The rise of the microbusiness

The concepts of microenterprise and microfinance were pioneered in 1976 by Nobel Prize recipient Muhammad Yunus, founder of the Grameen Bank (Bank of the Poor), in Bangladesh. The bank was established for making small loans to the poor − predominantly women – to help them obtain economic self-sufficiency. The fundamental principle behind the Grameen Bank is that credit is a human right. This strategy was highly effective as the bank grew exponentially; from fewer than 15,000 borrowers in 1980, Grameen Bank had 2.34 million members by 1998, 7.67 million at the end of 2008, 97% of whom are women, and 9.4 million today.

At the start on 2015 there were 5.3 million UK microbusinesses (those businesses with less than 10 employees).   They accounted for 95 percent of all UK businesses.   These small hubs of creativity and entrepreneurship have doubled in number over the last 15 years.  They account for 32 percent of employment and 19 percent of turnover.

 The rise of the microbusiness is a result of trends in the growth of self-employment and home-based business activities. Such trends are being driven by technological change, greater use of outsourcing and project-based working and wider labour market transformation associated with increased flexibility, entrepreneurship and job insecurity.

So why are they so successful and what’s the attraction?

Microbusinesses are set up because of ambition, passion or, sometimes, quite simply the necessity to create a business to earn a living when no employment opportunities exist.  They often take little money to launch.  Owners feel masters of their own destiny.  Low staff numbers result in a business that is flexible, nimble and adaptive.  They spend less time on administrative tasks freeing them up to focus on customers.   While start-ups beg, borrow and barter, large companies follow established processes, protocol and prices to accomplish the same things at a much slower speed and a heavy multiple of the cost.  Start-ups require innovative entrepreneurs, and that typically isn’t in a job description for a large company. Big companies hire people when the workload demands it, not when they can come up for air and think about innovation.

So…maybe it’s time we all started to encourage our children to become entrepreneurs and set up their own microbusinesses.

  • 95% of all UK businesses are micros.
  • 81% of all UK employing businesses are microbusinesses.
  • In 2015 employment in microbusinesses was 8.5 million, 33% of total UK private sector employment.
  • In 2015, microbusinesses had a combined annual turnover of £673 million, 18% of all private sector turnover.
  • Microbusinesses contributed 19% of all Gross Value Added (GVA) in the UK non-financial business economy in 2014. (ONS Annual Business Survey 2014)
  • 17% of micro employers experienced employment growth between 2013 and 2014, and 38% experienced turnover growth.
  • 71% of micro employers in 2014 aimed to grow their business in the next two to three years.
  • Just under one million (20%) of UK microbusinesses were majority women-led in 2014.
  • Around 280,000 (6%) of UK microbusinesses were minority ethnic group led (MEG-led) in 2014.
  • 59% of all microbusinesses and 37% of micro employers were home-based in 2014. The definition of home-based businesses used by BIS is explained here.
  • 74% of micro-employers were family-owned in 2014.