Business News

An increase in the number of registered businesses does not necessarily reflect the growth of small companies, the Forum of Private Business (FPB) has said.

The forum reacted to claims made by Prime Minister Gordon Brown in his speech to the Labour Party Conference. Mr Brown said that the "one million small and medium-sized businesses set up in the last 11 years" represented "the local businessman who's taken on two local teenagers as apprentices."

The FPB said that the figure was more reflective of the Government's initiative to encourage existing businesses to register officially, than an increase in employers, stating that since 1997, the number of businesses employing people has remained at 1.2 million.

The FPB also cited a study by the European School of Management that found that while there were more small businesses registered in 2006 than 2001, the cost of complying with business regulations was causing many firms to struggle.

The study found that the proportion of businesses achieving an annual turnover in excess of £1 million in their first five years fell from 29% in 1998 to 16% in 2006.

However, the Department for Business, Enterprise and Regulatory Reform (BERR) said that the number of businesses with employees rose from 1,184,160 in 1997 to 1,218,720 in 2007, representing a 3% increase. "Although when rounded it looks like the number stayed at 1.2 million," Ian Thomson, spokesman for BERR, told More Than Business News.

"Employment in SMEs with employees has increased from 9,096,000 in 1997 to 9,681,000 in 2007, an increase of 6%," he said.

"Taking into account that even small businesses without employees create one job for the sole proprietor, then employment in all SMEs (with and without employees) has increased by 12%."