to stimulating further innovation and entrepreneurship to fuel the recovery, the FSB proposes encouraging demand for innovation through public procurement, infrastructure and the open market. There is a need to look at more-effective ways of financing innovation through the reform of the Enterprise Investment Scheme (EIS) and by supporting entrepreneurship, with less money being spent more wisely on targeted business support for small and micro businesses.

Infrastructure/E-Commerce/Broadband • To ensure the future growth of the economy, small businesses must be given maximum opportunity to trade online. High-speed broadband is no longer an optional extra; it is a necessity. Service providers must guarantee minimum upload and download speeds and diversification of the marketplace should take place in order to encourage stronger competition, alternatives to established providers, and greater customer choice.

Environment and the Low-Carbon Economy • There are both challenges and opportunities in encouraging businesses to engage with initiatives for countering climate change and developing the future low-carbon economy. There is a need for tailored advice for SMEs on energy efficiency and support so that small businesses can maximise their use of smart metering. With regard to waste and recycling, a local waste infrastructure should be put in place that better meets the needs of local businesses. Improving and expanding low-carbon business support and incentives would also help small businesses to realise the huge role they have to play in our low-carbon future.

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1. Introduction

1. Introduction 1.1 The Federation of Small Businesses The Federation of Small Businesses (FSB) is the UK’s largest business organisation representing the selfemployed and owners of small businesses. The FSB is almost unique in its representation of the interests of genuinely “small” business, with much of its 215,000 membership comprising firms with less than 50 employees. Included within this extensive membership are many who are sole traders and members spanning all industry sectors and regions of the UK. As a lobbying organisation, the FSB is the leading voice of small businesses. The FSB lobbies at all levels of government; at European, national, regional and local level. The target audience of the FSB is, inter alia, Members of Parliament, the Civil Service, Regional Development Agencies and Local Authorities.

1.2 Background and objectives This report presents the findings of a research study conducted by Guided Insight and ICM Research on behalf of the FSB. The project consists of two parts: 1. An annual survey (“Annual Small Business Survey”) of its self-employed and small business membership (replacing the biennial survey since 2000) to identify the state of the small business sector and the key issues affecting it; and 2. The creation of a “National Survey Panel” and 12 regional/devolved panels (“Small Business Voice Panel Community”) that will help the FSB consult and engage on an ongoing basis with a representative sample of its membership. A key aim throughout has been to deliver robust data from a representative sample of the FSB membership which can stand up to internal and external scrutiny.


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1.3 Methodology Guided Insight and ICM employed a mixed methodological approach to undertaking the FSB’s Annual Membership Survey, consistent with previous biennial surveys. All 215,000 members were invited to take part in the survey and self-completion surveys were received from 9,761 members of which 6,610 were postal questionnaires and 3,151 were online. The following chart shows the geographical distribution of the achieved sample and confidence interval in each part of the country. Fieldwork was undertaken between 18 September and 30 October 2009. The data have been weighted by gender and region/nation to reflect the known profile of the FSB membership.

Geographical distribution of completed returns

United Kingdom

9,761 interviews (±1%)

Scotland


England


Northern Ireland

327 interviews (±5%)

North East


Yorkshire & Humber 716 interviews (±4%)

North West


Wales


West Midlands


South West


FSB Annual Report 2009

East Midlands


East of England


London


South East


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1. Introduction

1.4 Interpretation of the data It should be remembered that a sample, and not the entire membership of the FSB, has been surveyed. Therefore, all results are subject to sampling tolerances, which means that not all differences are statistically significant. • With a total sample of 9,761, data at the UK level is accurate to plus or minus one percentage point (±1%); and • In order for differences between 2008 and 2009 to be considered statistically significant, the margin between any two findings, and based on the total sample, must be two percentage points or greater (±2%). A detailed guide to statistical reliability is appended. Where percentages do not sum 100, this may be due to computer rounding, the exclusion of “don’t know” categories, or multiple answers. An asterisk () denotes any value less than half a per cent but greater than zero. Reference is made throughout the report to “net” figures. A “net” figure represents the sum of two percentages, for example, “net helpful” is the combination of “very helpful” and “quite helpful”. It is also worth emphasising that, on attitudinal questions, the survey deals with members’ perceptions at the time the survey was conducted rather than with facts.

1.5 Acknowledgements Guided Insight and ICM would like to thank John Walker, Clive Davenport, Andy Willox, Andrew Cave and Rosina Robson at the FSB for their help and advice in developing this project. Special thanks also go to the 9,761 members who took part in this survey. ©ICM Research/206172 January 2010 Report prepared by: Gregor Jackson ([email protected]) Matthew Jeatt ([email protected]) Annabel Hudson ([email protected]) Laurence Olding ([email protected])

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2. Business Profile 2.1 Geographical distribution As would be expected the overwhelming majority (80%) of FSB members are based in England. A fifth (19%) of responses to the survey are from members in the devolved countries which means that Northern Ireland, Scotland and Wales are over-represented in the FSB membership relative to their combined population as a proportion of the UK total. While generally speaking the number of responses in each English region corresponds to the known regional profile of the FSB membership, it is interesting to note the disproportionately small number of London members relative to its population. Around 13 per cent of the UK population live in London but the capital accounts for just three per cent of the FSB membership. A third (34%) of members live in the South East and South West of England.

Distribution of responses across the UK Base: All respondents (9,761) % Total

United Kingdom

100

Country

England

80

Scotland

10

Northern Ireland

4

Wales

5

East Midlands

8

East of England

8

London

3

North East

2

North West

9

South East

19

South West

16

West Midlands

8

Yorkshire & the Humber

6

English Region/APU

Source: Guided Insight/ICM Research

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2. Business Profile

ICM mapped respondents’ postcodes to the Office for National Statistics (ONS) Rural/Urban classifications. It is evident that the FSB is overrepresented by people living or owning businesses in rural areas compared to the population in general. A third (36%) of members are based in a rural area with (59%) in urban areas.1 The regions with the highest concentration of members in rural areas are Scotland (51%), Wales (51%) and the South West (50%).

2.2 Business sector Members’ businesses are most likely to be based in the retailing, construction/building and business services sectors. However, the proportion in each sector varies across the country; for instance, members in Northern Ireland (25%), Scotland (24%) and the North East (24%) are more likely to be based in retailing compared to elsewhere in the UK. Moreover, there is an above average incidence of manufacturing among members located in the West Midlands (16%) while a fifth (21%) of FSB members in London are based in business services compared to 14 per cent nationally. More members in Scotland than across the country are based in hotels and catering (13% versus 8%) reflecting the importance of tourism north of the border.

Business sector (all businesses) Retailing Construction and building related activities Business services Manufacturing Hotels, restaurants, bars and catering Real estate activities Agriculture, forestry, fishing Computer and related activities Sale, maintenance and repair of motor vehicles and fuel retail Transport and activities related to transport Creative services Health and social work Personal services (e.g. dry cleaning, hairdressing) Wholesale trade Financial services Education Leisure/sports/Entertainment Renting of machinery, equipment, personal and household goods Electricity, gas and water supply Research and development activities Post, courier and telecommunications services Engineering (unspec) Repairs/Maintenance (other than motor vehicles) Electronics/Electrical (unspec) Mining & quarrying Other Refused

18% 15% 14% 10% 8% 5% 5% 5% 4% 4% 4% 4% 4% 3% 3% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Q7 In what sector is/are your business/es? Base: All respondents (9,761) FSB Annual Survey 2009 4 per cent of members could not be classified because of incomplete postcode information.

1

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There are a number of statistically significant differences between rural and urban-based members when it comes to the industry sector of their business and these are set out in the table below. While retailing and business services are more likely to be the domain of urban-based members, those located in rural areas are more likely to be found in hospitality (hotels, restaurants, bars and catering) and – unsurprisingly of course – in agriculture, forestry and fishing.

Industry sector Base: All respondents (9,761) Overall2 %

Urban %

Rural %

Retailing

18

18

16

Business services

14

16

12

Hotels, restaurants, bars and catering

8

7

10

Agriculture, forestry, fishing

5

2

10


2.3 Number of businesses owned and length of ownership Three-quarters of members currently own or co-own and manage one business, consistent with the pattern in previous years. The mean number of businesses currently owned or co-owned by a member is 1.4.

