A leading business lobby group has accused the government of spinning company start-up statistics to mask concerns over the business climate.
The Federation of Private Business (FPB) claims competitiveness minister Stephen Timms’ assertion there are now ‘a record number of small businesses in the UK’ owes more to a growing number of sole traders registering as limited companies than a surge in start-ups.
The FPB’s national chairman Len Collinson said: "The fact of the matter is there are no more employers than there were in 1997. This increase in the number of small firms is all about more companies without employees."
Collinson pointed to a report released today by the European School of Management (ESM) and commissioned by shadow chancellor George Osborne to back his group’s allegation.
The report claimed despite an increase in overall business population, small business growth has actually been in decline over the past five years.
The proportion of businesses achieving annual turnover in excess of £1 million in their first five years fell dramatically from 29% in 1998 to 16% in 2006.
Only 6.8% achieved a turnover of over £7 million in their first five years, a far lower rate than the 16.3% elsewhere in Europe. Since 2002, this figure has continually fallen in the UK, while rising across Europe.
The report added while there were more than 4.4m small businesses registered in 2006, compared to 3.8 million in 2001, the cost of complying with employment red tape, skills shortage and rising taxation were significant barriers to growth.
It also argued analysing growth, not counting the total number of firms, is the best way to judge the strength of small businesses in the UK.
Tracy Hoather, of courier firm Sameday Plc in Knutsford, Cheshire commented: "I would be interested to know how many of those ‘new’ firms are micro businesses and one man bands that have now officially registered.
“Beyond former employees now employing themselves, how many actual jobs have these businesses created?"
© Crimson Business Ltd. 2008