Is it Realistic for Private Businesses to Employ more Staff in 2011?

The majority of businesses in the UK are defined as small and employ fewer than 50 people while only one per cent of UK companies employ more than 1000 people.

Small businesses would generally be defined as having fewer than 50 employees, assets worth less than £5 million and a turnover less than £5 million, yet they account for two thirds of the UK’s private sector.

The Government is pinning its hopes of recovery on dramatically and quickly reducing the country’s budget deficit with a combination of cutbacks, including making an estimated 330,000 people in the public sector redundant, a figure revised downwards in November 2010 from its estimate of 490,000 the previous June.

This revision, albeit in human terms still a large number of people, is based on its forecast for growth in the economy in 2011 of 2.1% for all of which it relies on the private sector – the majority of which is made up of small businesses.

Economists and politicians are both emphasising that the opportunities for growth lie largely in increasing exports on the grounds that there is a burgeoning middle class in the fastest growing economies, like China, India, Brazil and Russia (the BRICS) with a growing appetite for sophisticated technology and household products.

But while this might be an option for businesses involved in manufacture it does not help those many small businesses providing services and products to local businesses and consumers in the UK only.

The UK manufacturing sector currently accounts for 26% of Gross Domestic Product (GDP) and the Government’s Department for Business, Innovation and Skills (BIS) published a White Paper proposing to expand adult apprenticeships by up to 75,000 by 2014-15 and to set up a new £50 million Growth and Innovation Fund, with financial support to SMEs to co-fund the costs of training for lower skilled employees.

Help with skills training by 2014-15 is hardly much use in 2011 and in any event growth will depend on being able to both increase sales and availability of finance from the banks to fund the additional working capital needed to support them.

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