Number of businesses owned Base: All respondents (9,761) 2006 %

2008 %

2009 %

1 business

74

75

75

2 businesses

19

19

16

3 businesses

5

7

5

More than 3 businesses

2

-

2

Not stated

1

-

2

Mean number of businesses owned

-

-

1.36

Source: Guided Insight/ICM Research Members, on average, have owned or co-owned their main business for 14.4 years. Welsh members have owned their business longer than those from other parts of the UK (15.7 years).

Please see data tables for overall answers of 4 per cent and below.

2

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2. Business Profile

There is a clear gender divide in terms of length of business ownership: 15.4 years for men versus 11.8 years for women.

Number of years owned/co-owned main business 1–2 years

8%

3–5 years

15%

6–10 years

21%

Mean: 14.4 years 11–20 years

26%

21+ years

26%

Not stated

4%

Q2 How many years have you owned/co-owned your main business? Base: All respondents (9,761) FSB Annual Survey 2009

2.4 Legal form of business and type of ownership Half (49%) of FSB members’ main businesses are classified as limited companies and a third (32%) of members are sole traders/sole proprietors. While one in six (16%) are constituted as a Partnership, Limited Liability Partnerships account for only one in a hundred. Three-quarters (75%) of members state their main business is registered for VAT, in line with findings from previous surveys3.

2006 and 2008 ‘Barriers to Growth’ Surveys (77% and 74% respectively).

3

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Legal form of business Limited company

49%

Sole trader/sole propietor

32%

Partnership

Limited liability partnership

Co-op

16%

1%

Half of FSB members are limited companies and a third are sole traders/sole proprietors. Meanwhile, Limited Liability Partnerships account for only one in a hundred.



Q4 What is the legal form of your main business? Base: All respondents (9,761) FSB Annual Survey 2009

As the following chart illustrates, half (52%) of member businesses are mainly or solely owned by men while a third (32%) of members say their main business is equally male and female owned. Just 15 per cent describe the ownership as being mainly or solely female, one percentage point fewer than recorded in the 2008 Membership Survey.

Business ownership by gender

NET: Mainly/solely male 52%

Solely male, 41%

Mainly male, 11%

Equal male & female, 32%

NET: Mainly/solely female 15%

Solely female, 12%

Q5 Are the owners (including partners/directors) of your main business…? Base: All respondents (9,761) FSB Annual Survey 2009

27% of respondents are female. 73% are male. The average age is 53. Just 4% are aged 16–34 years.

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2. Business Profile

2.5 Business rates Six in ten (60%) members state that they pay business rates although this figure varies from 41 per cent among Scottish members to seven in ten among those in Northern Ireland and Wales (73% and 70%). The discrepancy between Scotland the rest of the UK can be explained by the fact that a quarter (26%) of members north of the border are receiving 100 per cent rate relief.

Payment of business rates Base: All respondents (9,761) UK

England

Scotland

Northern Ireland

(9,761)

(7,615)

(1,165)

(327)

(498)

%

%

%

%

%

Yes

60

61

41

73

70

Included in my rent

5

5

2

4

3

No

28

29

27

18

21

Not applicable/Receiving 100% rate relief

4

1

26

1

2

Not stated

3

3

3

3

4

Wales

Source: Guided Insight/ICM Research More urban-based than rural-based members pay business rates (61% compared to 57%), partly accounted for by the fact that the latter are more likely to be receiving 100 per cent rate relief (5% versus 3% of members in urban areas).

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The following chart shows the proportion of members whose business is entitled to, has applied for, and is in receipt of small business rates relief. (Please note that at the time of the survey, Northern Ireland did not have a Small Business Rates Relief scheme so members based there were not asked this question). A third (32%) of members admit that their business is currently in receipt of small business rates relief, five percentage points lower than the number who claim they are entitled to rates relief. At the same time this figure is considerably higher than the proportion who have been in receipt of transitional relief (8%) and other business rates relief (1%).

Small businesses rates relief/transitional relief 37%

a) ENTITLED to small business rates relief

19% 43%

b) APPLIED for small business rates relief

33% 32% 34%

c) In RECEIPT of small business rates relief

32% 35% 33%

d) In receipt of other business rates relief

e) In receipt of transitional relief

f) Benefited from transitional relief

% Yes % No % Not stated

1% 63% 36% 8% 56% 37% 7% 55% 38%

Q3 Is your business…? Base: a) – c) All respondents except those in Northern Ireland (9,433); d) – f) All in England (7,614) FSB Annual Survey 2009

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2. Business Profile

2.6 Business premises The ownership status of members’ business premises is extremely diverse as the chart below demonstrates. Just three in ten (31%) members actually own their premises although this proportion does rise to four in ten among members located in the devolved countries. Approaching half of members rent or lease their business premises while close to a quarter work from home. Northern Ireland appears to be an outlier here. It has considerably more members renting their business premises (36%) but relatively few operating from home (8%).

Business premises

Work from home, 23%

Own premises, 31%

Lease premises, 18%

Rent premises, 26%

Q10 Do you own, lease or rent your business premises? Base: All respondents (9,761) FSB Annual Survey 2009


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2.7 Gender, age and health Approaching three-quarters (73%) of the members taking part in the Annual Survey are men. The gender profile of responses is broadly consistent across all English regions and devolved countries.

Gender Base: All respondents (9,761) Male/men Female/women

% 73 27

Source: Guided Insight/ICM Research The average age of an FSB member is 53 years, as per the table overleaf. Less than half a per cent of the respondents to this survey are aged 16-24 years and just one per cent of members are 75 years or older.

Age Base: All respondents (9,761) % 16-24 25-34 35-44 45-54 55-64 65-74 75+ Not stated Mean age in years



4 17 33 34 10 1 1 53

Source: Guided Insight/ICM Research Just under a quarter (23%) of members say they have a long-standing illness, disability or infirmity including one in ten (9%) who report that it limits their work activities.

Long-standing Illness and Disability Base: All respondents (9,761) NET: Yes Yes – but it has not limited my work activities in any way Yes – and it has limited my work activities in some way No Not stated Source: Guided Insight/ICM Research

% 23 14 9 76 1

23


3. Customers and Markets 3.1 Client base Location On average, customers in their local area account for over half (56%) of FSB members’ sales, while sales to the rest of the UK and within the region (but outside of the local area) each represent around a quarter.4 Meanwhile, sales to customers in the EU and to the rest of the world (outside Europe) each make up an average of four per cent of members’ business. A tenth (12%) of trade is from e-commerce, marking no significant change since 2008, while nine-tenths (89%) is done offline in the traditional way.

Annual sales – Customer base in… 56%

Local area

26%

Rest of UK

In your region

25%

EU

4%

Rest of world

4%

ROI

2%

Non-EU Europe

1%

Online – e-commerce, 12%

Offline – traditional commerce, 89%

Q12 Approximately what percentage of your annual sales are in each of the following areas? Q12 What percentage of your trade is from e-commerce? Base: All respondents (9,761) FSB Annual Survey 2009

As the table below illustrates, the larger a business’s turnover, the lower the proportion of its sales is conducted locally. Those with a turnover of more than £5 million have a lower percentage of sales in their local area. On the other hand, larger firms have a higher percentage of sales with the rest of the UK and – although not shown in the table below – to customers outside of the country. Intuitively we would expect a correlation between turnover and proximity of trading. Among those businesses in the lowest turnover bracket will be some very small businesses including sole traders, which only operate within their local area (e.g. a plumber, or a newsagent).

Please note percentages sum to more than 100 per cent, because of user error among those who completed the postal version of the survey.

4


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Commerce/trade with local customers makes up a higher proportion of overall sales for female members (58%) and those representing a female-majority enterprise (61%). Meanwhile, members with less than ten full-time staff have the highest proportion of local sales (56%) and the lowest proportion of sales to the rest of the UK (26%). The percentage of annual sales in an area is also determined by where a member is based. Members in urban areas are more likely than those in rural parts of the country to trade locally. In contrast, more members in rural than urban locations earn sales from the rest of the UK.

Q12. Approximately what percentage of your annual sales are in each of the following areas?5 Base: All respondents (9,761) Local Area %

Region %

Rest of UK %

56

25

26

Male

56

26

27

Female

58

24

25

1 business

58

25

25

2 businesses

53

26

29

3 businesses

52

24

29

More than 3

45

24

34

Male majority

56

26

26

Equal

54

25

29

Female majority

61

23

23

Less than £100k

60

25

24

£100k to £500k

58

25

25

£500k to £1m

48

27

31

£1m to £5m

41

28

34

More than £5m

28

22

42

Total Gender

Number of businesses owned

Gender balance

Level of turnover

Please note that throughout the report, where a figure in a table is shaded, it is statistically significantly different to all other subgroups in that category. Also see footnote on page 29.

