Hamish McRae: ‘Independent businesses will create most of the net jobs in the next five years’

Analysis

It should have come as no surprise to us that Independent readership among entrepreneurs is exceptionally strong. Still it is gratifying that this newspaper has a much higher proportion of its readers running or managing small and medium enterprises than other papers.

We suspected we had strong support among entrepreneurs – and we like the phrase “independent businesses” to describe SMEs – but it is good to have that confirmed. It has set us thinking about the nature of entrepreneurship in Britain, and the contribution it will make to the economic recovery. The starting point is that a recession creates opportunities for the nimble. It is not just that some weaker competitors have failed, creating openings; it is that all sorts of assets, from property to qualified staff, are freely available and at an attractive cost.

Even finance is often available, for though the conventional avenues of the banks may be clogged, the very low deposit rates paid by the banks has encouraged those with cash to seek out alternative outlets. As a result, the informal networks of providers of finance have taken up some of the territory abandoned by the banks. If it is a good time to start a business, or at least as good as any, is it a good time to be running one? The Government’s rhetoric has been favourable towards the independent business sector, even if the tax and regulatory policies have been less so. With a probable change in Government next year, the generally favourable climate should be maintained.

There is a powerful reason for this political support. It is that much, maybe all, of the net job creation over the next five years will come from independent businesses. The state will be downsized radically, whoever wins the next election, because there will not be the revenues to support the present level of staffing in the public sector. So all the new jobs will have to come from the private sector. But large businesses are unlikely to increase their level of employment to any extent, given their experience of the past two years. The best that can be hoped for there will be that they re-employ some of those they have laid off. So the onus will be on smaller businesses to take on more people, and on self-employment.

The self-employed are an interesting group, for self-employment has climbed through the recession. That may be partly a function of larger employers scaling down their staff but still needing to get the jobs done. So people are laid off, set up on their own, but then pick up consultancy jobs in the same field. It may be partly a tax effect, for the higher tax rates on employees encourages people to hire themselves: they can then decide how much to take out of their own business in salary and how much to leave in it for the future. Proposed steps by the Conservatives to reduce or even eliminate national insurance contributions for new businesses will encourage this trend.

Many new businesses will be in activities that do not exist now. But as a rule, expect more of the same. Most new businesses will be in the service industries and most will be in London, the Southeast and East Anglia. Many will be “virtual” ones – legal entities with an address but without any specific place of work. The explanation is that more than 10 per cent of employment comes from tele-workers – people who work on-line from home or from a variety of locations using home as a base. That is rising each year by about 0.5 per cent of the workforce, and 70 per cent of those tele-workers are self-employed.

From the perspective of a newspaper, this is exciting. We are in an “old” industry in the sense that we produce a physical product. But we are in a new one in the sense we are developing and marshalling information and making that available online. We look forward to serving the growing independent business community – one which fits so closely with our own history and aspirations.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: £20000 - £25000 per annum + c...

Recruitment Genius: Account Handler - Personal Lines

£20000 per annum: Recruitment Genius: This provider of insurance and financial...

Recruitment Genius: Graduate Developer / IT Support Engineer

£16000 - £25000 per annum: Recruitment Genius: This fast growing financial ser...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Day In a Page

Solved after 200 years: the mysterious deaths of 3,000 soldiers from Napoleon's army

Solved after 200 years

The mysterious deaths of 3,000 soldiers from Napoleon's army
Every regional power has betrayed the Kurds so Turkish bombing is no surprise

Robert Fisk on the Turkey conflict

Every regional power has betrayed the Kurds so Turkish bombing is no surprise
Investigation into wreck of unidentified submarine found off the coast of Sweden

Sunken sub

Investigation underway into wreck of an unidentified submarine found off the coast of Sweden
Instagram and Facebook have 'totally changed' the way people buy clothes

Age of the selfie

Instagram and Facebook have 'totally changed' the way people buy clothes
Not so square: How BBC's Bloomsbury saga is sexing up the period drama

Not so square

How Virginia Woolf saga is sexing up the BBC period drama
Rio Olympics 2016: The seven teenagers still carrying a torch for our Games hopes

Still carrying the torch

The seven teenagers given our Olympic hopes
The West likes to think that 'civilisation' will defeat Isis, but history suggests otherwise

The West likes to think that 'civilisation' will defeat Isis...

...but history suggests otherwise
The bald truth: How one author's thinning hair made him a Wayne Rooney sympathiser

The bald truth

How thinning hair made me a Wayne Rooney sympathiser
Froome wins second Tour de France after triumphant ride into Paris with Team Sky

Tour de France 2015

Froome rides into Paris to win historic second Tour
Fifteen years ago, Concorde crashed, and a dream died. Today, the desire to travel faster than the speed of sound is growing once again

A new beginning for supersonic flight?

Concorde's successors are in the works 15 years on from the Paris crash
I would never quit Labour, says Liz Kendall

I would never quit party, says Liz Kendall

Latest on the Labour leadership contest
Froome seals second Tour de France victory

Never mind Pinot, it’s bubbly for Froome

Second Tour de France victory all but sealed
Oh really? How the 'lowest form of wit' makes people brighter and more creative

The uses of sarcasm

'Lowest form of wit' actually makes people brighter and more creative
A magazine editor with no vanity, and lots of flair

No vanity, but lots of flair

A tribute to the magazine editor Ingrid Sischy
Foraging: How the British rediscovered their taste for chasing after wild food

In praise of foraging

How the British rediscovered their taste for wild food