Micro-business and job creation

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Micro-business and job creation

Federation of Small Business

Rocket Science were commissioned by the Federation of Small Businesses to explore the employment potential of micro-businesses (employing fewer than 10 people) and the extent to which there was scope to enhance recruitment by micro-businesses by providing appropriate recruitment-focused support. We reviewed statistical evidence from across Europe and our findings included:

  • Micro-businesses make up nearly 94% of Scottish businesses and provide 27% of the private sector jobs in Scotland[1].
  • This underplays their significance in tackling unemployment:
  • Over 40% of unemployed people who find work in the private sector go to work in a micro-business or become self-employed[2].
  • 26% of recruits to micro-businesses across the EU are long-term unemployed people[3].
  • Micro-businesses, therefore, provide a disproportionate number of opportunities for those previously unemployed and a significant part of Scotland’s ‘demand side’.

We surveyed 580 micro-businesses and interviewed over 70 micro-business owners.  Our findings included:

  • Micro-businesses are a particularly diverse customer group
  • There are distinctive issues around recruitment for micro-businesses
  • Micro-business owners develop highly-flexible approaches to employment
  • Recruitment presents micro-businesses with a range of risks and difficulties
  • The level of risks perceived by micro-business owners far exceed the reality of those risks and often, in themselves, lead to decisions not to recruit – despite the fact that the business needs to recruit
  • Micro-businesses often have limited capacity to manage staff.

We uncovered significant under-employment by micro-businesses and clear evidence that a support service that focused on helping micro-businesses grow through recruitment would help to tackle the risks around recruitment that micro-business owners perceived. On the basis of these findings we developed a range of detailed recommendations for national and local organisations about what an appropriate service should look like.

Outcome:  Micros Untapped has proved to be highly influential report and in Scotland there are now ‘growth through recruitment’ programmes in place in over 5 local authority areas, with more in the pipeline.  Glasgow’s economic development arm, ‘Jobs and Business Glasgow’ reoriented their whole strategy to focus on micro-businesses.  Early results show a significant upturn in recruitment by micro-businesses in the areas where such a service has been put in place, and in two of the areas the project has been significantly expanded.

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[1] Scottish Corporate Sector Statistics (2011), p.27

[2] Urwin, P and Buscha, F (2012).  Back to Work:  The role of small businesses in unemployment and enterprise.  Federation of Small Businesses.

[3] cf 14% for Small and Medium and 9% for those employing over 250, de Kok et al, 2011