5

25


Q12. Approximately what percentage of your annual sales are in each of the following areas?5 Full-time staff

Urban/Rural classification

Up to 10

56

25

26

11 to 20

47

27

33

21 to 50

41

28

34

51+

46

24

36

Urban

58

25

25

Rural

53

26

30


E-commerce Members based in Northern Ireland derive the least amount of trade from e-commerce compared to the other home countries (7% compared to 12% nationally). Within England, it is those in the East Midlands who record the lowest proportion of e-commerce (9%). However, while the prevalence of e-commerce varies across the country there is no difference irrespective of whether a member is based in an urban or rural location. E-commerce constitutes a lower percentage of sales for members who have owned/managed their business for more than eleven years (10%). Unsurprisingly perhaps, those who work from home record the highest percentage of e-commerce (15%). The ability to trade online without the need for a business premises may have been a motivating factor for some of those who work from home. It is also notable that members whose profits decreased over the last year say e-commerce accounts for a significantly lower proportion of their trade (11%) than those whose profits remained stable or increased. This may indicate that having an online presence has boosted members’ ability to weather the storm during the recession.


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Q13. What percentage of your trade is from e-commerce? Base: All respondents (9,761) % E-commerce Total Nation


Years owned/managed business

Type of premises

Profitability over last year

12 England

12

Scotland

13

Northern Ireland

7

Wales

11

Urban

12

Rural

13

1 – 2 years

14

3 – 5 years

17

6 – 10 years

13

11+ years

10

Own

13

Lease

9

Rent

11

Work from home

15

Increased

13

Stayed the same

13

Decreased

11


Sector Three-quarters (75%) of FSB members have supplied goods or services to the private sector within the last year and two-fifths (41%) have supplied to a public sector organisation. Of course, many will have supplied both the public and private sectors. Local authorities are the largest public sector client listed with over a quarter (27%) having supplied them; schools, universities and colleges follow close behind (24% have supplied). The NHS is a client for one in ten (12%).

27


A fifth (19%) do not supply goods or services to any of the client types listed, which largely reflects the fact that many businesses (for example plumbers or retail outlets) might only deal with private individuals and not count any organisations among their clients. Others might only work with voluntary organisations. The percentage of business conducted with the private sector is consistent whether a member is located in an urban or local area (75% each). On the other hand, those in urban areas are more likely than members in rural areas to have supplied to the public sector (42% versus 40%).

Clients supplied in the past 12 months Private sector

75%

Local authorities/councils

27%

Schools/universities/colleges

24%

NHS

12%

Government agencies/quangos

7%

Police/fire services

7%

UK central government Devolved government

41% supply to the public sector

5% 2%

EU institutions

1%

Olympics 2012



None of these

19%

Q14a To which of the following has your business supplied goods and/or services during the past 12 months? Base: All respondents (9,761) FSB Annual Survey 2009

As many as a third of businesses report late payment for goods/service supplied to the private sector (34%), which is found to be the least prompt when it comes to settling invoices. The police and fire services are the most prompt although even they are reported to pay late by a fifth (18%) of respondents.

Payments from sector tend to be received Late

On time/early

75%

71%

70%

70%

69%

66%

18%

22%

23%

25%

25%

29%

30%

30%

31%

34%

en

N

rit ho ut la ca

Lo

H

ag

cs m pi ly O

ci Go es v /q ern ua m ng en os t EU in st itu tio C ns en tra lg ov er nm en t Pr iv at e se ct or

74%

S

76%

ie s

78%

Po Sc lic ho e/ fir ol /u e ni ve rs ity /c ol D le ev ge ol ve d go ve rn m en t

82%

Q14b To which of the following has your business supplied goods and/or services during the past 12 months, and has payment tended to be early, late or on time? Base: All who've supplied sector FSB Annual Survey 2009

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Members in the North East are the most likely to have supplied to the public sector with half (49%) having done so in the past 12 months. In particular, 41 per cent have supplied to local authorities/councils, significantly higher than members in any other region. In London, only a fifth (19%) have done so.

3.2 Internet use The vast majority of FSB members use the internet when running their main business, with email – mentioned by 83 per cent – the most popular function. Three-quarters (77%) go online for advice, guidance and information while 72 per cent use the internet to download information or documents. Three-fifths (59%) maintain a business website, 55 per cent pay bills online and half (50%) of businesses visit government websites for information on how to comply with legislation. Only a tenth (11%) use the internet for recruitment purposes.

Uses of the internet for business purposes (top 12) 83%

Emailing

77%

Finding advice, guidance, info

72%

Downloading info/documents 59%

Maintaining a business website

55%

Paying bills online Visiting government websites to comply with legislation

50% 48%

Making orders/arranging deliveries

46%

Searching for info on competitors

37%

Uploading tax return Placing adverts/marketing

30%

Visit local authority websites Do not use internet

26% 9%

Older members are much less likely to use the internet (65-74 = 17% ‘No’ 75+ = 33% ‘No’

Q15 What, if at all, do you use the internet for when running your main business? Base: All respondents (9,761) FSB Annual Survey 2009

The overwhelming picture is of a high level of internet dependence with nine in ten using the internet in the running of their business. The table overleaf illustrates some key subgroup differences among those FSB members who do not use the internet for business purposes (9%), reflecting the fact that there are a small minority of firms whose operations can be carried out effectively via traditional channels. Echoing the picture ICM records among the general public, fewer older members utilise the internet and email. In addition, it is notable that those whose profitability has stayed the same or decreased over the last year are significantly more likely not to use the internet for business purposes than those whose profitability has increased. A similar picture is evident among those members who expect the business climate in which they operate to remain stable or deteriorate in the next 12 months. We can only speculate as to why

29


this might be – it may be that businesses that make use of the internet are more competitive as a result. On the other hand, it could be that the types of business that have suffered in the recession also happen to be the types of business which are less likely to need to use the internet. Members in the North East are the most likely to report that they do not use the internet for business purposes (13%), while in London only one in twenty (5%) do not – the lowest in England.

Q15. What, if at all, do you use the internet for when running your main business? Base: All respondents (9,761) % Do not use internet6 Total Age



Expectation for next 12 months

9 16-34

3

35-44

4

45-54

7

55-64

10

65-74

17

75+

33

Urban

8

Rural

9

Increased

5

Stayed the same

11

Decreased

9

Improve

5

Remain stable

10

Deteriorate

11


Please note that throughout the report, where a figure in a table is shaded, it is statistically significantly different to all other subgroups in that category. For example, in this case, 5 per cent of respondents whose profitability increased in the last year do not use the internet – statistically significantly less than those whose profitability stayed the same (11%) or decreased (9%).

6


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Internet usage when running a business is broadly consistent across rural and urban classifications, as per the table above. However, the following chart illustrates how members based in urban areas are more likely to use the internet for a greater number of activities. For instance, 61 per cent of urban members maintain a business website compared to 58 per cent of rural members.

Q15. What, if at all, do you use the internet for when running your main business? Base: All respondents (9,761) Urban %

Rural %

(5,738)

(3,540)

E-mailing

84

83

Finding advice, guidance and information

78

76

Downloading information/documents

73

71

Maintaining a business website

61

58

Paying bills online

56

55

Visiting government websites to comply with legislation

51

48

Making orders/arranging deliveries

48

48

Searching for information on competitors

47

45

Uploading tax return

38

37

Placing adverts/marketing

31

28

Visiting local authority websites

27

26

Expressing my views/participating in research/consultation

24

22

Obtaining advice on running/starting business

20

16

Searching for tender opportunities/submitting tenders

18

13

Searching for staff/recruitment

11

10


31


4. Business Financial Performance 4.1 Turnover One in ten FSB members turned over less than £25,000 in the last financial year while at the other end of the scale, the same proportion earned more than £1 million. Around half of FSB members report a turnover of between £25,001 and £200,000 and the mean turnover for the year was approximately £524,0007.

Level of turnover for the last financial year 1% 9% >£5m £1,000,001– £5m

10% 11%

£500,001– £1m £300,001– £500,000 £200,001– £300,000

10%

17%

£100,001– £200,000 £50,001– £100,000 £25,001– £50,000

18%

While one in ten FSB members turned over less than £25,000, at the other end of the scale, the same proportion turned over more than £1 million.

