SMEs are creating jobs but it is sustainable?

Small businesses across the UK have created 400,000 new job roles in the past year according to Office for National Statistics data, but is such growth sustainable?

UK SMEs are responsible for 15.6 million jobs in the current market and could – if historical trends data is to be believed – account for two-thirds of all new roles at some point in the next decade.

Small firms in the UK account for around 47.2% of private sector turnover, representing an increase of 0.4% from a year ago.

The number of unregistered firms without any employees has also grown significantly to now account for 56% of the UK’s business population.

This is an issue in terms of economic output as data suggests that non-employers have an average turnover of £53,000, compared to the figure for SME employers of £135,900 – the difference is suggestive of a lower level of productivity.

The Forum of Small Businesses has suggested that more needs to be done to support smaller businesses in order for them to achieve sustainable growth.

The organisation points to figures that suggest taking on staff is not a viable option for micro employers as it is not affordable to do so.

Businesses that do hire could place themselves under unnecessary financial pressure and may even be forced to consider their trading position if sales decline for any reason.

For firms operating on tight budgets, expenditure on staff can difficult to manage and many were found to turn to freelancers rather than employing.

This requires a great deal of financial management as a business owner could easily face winding up a company if its finances are mishandled in any way.

So although the wider economic situation for businesses is positive, many still need to keep a watchful eye on their bottom line to ensure they are in a strong position should the economy deteriorate.

By Phil Smith

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