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Diverse micro-businesses face challenges together

A significant force in the UK economy, micro-businesses can cover a wide range of enterprises, but they face many common issues, says LSCA Business Board member Vicky Andrew.

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Vicky Andrew

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November 2018

SMEs are rightly regarded as an important sector of the UK economy, not least because of their role as employers and innovators, and their contribution to the national tax take. Within the SME sector, micro-businesses form an important sub-group.

The usual definition of a micro-business is one with less than 10 employees and an annual turnover of less than about £1.75m. There are over five million micro-businesses in the UK; this represents about 95% of all UK businesses. More than one million of these have at least one employee; this represents more than 80% of UK employing businesses, or one third of total UK private sector employment.

Government research and policy needs to be informed by an understanding of micro-business in the UK, and its increasing prominence, which is being driven by technological change, home-based working, greater use of outsourcing and project working, and the gig economy.

However, one should understand that ‘micro-business’ is not a ‘one size fits all’ concept. A business with nine employees turning over in excess of £1m is a very different animal to a sole trader operating well below the VAT threshold. Moreover, for some people, being in business is not necessarily a choice they have made; some are forced into it through lack of employment opportunities, others find themselves operating as independent contractors because that is the only way they can find work. This is quite different to a start-up with ambitions for growth.

Despite the diversity of micro-businesses, various recent surveys have shown that there are many issues which they share:

  • Modernisation: concern with keeping abreast of developments in technology and innovations in products and services.
  • Scaling up: deciding whether to grow or whether to stay as a one-man band; being able to access funding for growth; recruiting and retaining the right people.
  • Work-life balance: putting in long hours to the point of jeopardising physical and mental wellbeing (even when that was one of the reasons for setting up in business).
  • Government and political issues: including Brexit, MTD, and the complexity of the UK tax system.
  • Late payment.
  • The position of independent contractors, both as business owners and as suppliers, and whether they fit into the hybrid category of “workers.” 

I plan to return to some of these themes in future issues of London Accountant.

Vicky Andrew is an ICAEW Chartered Accountant and Director of Millcove Solutions Ltd, trades as Vicky Andrew and Associates vickyandrew.com providing advice to small businesses and accountancy firms throughout the UK. Vicky has worked with micro-businesses for more than 30 years, specialising in firms with turnover of up to £½m.

She is currently serving as chair of ASDAC and South East London Area Society of the LSCA, and is a member of the LSCA Business Board.

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