Mean £524,000

>£25,000 13% 10%

Q16 Please indicate the level of turnover for your main business for the last financial year? Base: All respondents (9,761) FSB Annual Survey 2009

Differences along gender lines can be found at both ends of the spectrum as illustrated by the table overleaf. Female members are more likely to run businesses whose turnover is up to £50,000, while men are more likely to represent firms with a turnover of more than £300,000.

Mean turnover is based on taking the mid-point of the turnover bracket mentioned by each member. As such, it is an approximation of average turnover rather than a true mean.

7


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Q16. Please indicate the level of turnover for your main business for the last financial year. Base: All respondents (9,761) Male %

Female %

Less than £25,000

8

14

£25,001 to £50,000

12

16

£50,001 to £100,000

17

19

£100,001 to £200,000

17

17

£200,001 to £300,000

10

9

£300,001 to £500,000

12

10

£500,001 to £1m

10

8

£1,000,001 to £5m

10

4

More than £5m

1



Mean

£589,000

£344,000

Source: Guided Insight/ICM Research The gender balance within an organisation is also closely correlated with turnover. As the table below demonstrates, firms whose owners/directors are solely or mainly female are disproportionately represented among businesses with turnovers of £100,000 or below. They are also less likely than those whose ownership is majority-male or equal male-female to have returns of between £500,001 and £5 million. Past the £5 million mark, there are significantly more male-majority enterprises. Female-majority organisations have the lowest mean turnover (£237,000).

33


Q16. Please indicate the level of turnover for your main business for the last financial year. Base: All respondents (9,761) Male majority %

Equal %

Female majority %

Less than £25,000

9

5

21

£25,001 to £50,000

12

10

21

£50,001 to £100,000

17

17

22

£100,001 to £200,000

16

20

15

£200,001 to £300,000

9

12

7

£300,001 to £500,000

11

14

6

£500,001 to £1m

11

11

5

£1,000,001 to £5m

11

8

3

More than £5m

2





Mean

£632,000

£486,000

£237,000

Source: Guided Insight/ICM Research Marked variations in turnover exist depending on where members are located. More businesses based in Northern Ireland turned over between £1,000,001 and £5 million than anywhere else and the mean annual turnover for FSB members in the province is significantly higher than in all other countries. Within England, FSB members with the highest revenue are most likely to be found in London (mean £756,000). Those in the South West have a higher tendency than other regions to be in the lower turnover brackets (£387,000).

Q16. Please indicate the level of turnover for your main business for the last financial year. Base: All respondents (9,761)

Mean

England

Scotland

Northern Ireland

Wales

£518,000

£480,000

£830,000

£458,000

Source: Guided Insight/ICM Research Members who own/manage more than four firms are the most likely to say that their main business turned over more than £5 million last year (5%) and the more firms a person owns/manages, the higher the mean annual turnover of their main business (rising from £454,000 among those who own/manage one business, to £1,240,000 if they own/manage four or more). Turnover also increases with years of experience reflecting the time that it can take to build up a business. Those with up to five years in business are significantly less likely than those who have been in business for longer, to have passed the £1 million annual turnover mark. FSB members who have been running their


34

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business for over 21 years are more likely than anyone else to be turning over more than £5 million and at £694,000, their mean annual turnover is higher than any other group.

4.2 Profitability and sales volume Half (52%) of FSB members have seen a fall in profitability over the last year and the same is true of sales volume (48%). On a more positive note, a fifth (19%) have managed to maintain profitability through the recession and a similar proportion (16%) have kept their sales volume constant. Furthermore, a quarter (27%) have seen a rise in profitability and three in ten (30%) have increased their sales volume. Given the turbulent period that the economy has been through of late, it is not surprising that businesses have suffered from declining revenues. The fact that some have continued to prosper signals the very uneven impact of recession. It is possibly also a function of measures taken by businesses as a result of the economic downturn, such as pay freezes or job cuts which may have enabled them to increase profitability (note that only two per cent have seen a rise in profitability of more than 50 Per cent. Many may have seen marginal increases as a result of such cost-cutting measures).

Recent financial performance – profitability and sales NET: Increased

27%

30%

2%

2%

25%

28%

19%

Increased >50% 16%

Increased 1– 50% Stayed the same Decreased 1– 50%

NET: Increased

44%

42%

8%

6%

Profitability

Sales volume

52%

48%

Decreased >50%

Q17 Over the last financial year has your profitability…? Q18 Over the last year has your sales volume…? Base: All respondents (9,761) FSB Annual Survey 2009

35


The following table, comparing responses to this question between 2008 and 2009 starkly illustrates the impact that the economic downturn has had on FSB members over the last year.

Q17. Over the last financial year has your Profitability…. 2008

2009

(8,311)

(9,514)

%

%

Increased

42

27

Stayed the same

26

19

Decreased

32

53

Base:

Source: Guided Insight/ICM Research Looking at the table overleaf, it is notable that businesses in the highest turnover bracket (over £5 million per annum) seem to have fared best, being most likely to have seen an increase in profitability over the last financial year and among the least likely to have experienced a fall in profits. At the other end of the scale though, firms turning over less than £100k have not necessarily out-performed others in increasing profits, but they are the most likely to have managed to maintain profitability and disproportionately less likely to have seen it decrease. While the report has already identified that higher-yielding businesses tend to be owned solely or mainly by men, we see that male-majority businesses have been outperformed in the downturn by femalemajority enterprises, who are significantly less likely to have seen a decrease in profits (47% compared to 54%) and more likely to have increased profitability (30% versus 25%). Just as the so-called “mancession” (a phrase coined by economists to describe the disproportionately higher number of job losses among men than women in this recession) has been attributed to the decline of manufacturing and construction industries, which employ more men than women, so too it would appear that this accounts for the difference in fortunes among FSB members. Male-majority firms are much more likely to be in the construction sector than female ones (20% compared to 3%); the same is true of manufacturing (12% and 5% respectively), two sectors which have been hit hard by the recession.

2009 responses are rebased to exclude refusals to enable comparisons with 2008.

8


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Q17. Over the last financial year has your profitability…. Base: All respondents (9,761) % Increased

% Stayed the Same

% Decreased

27

19

52

16-34

37

22

37

35-44

31

17

50

45-54

28

18

52

55-64

24

19

55

65-74

22

22

53

75+

21

23

47

Less than £100k

26

24

48

£100 to £500k

27

17

55

£500k to £1m

29

13

57

£1m to £5m

28

14

57

More than £5m

41

15

45

Male majority

25

19

54

Equal

28

19

52

Female majority

30

20

47

1-2

34

29

29

3-5

38

17

44

6-10

28

17

54

11-20

24

19

56

21+

21

19

58

Urban

25

17

55

Rural

30

21

47

Total Age

Level of turnover

Gender balance

Yrs owned/managed business

Urban/Rural classification Source: Guided Insight/ICM Research

37


While we saw that those who have owned their business for the longest period have the highest annual turnover, it is also the case that their profits have suffered more in the recession than their less experienced counterparts. As the table above shows, owners/managers who have been in the business for over 21 years are the least likely to have seen their profits increase. At the same time, the most recently-established players (1-2 years) are the most likely to have seen an increase. Again, this may have something to do with the industry sectors in which they work (well-established FSB members are more likely to be found in construction, manufacturing and real estate – all of which have been hit hard) but it could also indicate that “old hands” are less flexible in their responses to the economic downturn. In a related finding (given age and experience must correlate to some degree), the youngest cohort are the most likely to report an increase in profits (37%) and the likelihood of an increased profit over the last year decreases with age (to 21 per cent among the 75+ group). Members in rural areas have fared better than their urban counterparts as the table illustrates. In England, members in the South West are among the most likely to report that their profits have gone up over the last financial year with three in ten (30%) saying that this is the case –significantly higher than the East Midlands, the North West, the West Midlands and Yorkshire & the Humber, where no more than a quarter give this response. These differences might in part be due to regional differences in industry sector. For example, the South West has a disproportionately high number of businesses in Agriculture, Forestry & Fishing and this sector is withstanding the current recession better than many others. At the same time, the West Midlands and Yorkshire & the Humber both have disproportionately high levels of manufacturing businesses and this will have impacted on those regions’ profitability. Members in Scotland are significantly more likely than those in England to report a rise in profits (30% compared to 26%) while those in England are more likely than their counterparts in Scotland or Wales to say profits have declined over the last year.

