Small Talk: Who should we thank for falling unemployment? SMEs. So we must do everything we can to help them carry on the good work

 

Who should take the credit for Britain’s jobless rate falling back below 7 per cent? Well, while policymakers argue about the politics of lower unemployment, let’s look at the figures: since 2010, 84 per cent of job growth has come from small and medium-sized enterprises, while almost nine in 10 people moving out of unemployment have either started their own business or been taken on by someone else’s small company.

Given that SMEs account for only two-thirds of employment as a whole, their performance in terms of job creation has been phenomenal. If this Government, or any other, is to succeed in its aim of returning Britain to full employment, it is now obvious what the priority for policy should be: helping smaller businesses to recruit even more people.

A research paper published by the Institute for Public Policy Research (IPPR), the left-wing think tank, looks at exactly that challenge – and concludes that small businesses’ record on job creation is all the more impressive given the greater barriers they face when hiring new employees.

As the IPPR points out, SMEs take more of a risk when hiring new staff, since the additional labour costs incurred represent a larger proportion of their total expenses. The difficulties are even more acute when small businesses recruit from those groups in society where unemployment remains stubbornly high, like those with fewer skills or with health conditions that mean they are more likely to take time off work sick.

The Government has begun to recognise this. The incentives it now offers to small businesses taking on young employees and apprentices are relatively generous. But much more can be done – and there is not necessarily a need for the Treasury to find substantial sums.

The IPPR’s recommendations fall into four categories. First, it wants greater financial support for the costs of becoming an employer – everything from employers’ liability insurance to payroll administration expenses. Second, it suggests reforms to the sick pay rules, so that budgets are focused on firms hiring staff with work-limiting health conditions. Third, it calls for an overhaul of the Work Programme, the Government’s welfare-to-work scheme, so that employers can hire on more flexible terms. Finally, it calls for the launch of occupational benefits schemes that enable SMEs to come together to offer benefits such as sick, maternity and paternity pay that go beyond the statutory levels.

All of these suggestions are sensible, and  shifting the dial only marginally would also have a big impact. One reason for the dramatic fall in unemployment over the past year or so has been the large number of people moving into self-employment. Most of these people will be operating as sole traders with no employees at all. Raising the number even marginally would make a huge difference.

Cost of an Aim listing is 9.5% of funds

The recovery of the Alternative Investment Market has led to a sharp rise in the cost of floating on London’s junior exchange, research shows. The average cost of an IPO on Aim now stands at 9.5 per cent of all funds raised, up from 8.4 per cent a year ago.

The figures, based on research by the accountancy group UHY Hacker Young, reflect the relatively limited number of brokers with the skills and experience to advise on Aim IPOs, with many firms having exited the market during the years following the financial crisis, when deal volumes fell to unprecedented lows.

With the number of IPOs on Aim having risen to 61 last year, up from 43 in 2012, those advisers still available have seen rising demand, and costs have increased accordingly. “Broker fees are being boosted by the rush in new IPOs coming on to Aim, as many companies look to capitalise on renewed investor demand by raising funds,” said Laurence Sacker, a partner at UHY Hacker Young.

The trend looks set to continue in 2014, with IPO numbers having risen further during the first few months of the year. “Businesses are focused on seizing the opportunity to get the right valuation for their companies, and if they need to pay slightly higher professional fees to get the float through soon, it is a cost they are prepared to swallow,” Mr Sacker added.

Crowdfunding to have FCA regulation

Formal regulation of the crowdfunding sector could provide a massive boost for platforms raising equity finance for start-up businesses, a report claims. While there have been warnings that tighter regulation could damage the crowdfunding sector, the research, published by the crowdfunding site Volpit, suggests the new regulation could actually result in billions of pounds flowing into growing businesses.

The Financial Conduct Authority tightened the rules on crowdfunding last month, with platforms offering loans to small businesses brought under the supervision of regulation for the first time and equity-based platforms subjected to more demanding rules. However, Volpit’s research suggests that two in five investors would welcome the opportunity to invest in small businesses if they thought platforms were appropriately policed. One in three said they would invest at least £1,500.

“The FCA’s new policy is a huge deal, but very few everyday investors really understand what this means for them and the wider UK economy,” said Justin Nothling, co-founder of Volpit. “We are expecting massive growth of the angel investor market and a lot more innovative start-ups funded as a result.”

Small Business Person of the Week: Ed Bussey, Founder, Quill

“Quill is now Europe’s leading content marketing company; I launched it four years ago. I had been one of the founding team at Figleaves.com.

“In 2010, Google made a massive change to its algorithm: suddenly, it was able to identify web pages where there was fresh and updated content. Anyone who didn’t have good content on their site found it extremely difficult to get into Google’s search results.

“This was the inspiration for Quill: anyone who wants to sell online nowadays also has to be a publisher – and across so many different platforms – that’s what we do for businesses. We work with 3,000 specialist content creators, ranging from writers to video producers, in 17 countries. They supply the content for clients – who include advertising agencies, well-known brands and some smaller companies, too.

“All of the content goes through at least one pair of human eyes for editing, but there’s also a tremendous amount of editing work that can be done through automated software.

“To build a scalable business, you’ve got to think internationally from the beginning. We wanted a platform where content could be in English, or German, or even Mandarin; exports now account for 25 per cent of sales.

“We’ll have 40 staff by the end of the year. I’m even paying myself a salary.”

@davidprosserind

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