SMALL BUSINESS UPDATE

1. SMALL BUSINESSUPDATE Matthew James Thursday, 19th May 2005

2. Objectives for the Presentation > Small Business Trends > Small Business Performance > Entrepreneurship in the UK > Spotlight on Female Entrepreneurs > Population Growth & Ethnic Groups

3. SMALL BUSINESSTRENDS

4. Recent Trends: Starts During 2004, London & South East continueto lead the way in business starts Source: Barclays ‘Starts & Closures’, 2004(000’s - estimates based on business accounts)

5. Recent Trends: Starts (2) Rise in starts across the Capital during 2004,Though down slightly across the South East Source: Barclays ‘Starts & Closures’, 2004(estimates based on business accounts)

6. Recent Trends: Closures At a UK level, mainstream business closures are on the rise… …BUT, still outnumbered by starts Source: Barclays ‘Starts & Closures’, 2003/4(estimates based on business accounts)

7. 2004 2004 2004 2004 2005 Q1 Q2 Q3 Q4 Q1 Liquidations 3,131 3,151 2,969 2,938 2,900 Bankruptcies 10,343 11,214 12,032 13,020 13,229 Total 13,474 14,365 15,001 15,958 16,129 Bankruptcies & Closures Bankruptcies form a small part of registered stock;Typically less than 10% of all business closures Source: Depart of Trade and Industry, 2005

8. Starts & Closures in the UK London has highest business start and closure rate in the UK Source: LDA ‘Economic Development Strategy’

9. Effect on UK Business Stock 2003 – APPROACHING 4.0m BUSINESS ENTERPRISES IN THE UK First significant rise in business stock for some time 2003= 3.945m Source: SBS, ‘Small Business Statistics’ 2003

10. Employee Growth Growth in business stock, BUT not in businesses with employees No. with no employees up on previous year (240,000) No. with employees down slightly on previous year (10,000)

11. SMALL BUSINESSPERFORMANCE

12. Business Survival Rates About two thirds still trading 3 years after registration London lower than South East & UK averageBUT more starts and more closures = CHURN Source: SBS SME Statistics, 2003

13. Change Q4 03/Q4 04 Up Down Same Balance Sales Turnover 47% 28% 23% +19 Average Employment 18% 12% 67% +6 Investment 23% 15% 59% +8 Selling Prices 37% 10% 50% +27 SME Performance: Current Sales performance of Britain’s small firms= Performance of the Workspace Group market place Source: SERT, ‘Quarterly Survey of Small Businesses in Britain’, Q1 2005

14. SME Performance: London & SE London and SE show good sales performance… …BUT London only area in UK to where moresmall firms cut the numbers they employ Source: SERT, ‘Quarterly Survey of Small Businesses in Britain’, Q1 2005

15. SME Performance: Sectors Balance reporting an increase in sales over last 12 months Source: SERT, ‘Quarterly Survey of Small Businesses in Britain’, Q1 2005

16. Change Q4 04/Q1 05 Up Down Same Balance Sales Turnover 42% 25% 32% +16 Average Employment 15% 8% 75% +7 Investment 18% 15% 65% +3 Selling Prices 29% 7% 60% +22 SME Performance: Prospects Anticipated change over Q1 2005 Confidence about sales translated into overall increases in selling prices Source: SERT, ‘Quarterly Survey of Small Businesses in Britain’, Q1 2005

17. SME Problems & Issues Government regulations & paperwork seen as biggest concern- as it has been for last 18 months Source: SERT, ‘Quarterly Survey of Small Businesses in Britain’, Q1 2005

18. ENTREPRENEURSHIP IN THE UK

19. Based on ‘Total Entrepreneurial Activity’,UK is ahead of Germany & France but behind the USA 2004 GLOBALAVERAGE = 9.3 Source: GEM, 2004 How Entrepreneurial is the UK?

20. TEA in the UK: A regional Picture London & SE lead the UK in TEA…… and both have seen significant increases over last 2 years Source: GEM, 2004

21. Expect to start a business UK: 9.5% of working age population expect to start a business innext 3 years – US, Germany, Japan all down Source: GEM, 2004

22. SPOTLIGHT ONFEMALE ENTREPRENEURS

23. Women: The Facts 25% of the UKs 3.2m self-employed workers are now women  30% of business owners are women The highest number of female startups are based in London, where 8.4% of the female workforce are self-employed Source: Labour Force Survey, 2003 BUT… Men are still twice as likely to start a business as women Source: GEM, 2004

24. Characteristics of Female Entrepreneurship Businesses started by women use less capital than those started by men Women tend to have slower early growth trajectories – stronger ties and egalitarian coalitions Women tend to start businesses with known technology and in established markets – less innovative? Women’s businesses tend to be smaller and less expensive than those of men Source: GEM, ‘Report on Women & Entrepreneurship’ 2004

25. Attitudes to Entrepreneurship Women showing improvement but still behind menon key start-up indicators Source: GEM, ‘Report on Women & Entrepreneurship’ 2004

26. Women: Trends Lower expectations – expect growth of two-fifths over 3 year period compared to men who expect to double Over 5 year period from start-up, women expect to create 2 new jobs; men expect to create at least 5 “Women have lower expectations of what they can achieve and this translates into lower expectations of job creation and turnover growth” Source: GEM, ‘Report on Women & Entrepreneurship’ 2004

27. POPULATION GROWTH & ETHNIC GROUPS

28. UK Annual Population Growth Growth in London outpacing the UK… …GLA forecasts a rise of 711,000 by 2016 Source: LDA ‘Economic Development Strategy’

29. Population Growth by UK Region Strong increase in London population growth between 1991-2001 Source: LDA ‘Economic Development Strategy’

30. Accounting for Growth Net international migration in London accountsfor growth of about 100,000 pa Source: ONS ‘London: Region in Figures’

31. Who are the Immigrants? Stock of working age foreign-born population, by country of birth= c3.6m, about 10% of total working age population Source: Dept for Work & Pensions ‘Migrants in the UK’

32. Effect on Working Population • Of current UK working population, 3.6m are foreign born (10%) • Tend to be ‘…very heavily concentrated in London and the South East’ • And ‘…of working age, concentrated between 25 and 49’ (table below). Source: Dept for Work & Pensions ‘Migrants in the UK’

33. TEA by Ethnicity Almost without exception, ethnic groups are moreentrepreneurial than the white population Ethnic Groups Source: GEM, ‘Report on Women & Entrepreneurship’ 2004

34. TEA Amongst Ethnic Groups Ethnic Groups are characterised by expectation of starting business and belief in their skills to do so Source: GEM, ‘Report on Women & Entrepreneurship’ 2004

35. Types of business Whites or mixed race are most likely to be involved in start-up activity involving a technology not available a year ago Black Caribbean most likely to be starting up a business that provides a good or service that is new to all customers Indian businesses are least likely of all ethnic groups to be export oriented – 87.5% said that they have no overseas customers “Ethnic minority people tend to have more positive attitudes towards entrepreneurship and better self perception of their capacity to establish a business” Source: GEM, 2004

36. Conclusions > Starts outnumber closures = increase in population > Improving performance & confident forecast > Entrepreneurship in the UK at good level > Impact of rising female starts & optimism? > Impact of growth in population & net migration?