Profitability over the last financial year, by region/devolved nation

49%

48%

23%

22%

17%

19%

57%

57%

Yo r

ks

r be

&

tM

H

id la

um

nd

s

20%

W al es

19%

W es

Ea h

la

nd

So ut

ot

52%

st

47%

Sc

la Ire n

er th or

49%

nd

t W es th N

Q17 Over the last financial year has your profitability…? Base: All respondents (9,761) FSB Annual Survey 2009

20%

29%

t

54%

19%

30%

W es

53%

22%

27%

h

53%

30%

ut

52%

26%

Increased

So

19%

st

20%

or

En g of

st Ea

18%

la

nd id la M st Ea

17%

N

ll ra ve O

24%

Ea

55%

25%

or th

52%

26%

N

18%

27%

Lo nd on

19%

Stayed the same

nd

25%

s

27%

Decreased

38


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It is also the case that members in the South West are the most likely to have seen their sales volume increase in the last year with a third (34%) giving this response – statistically significantly higher than their counterparts in the North West, South East, West Midlands and Yorkshire & the Humber.

Sales volume over the last financial year, by region/devolved nation

27%

16%

17%

51%

52%

r be H

id

la

um

nd

s

44%

es

45%

& ks Yo r

t

20%

27%

tM

h ut

16%

W es

Ea

nd la ot

49%

29%

W al

45%

17%

34%

W es

47%

30%

st

18%

So

or N

Q18 Over the last year has your sales volume…? Base: All respondents (9,761) FSB Annual Survey 2009

17%

Sc

th

th

52%

31%

nd

Ea

on

or

Lo

nd N

of st Ea

Ea

st

M

En

id

gl

la

an

nd

d

ll ra ve O

46%

28%

la

49%

Ire

51%

t

49%

n

48%

15%

16%

er

18%

W es

14%

th

15%

or

16%

31%

N

29%

st

30%

s

30%

h

27%

30%

Increased

ut

Stayed the same

So

Decreased

39


4.3 Expectations for next 12 months Close to three in ten (28%) FSB members expect an improvement in the business climate in which they operate over the next year. Just under half (46%) are not as optimistic but do expect it to remain stable while a fifth (22%) predict a deterioration.

Expectation for next 12 months Improve, 28%

Remain stable, 46%

Deteriorate, 22%

Q19 Over the next 12 months do you expect the business climate in which your business operates to generally improve, remain stable or deteriorate? Base: All respondents (9,761) FSB Annual Survey 2009

Looking across the country, economic optimism is generally consistent although members in England and Scotland are the most likely to expect an improvement in the business climate (29% and 27% respectively).

Expectation for next 12 months, by region/devolved nation

23%

24%

r be um

nd

H

la ot

24%

s

20%

&

21%

43%

ks

24%

nd

nd la Ire n

er

N

or

th

N

Sc

t W es

st

or th

Ea

N

or

th

nd

gl En of

st Ea

Lo

an

nd la id M st Ea

on

d

s

l ra l ve O

29%

46%

id la

22%

31%

Yo r

24%

es

25%

51%

28%

tM

23%

48%

W al

21%

47%

21%

W es

22%

46%

st

41%

45%

Ea

39%

46%

30%

h

46%

31%

ut

50%

27%

So

46%

23%

t

28%

28%

W es

31%

26%

h

33%

28%

Improve

ut

Remain stable

So

Deteriorate

Q19 Over the next 12 months do you expect the business climate in which your business operates to generally improve, remain stable or deteriorate? Base: All respondents (9,761) FSB Annual Survey 2009


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The youngest cohort (16-34 year olds) are significantly more likely than anyone else to expect an improvement in the climate (43%). Indeed, optimism falls with age and among those over the age of 65, only a quarter (23%) expect the situation to improve. There is a close correlation between the number of businesses a person owns/manages and their outlook: those with one business are less likely than anyone running more than one to expect an improvement. At the same time, the longer a person has owned/managed their main business, the more pessimistic they are about next year. It is also the case that the lowest turnover bracket (less than £100,000 over the last year) has the highest expectations for next year, with three in ten (31%) members in that category expecting an improvement, significantly more than those turning over between £100,000 and £5 million per year. Meanwhile members in urban areas show more optimism than those in rural locations (rural members are more likely to expect the business climate to remain stable, but more urban than rural members predict an improvement).

Q19. Over the next 12 months do you expect the business climate in which your business operates to generally improve, remain stable or deteriorate? Base: All respondents (9,761) % saying Improve Total Age

Nation


28 16-34

43

35-44

34

45-54

28

55-64

26

65-74

23

75+

23

England

29

Scotland

27

Northern Ireland

23

Wales

21

1 business

27

2 businesses

32

3 businesses

33

More than 3

38

41


Q19. Over the next 12 months do you expect the business climate in which your business operates to generally improve, remain stable or deteriorate? Yrs owned/managed business

Level of turnover

Urban/Rural classification Source: Guided Insight/ICM Research

1 – 2 years

48

3 – 5 years

38

6 – 10 years

30

11 – 20 years

25

21+ years

20

Less than £100k

31

£100 to £500k

27

£500k to £1m

27

£1m to £5m

25

More than £5m

27

Urban

29

Rural

27

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5. Finance 5.1 Sources of finance The most common source of long-term finance is bank overdrafts (28% have used them as a major source of finance in the last 12 months) and respondents’ own savings, which a quarter (24%) have dipped into. Retained profits have also been used as a major source by 24 per cent of FSB members, while one in ten (11%) have used secured bank loans. When it comes to short-term financial resources, members are most likely to have used their own savings (17%), bank overdrafts (15%), company credit cards (15%) and personal credit cards (14%). A quarter (27%) of members have not accessed any sources of long-term capital over the last year, while 44 per cent have not used short-term finance.

Sources of business finance Bank overdraft

28%

Own savings

24%

Retained profits

24%

Bank loan (secured)

15% 17% 8%

11% 3%

Company credit card 7%

15%

Personal credit card 7%

14%

Major

Family 7% 8%

Minor

Supplier credit 5% 8% Bank loan (unsecured) 6% 5% Factoring/invoice discounting 3% 2% Leasing 3% 4% Other business/employment 3% 3% Second mortgage 3% 1% None of these

27%

44%

Q15 Which of the following sources have you used to finance the business in the last 12 months? Please indicate whether you regard them as a major financial source (e.g. long-term capital provider), or minor financial source (e.g. small amounts of shortterm finance). Base: All respondents (9,761) FSB Annual Survey 2009

The following chart provides a summary of the types of finance used. Financial sources include bank overdrafts, bank loans, company credit cards, second mortgages, leasing, factoring/invoice discounting and small business loan guarantees. Two-fifths (40%) have used these as a major source of long-term capital, while a third (33%) have resorted to personal sources such as their own savings, their family, or personal credit cards. Only one per cent have used government funding as a major source of finance, while four per cent have accessed it on a short-term basis.

43

5. Finance

Sources of business finance NET: Financial NET: Personal Sources NET: Miscellaneous

40%

32% 33%

33% 28%

Major

15%

Minor

1% 4%  NET: European Union 1% NET: Government

None of these

27%

44%

Q20 Which of the following sources have you used to finance the business in the last 12 months? Please indicate whether you regard them as a major financial source (e.g. long-term capital provider), or minor financial source (e.g. small amounts of short-term finance). Base: All respondents (9,761) FSB Annual Survey 2009

Major source (long-term capital) Younger members (aged 16-44) are significantly more likely than their older peers to have used financial sources (44%). One possible explanation is a generational gap evidenced by younger people having a more relaxed attitude towards the being indebted to financial institutions.9 This younger group are also more likely to have borrowed from personal sources (39%) in the last year, specifically from family (18%) and to use personal credit cards (11%). It is likely that as the recession has taken hold, some young entrepreneurs have been forced to access these sources to keep their businesses afloat. The oldest age bracket (aged 75 and over) is the least likely to have gone to their family for finance (3%) or used their personal credit card (4%). At the same time, they are significantly more likely to have used their pension to finance their business (9%). Northern Ireland-based members are more likely than anyone else to have accessed financial sources of long-term capital in the last 12 months, with half (49%) of NI members saying they have. Three-fifths (58%) of owners/managers of less-established businesses (one to two years) have had financial assistance from personal sources which is significantly higher than anyone who has owned/ managed their business for three years or more. Meanwhile there is a clear relationship between a business’s turnover and the nature of long-term financing. It is not surprising that the higher the organisation’s annual turnover, the less likely the member is to have used personal sources of finance. At the same time, members with the lowest annual turnover (less than £100k) are least likely to have accessed financial sources which may reflect the fact that they have less access to credit because of their comparatively low turnover.

Certainly this reflects the attitudes among the general population in ICM’s other research.

9


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Q20. Which of the following sources have you used to finance the business in the last 12 months? Base: All respondents (9,761) Major Source Total

% Financial

% Personal

40

33

Age

16-34 35-44 45-54 55-64 65-74 75+

44 44 41 39 34 33

39 36 33 32 31 32

Nation

England Scotland Northern Ireland Wales

40 42 49 41

34 31 32 29


1 business 2 businesses 3 businesses More than 3

39 46 45 50

32 38 42 38


1 – 2 years 3 – 5 years 6 – 10 years 11 – 20 years 21+ years

38 39 41 40 41

58 41 32 28 29

Level of turnover

Less than £100k £100 to £500k £500k to £1m £1m to £5m More than £5m

32 46 46 48 55

41 31 26 21 14


45

5. Finance

5.2 Borrowing Half (48%) of FSB members have not borrowed any money over the last 12 months. Looking at the amounts borrowed by those that have needed loans, the majority of firms have borrowed less than £20,000. One in twenty (5%) has taken between £20,001 and £30,000 and the same proportion (5%), between £30,001 and £50,000. The mean amount borrowed over the last year across all FSB members is around £25,000.10

Amount borrowed in past 12 months

>£250,000 £100,001– £250,000

2% 2% 4% 5% 5% 9%

£50,001– £100,000

10%

£30,001– £50,000

11%

Mean £25,368

£20,001– £30,000 £10,001– £20,000 £5,001– £10,000 £

28%

32%

Q22 Have you experienced any changes in the overall interest rate charged for these products compared to what you were charged in the last few years? Base: All respondents who have borrowed loans in the last 12 months (4,813) FSB Annual Survey 2009

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6. Employment 6.1 Workforce Across all staffing categories there has been a slight dip in numbers compared with 12 months ago. However, it is also clear that, on this measure, members expect some recovery over the year to come. In the case of full-time, part-time and casual/seasonal staff, they do not expect to return to the levels they had a year ago, but they do anticipate a rise in the workforce from their current levels. With regard to temporary staff, members actually expect that in a year’s time they will be employing more temporary staff than they were 12 months ago. It may be that employers intend to recruit staff on temporary contracts because of a reluctance or inability to take on permanent staff given current economic uncertainty. The average workforce of FSB members currently stands at 7.35 which is down from 8.06 last year. Respondents expect that in 12 months’ time, levels will have increased to 7.65 – a partial recovery.

Mean number of staff employed 4.85

12 months ago

Full-time

Now

4.54

In 12 months time

4.62

12 months ago

Part-time

Casual/seasonal

Temporary

2.08

Now

1.83

In 12 months time

1.89

12 months ago

0.74

Now

0.64

In 12 months time

0.67

12 months ago

0.39

Now

0.34

In 12 months time

0.47

Total workforce 12 months ago 8.06 Now 7.35 In 12 months time 7.65

Q23 How many people are employed in your main business at the moment, and 12 months ago, and in 12 months time? Base: All respondents (9,761) FSB Annual Survey 2009

49

6. Employment

6.2 Working arrangements Half of FSB members (47%) employ staff on a part-time basis, three in ten (29%) have staff working flexible hours and just over a quarter (27%) permit working from home. One in fifty (2%) operate jobshare schemes. However, a substantial minority (28%) of FSB members do not use any of these working arrangements.

Staff working arrangements Work part-time

47%

Work flexible hours

29%

Work from home

Job share

27%

2%

None of these

Not stated

28%

4%

Q24 Do any of the people employed in your business…? Base: All respondents (9,761) FSB Annual Survey 2009

Given that the average workforce of FSB members is around seven members of staff (see Section 6.1), the capacity for flexibility might be limited. However, while smaller businesses (up to ten full-time staff) have fewer employees working on a part-time basis than is typical (44%), they are also the most likely to have staff working from home (30%). There appears to have been a generational shift towards a flexible working culture with members aged 16-54 years significantly more likely than those aged 55 and over to say that their business allows flexible working hours (32% compared to 26%). Compounding this finding is the fact that those who have been in the business for more than 21 years are most reluctant to have adopted any of these flexible arrangements. Working arrangements are found to be linked to members’ age as well as gender. Significantly more men than women report that their business does not operate any of these practices (29% versus 24%).This finding is further evidenced when comparing male-majority firms against women-dominated businesses (31% and 22% respectively do not use these arrangements).


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Q24. Do any of the people employed in your business…? Base: All respondents (9,761) Work part-time %

Work flexible hours %

Work from home %

None of these %

47

29

27

28

Male

45

29

28

29

Female

53

32

25

24

16-34

45

34

27

29

35-44

49

34

28

27

45-54

48

31

28

28

55-64

45

27

27

28

65-74

47

25

26

28

75+

48

22

28

27

Up to 10

44

30

30

29

11 to 20

58

32

15

30

21 to 50

64

32

22

26

51+

56

34

16

31

1 business

45

28

27

29

2 businesses

51

34

30

25

3 businesses

52

38

30

24

More than 3

53

36

35

25

1 – 2 years

37

33

36

28

3 – 5 years

44

35

35

24

6 – 10 years

49

33

32

25

11 – 20 years

48

30

27

28

21+ years

49

23

18

33

Male majority

43

28

28

31

Equal

51

30

28

26

Female majority

52

33

27

22

Total Gender

Age

Full-time staff



Gender balance


51

6. Employment

6.3 Employment tribunals Only three per cent of FSB members say they have been summoned before an employment tribunal (or Northern Ireland Fair Employment Tribunal) in the last five years. Of those, a third (35%) had their case resolved in court, three in ten (29%) out of court, a fifth (19%) by arbitration or mediation and one in ten (11%) have still not settled the case. Over half (56%) say the case cost them less than £4,999 while 28 per cent paid between £5,000 and £14,999. The mean cost of a case was around £6,900.

Been summoned before employment tribunal Settled… Yes, 3%

In court

35%

Out of court No, 96%

Arbitration/ mediation Not settled

Cost

Not stated

56%

£5k £14,999

19%

11%

6%

Mean £6,922

28%

Up to £4,999

29%

8%

8%

£15k +

Don’t know

Q25 Have you been summoned before an employment tribunal in the past 5 years? Q26 And has the case been resolved? Q27 Approximately how much did the process cost you/your business? Base: All respondents (9,761) FSB Annual Survey 2009


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Smaller organisations – both in terms of turnover and size of workforce – have fared the best on this measure; those turning over less than £100,000 are the least likely to have been before a tribunal (1%), as are those employing ten full-time staff or less (2%) and members who own only one business (2%). London-based members (6%) are more likely than counterparts in other regions to have been summoned.

Q25. Have you been summoned before an employment tribunal or Northern Ireland Fair Employment Tribunal in the last 5 years? Base: All respondents (9,761) Yes % Total Level of turnover

Full-time staff



3 Less than £100k

1

£100 to £500k

3

£500k to £1m

5

£1m to £5m

10

More than £5m

19

Up to 10

2

11 to 20

9

21 to 50

13

51+

21

1 business

2

2 businesses

3

3 businesses

5

More than 3

9

53


7. Business Advice and Services 7.1 Sources of support Members were asked to indicate the helpfulness over the last year of a range of different stakeholders in terms of the support for the overall health of their business. If they did not identify the stakeholder in question as a source, they could select “did not seek advice”. The first of the two charts below illustrates which sources members have accessed over the last year. The second (overleaf) shows how helpful each stakeholder has been as a source of support, in the view of those who accessed them. Just under three-quarters (72%) of members have sought support/advice from their accountant in the last year, while around half have turned to their customers, suppliers, bank or the FSB itself. A third turn to informal methods of support such as their family (37%) and friends (33%). Just one in ten members report using universities/colleges, “Big Business” and EU funded help.

Sources of business support Accountant

72%

22%

Customers

52%

39%

Suppliers

52%

40%

Bank

52%

41%

FSB

50%

43%

37%

Family Friends

34%

Govt funded business support

31%

53% 56% 62%

Informal networks

27%

62%

Solicitor

27%

63%

Other trade associations

25%

65%

Local govt funded help

16%

Sought advice Did not seek advice

75%

Universities/colleges

12%

77%

‘Big Business’

11%

78%

EU funded help

9%

80%

Q28 During the last year, how helpful have each of the following sources of support been for the overall health of your business? Base: All respondents (9,761) FSB Annual Survey 2009

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Members identify accountants and family as their most helpful sources of support/advice over the last year (both 85%). Indeed, in all but three cases – local government funded help, EU-funded help and “Big Business” – perceived helpfulness exceeds unhelpfulness. However, Government funded business support and banks register high levels of unhelpfulness, as per the chart overleaf.

Sources of business support Accountant

85%

4%

Family

85%

2%

Customers

83%

3%

Friends

82%

2%

Suppliers

78%

5%

FSB

78%

4%

Informal networks

74%

Other trade associations

8%

54%

Bank

21%

51%

Universities/colleges Local govt funded help

5%

65%

Govt funded business support

35%

EU funded help

14%

‘Big Business’

13%

26% 12%

27%

Unhelpful

3%

67%

Solicitor

Helpful

36%

NET: Family/Friends/ Informal Networks = 79% helpful NET: Public funding = 47% helpful

30% 29%

Q28 During the last year, how helpful have each of the following sources of support been for the overall health of your business? Base: All who sought advice FSB Annual Survey 2009

Public funding FSB members in England (58%) are more likely than those elsewhere in the UK to have found public funding helpful (that is funding from local government, the EU, or central government – a combination of the public sector categories above). Specifically, it is those based in the South East who have found public funding most beneficial (68%, compared to a low of 44% in the North East).

55


Q28. During the last year, how helpful have each of the following sources of support been for the overall health of your business? Base: All who used each source NET: Public Funding % Helpful Total Region

Nation


56 East Midlands

53

East of England

58

London

49

North East

44

North West

54

South East

68

South West

61

West Midlands

48

Yorkshire & the Humber

54

England

58

Scotland

49

Northern Ireland

38

Wales

46

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7.2 Government “Real Help for Business” initiatives The most commonly-used and well-known government initiatives under the “Real Help for Business” banner are: • the Government Business Rates Deferral Scheme (13% have used, 33% are aware); • the HMRC Business Payment Support Service (13% have used, 20% are aware); and • the Enterprise Finance Guarantee while a further fifth (8% have used it, 19% have heard of it).

Usage· & awareness of Government initiatives under the ‘Real Help for Business’ banner Govt Business Rates Deferral Scheme

13%

HMRC Business Payment Support Service

13%

Enterprise Finance 8% Guarantee Trade Credit Insurance Scheme

33%

47%

20%

59%

19% 15%

66% 72%

Used it Aware of initiative but did not use it Unaware of iniative

Working capital Scheme

14%

Capital for Enterprise Fund

14%

Financial Intermediary Service (England only)

12%

73% 73% 75%

Q29 How helpful have each of the following Government initiatives under the ‘Real help for Business’ banner been for your business during the last year? Base: All respondents (9,761) FSB Annual Survey 2009

Distinct awareness patterns emerge from the data. London-based members and those whose business turns over more than £5 million annually report greater recall of initiatives.

57


Members with the smallest workforces (less than ten full-time employees) are among the least likely to have heard of any of these projects.

% Unaware of government initiatives under the “Real Help for Business” banner (Q29) Base: All respondents (9,761) Most likely heard of

Up to 10 full-time staff (74%)

Capital for Enterprise Fund

Enterprise Finance Guarantee

Least likely heard of

London (56%)


London (69%) Financial Intermediary Service (England)

Turnover more than £5m (62%) London (52%)

HMRC Business Payment Support Service

Turnover more than £5m (43%) London (64%)

Trade Credit Insurance Scheme

Working Capital Scheme Source: Guided Insight/ICM Research

Turnover more than £5m (48%) Turnover more than £5m (63%)





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8. Environment and a Low Carbon Economy 8.1 Business opportunities created by climate change FSB members display mixed emotions when it comes to the environment and a low carbon economy. The idea that energy efficiency can provide cost savings clearly resonates much more strongly than the suggestion that there are commercial opportunities in increased environmental awareness. Twice as many members agree with the former statement as with the latter (57% versus 28%). Increased environmental awareness can provide my business with new commercial opportunities NET: Agree

28% 10%

Energy efficiency can provide my business with cost savings 57% 20% Strongly agree

19%

Tend to agree 37%

29% 11% 9%

NET: Disagree

Neither/nor Tend to disagree

19%

Strongly disagree

7%

N/A Don’t know

23%

14%

20%

11%

Q30 To what extent do you agree or disagree with the following statements…? Base: All respondents (9,761) FSB Annual Survey 2009

Commercial opportunities While agreement that environmental awareness can create commercial opportunities is low, those members are who more likely to agree include: • Work from home (33%) • Aged 16-44 (33%) • Male-majority businesses (31%) • Rural-based (30%)

59

8.EnvironmentandaLowCarbonEconomy

The following are among those less likely to agree: • Turned over less than £500,000 last year (28%) • Owned/managed their business for 21+ years (25%) • Based in Yorkshire & the Humber (25%) • Based in the North West (24%)

Cost savings On the more immediate question of whether energy efficiency can provide their business with cost savings, the following groups are more likely to agree: • 21 to 50 full-time staff (73%) • Based in Northern Ireland (69%) • Based in Scotland (64%) • Aged 35-44 (62%) • Owned/managed their business for 3-5 years (62%) While the following are among those less likely to agree: • Less than ten full-time staff (57%) • Based in the South East (52%) • Based in the North East (52%) • Work from home (48%)

8.2 Changes to business as a result of climate change Almost three-fifths (57%) have changed the way they operate because of concerns regarding climate change, while 44 per cent have not. The most common action taken is recycling waste, cited by half (47%). A third (32%) have reduced energy use and a quarter have reduced the amount of rubbish they generate (25%) or bought energy efficient appliances (24%).


Changed the way they operate because of concerns re. climate change

60

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Actions taken (as a % of all members) Recycled waste

47%

Reduced energy use

No, 44% Yes, 57%

32%

Reduced landfill/amount of rubbish

25%

Bought energy efficient appliances

24%

Raised awareness of waste with staff

23% 19%

Sourced materials locally Reduced water consumption to save resources

17%

Used raw materials more efficiently Used & encouraged use of public transport Encouraged use of video/teleconferencing

15% 7% 5%

Q31 Have you changed the way your business operates because of concerns relating to climate change? Base: All respondents (9,761) All who have changed the way they operate (5,591) FSB Annual Survey 2009

Those who work from home are least likely to have made changes to the way their business operates because of concerns relating to climate change (51%). Members with the lowest turnover (less than £100k) are significantly less likely than those turning over between £100,001 to £5 million to have made any changes.

Q31. Have you changed the way your business operates because of concerns relating to climate change? Base: All respondents (9,761) % Yes Total Type of premises

Level of turnover


57 Own

62

Lease

60

Rent

57

Work from home

51

Less than £100k

54

£100 to £500k

60

£500k to £1m

60

£1m to £5m

62

61

9. Innovation

9. Innovation 9.1 Innovation: past and future Innovation is defined as the “the use of a new idea or method” and as such it represents a way for members’ businesses to get in front of the competition against the backdrop of recession.11 It is therefore encouraging to note that over half (53%) of members have introduced new or improved products or services in the past 12 months and that a similar proportion (51%) intend to do so over the next 12 months. However, the economic downturn is evidently creating an uncertain environment for members since a quarter do not know if they will be innovative over the coming year. Two-fifths (42%) say that new products or services introduced in the last three years account for less than 30 per cent of business revenue. Indeed, the mean proportion based on the scale in the pie-chart below is 14 per cent. However, three in ten (30%) members say new products or services do not account for any revenue and 14 per cent simply do not know.

Introduction of new/improved products or services

Revenue from new products or services introduced in last 3 years Don’t know Up to 10%

Yes

14%

51%

53%

23%

12%

30% 40%

25%

No 24% Don’t know

7% Past 12 months

Next 12 months

11%–20%

None/ N/A

8% 7%

3%

4%

21%–30%

31%–40% More than 41%–50% 50%

Q32 We’d now like you to think about innovation within your business. Have you introduced new or improved products or services in the past 12 months?/do you think you will in the next 12 months? Q33 What percentage of your revenue comes from new products or services that have been introduced in the last 3 years? Base: All respondents (9,761) FSB Annual Survey 2009

9.2 Who is most innovative? The proportion of members who embrace innovation varies considerably depending on the type of business run, outlined in the table overleaf. In the first instance, it is noticeable that there is a clear relationship between innovation and age with younger people much more likely to have introduced new products or services in the last year and to have plans to do so over the next 12 months. Urban members report higher levels of innovation on this measure than rural-based members. Source: Cambridge University Dictionary.

11

62


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Moreover, if ever there was any doubt about the impact of innovation on a business’s sales and profits then the figures below dispel this illusion. Members who have seen their profits grow over the last year are much more likely to have introduced new products and services recently than those whose margins have declined or stayed the same (62%, 51% and 49% respectively). In addition, the percentage of members introducing new products/services into their business increases with the number of businesses owned and the level of turnover while it decreases with the number of years the business has been open. In short, the most dynamic and innovative members tend to be young entrepreneurs who own more than one business and who are just starting out.

Percentage of members who have/will introduce new products or services (Q32a/b) Base: All respondents (9,761) Past 12 months %

Next 12 months %

53

51

16-34

68

69

35-44

59

58

45-54

55

54

55-64

51

47

65-74

48

42

75+

33

34

1 business

52

50

2 businesses

60

58

3 businesses

63

64

More than 3

66

62

1-2 years

64

66

3-5 years

61

61

6-10 years

57

56

11-20 years

52

50

21+ years

46

41

Less than £100,000

50

49

£100,000 – £500,000

54

52

£501,000 – £1 million

59

54

Total Age


Years owned/managed business

Level of turnover

63

9. Innovation

Percentage of members who have/will introduce new products or services (Q32a/b) £1 million – £5 million

62

59

More than £5 million

70

61

Increased

62

60

Stayed the same

49

48

Decreased

51

49


Source: Guided Insight/ICM Research While a specific type of member is likely to innovate, attitudes towards introducing new products and services are generally consistent across the country, as per the charts overleaf. The East Midlands is the exception to the rule here: less than half of members in this region have introduced new products and services in the last year, consistent with the percentage who anticipate doing so in the future. Yorkshire & the Humber also has fewer members prepared to be innovative next year (49%). London members exhibit a higher inclination to innovate over the next 12 months than members based elsewhere (57% versus 51%).

Introduced new products or services in the past 12 months, by region/devolved nation No

Yes

55%

55%

53%

52%

54%

40%

45%

40%

35%

40%

39%

36%

41%

39%

39%

40%

39%

39%

s

&

H

um be

an id l Yo rk

tM

h ut

W al W es

W es

t

st Ea So

h ut

ot la

nd So

th or

Sc

la Ire

er

or

n

th

W es

Ea th or

N

N N

st Ea

Lo

of E

ng

an id l M st Ea

la n

ds

ll ra ve O

r

52%

ds

54%

es

53%

nd

53%

t

56%

st

55%

nd on

47%

d

53%

Q32 We’d now like you to think about innovation within your business. Have you introduced new or improved products or services in the past 12 months?/do you think you will in the next 12 months? Base: All respondents (9,761) FSB Annual Survey 2009

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Expect to introduce new products or services in the next 12 months, by region/devolved nation No

Yes

50%

50%

53%

49%

54%

53%

48%

51%

49%

25%

29%

25%

16%

22%

26%

18%

25%

25%

25%

26%

24%

30%

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57%

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53%

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46%

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51%

Q32 We’d now like you to think about innovation within your business. Have you introduced new or improved products or services in the past 12 months?/do you think you will in the next 12 months? Base: All respondents (9,761) FSB Annual Survey 2009

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10. Plans for the Future 10.1 Objectives: now and in the past Members were asked to identify the principal objective facing their main business over the last 12 months. Three-quarters of members state that their aim has been to remain about the same size or to expand moderately by up to 20 per cent per annum. Eight per cent have been trying to expand rapidly in terms of turnover and sales. In short, the bulk of members have set out to either stay the same or to grow their business which is a very positive development during a period when the economy is contracting.

Business objectives for the last 12 months 8%

32% To grow rapidly (more than 20% pa) To expand moderately (up to 20% pa) To remain about the same size To downsize/consolidate 43%

To sell the business To close down/hand on business

10%

Q34 What has been your main objective for your main business for the last 12 months? Base: All respondents (9,761) FSB Annual Survey 2009

Interestingly, the type of member who has pursued growth mirrors the profile of small business owners who have innovated in the past 12 months. Members who have been expanding moderately or growing rapidly tend to be younger, serial entrepreneurs who have been running their main business for less than two years. As might be expected, older members are more likely than average to be attempting to sell their business, to be handing it on to a successor and to be trying to close it down.


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Business objective for the next 12 months – Age Base: All respondents (9,761) 16-34 %

35-44 %

45-54 %

55-64 %

65-74 %

75+ %

To remain about the same size

27

39

44

48

45

47

To expand moderately (up to 20% per annum)

45

40

34

28

22

15

To downsize/consolidate the business

3

6

10

11

12

10

To grow rapidly in terms of turnover/sales (>20%)

21

11

8

6

4

5

To sell the business

2

2

2

4

6

4

To hand on the business/succession







2

5

5

To close the business down

1



1

1

2

2

Not stated

1

1

1

1

3

11

Source: Guided Insight/ICM Research In order to fulfil their business objectives over the next 12 months, when prompted with the list below, members are most likely to say they will expand their client base (48%) and engage in marketing and advertising activity (41%). Around a fifth of members intend to invest in new equipment/machinery and take on new staff.

How businesses intend to meet objectives over the next 12 months Expand clients base

48%

Marketing/advertising

41%

Invest in new equipment/machinery

22%

Take on new staff

19%

Increase expenditure on staff training Move to new premises Expand/export abroad Increase R&D spending

11% 7% 6% 4%

Open additional branches

3%

To survive/carry on as usual/maintain current level

3%

Q35 Which actions do you intend to take to achieve your objectives over the next 12 months? Base: All respondents (9,761) FSB Annual Survey 2009

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10.2 Obstacles to achieving business objectives To achieve their objectives over the next 12 months members must first overcome the many perceived difficulties which confront them12. A general reference to the economy and recession is identified by most members as the principal barrier to achieving success. However, when looking at specifics, it is evident that obstacles to growth are grouped around five key themes: 1. Taxes and rates: Business rates are regarded as the biggest taxation impediment (cited by 29% of members) followed by VAT, due to increase to 17.5 per cent on 1 January 2010. Around a fifth mention PAYE/National Insurance and Corporation Tax; 2. Cost of finance/obtaining finance: As identified elsewhere in this report gaining access to credit and securing greater funding is a key consideration for many members. This is reinforced by the findings in the chart overleaf which reveal that “cash flow” is a concern for four in ten members (42%). Specifically obtaining finance (22%) or the cost of finance (18%) is a difficulty for around a fifth of members; 3. Regulations: A general reference to “regulations” is identified as an obstacle by a third (33%) of members suggesting support for a rolling back of so-called “red-tape”. Not detailed on the chart is the one per cent of respondents who specifically mention employment legal issues and regulations emanating from central government, local authorities, HMRC and the EU; 4. Competition in the market: three in ten (30%) members mention this barrier; and 5. Recruiting/retaining staff: 16 per cent of members cite recruiting and/or retaining employees as a barrier to growth. Just four per cent of members report that their main business does not face any obstacles in achieving success.

Potential obstacles or difficulties The economy/recession Cash flow Regulations Competition in the market Business rates VAT PAYE, National Insurance Obtaining finance Corporation Tax Cost of finance Recruiting staff Lack of marketing skills Availability/cost of suitable premises Shortage of skills/training generally Transport issues Planning Retaining staff Lack of financial understanding Crime Lack of broadband internet access

72% 42% 33% 30% 29% 26% 23% 22% 19% 18% 13% 11% 11% 8% 7% 7% 6% 5% 5% 3%

NET: Tax/Rates = 50% NET: Cost of finance/Obtaining finance = 29% NET: Recruiting/ Retaining staff = 16%

Q36 What would you say are the main obstacles to the success of your business in general? Base: All respondents (9,761) FSB Annual Survey 2009 Respondents were prompted with a list.

12


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The table overleaf outlines which type of member each of the main barriers is most and least likely to be a concern for.

Obstacles to achieving business objectives – Key subgroup differences Base: All respondents (9,761) Greater obstacle for… Cash flow (42%)

Smaller obstacle for…

N. Ireland (52%)

Aged 65+ (28%)

Aged 16-44 (51%)

Turnover >£5m (29%)

Lease premises (51%)

Own premises (35%)

Rent premises (50%)

Business owned >21 yrs (36%)

Business owned £5m (53%)

Business owned