Warwick Business School

Key learning objectives  Account for the changes in business populations over time  Example of the UK  Other international evidence

Warwick Business School Accounting for changes over time: the case of the UK  Is the UK an example of the increased importance of smaller businesses?  Although there is no comprehensive or continuous data available, what evidence can we use to chart changes in the UK enterprise population?  Will examine evidence for and against profound changes in the UK’s enterprise population

Warwick Business School What was the situation before the 1980s?

Warwick Business School What does the ‘U’-shaped pattern imply?  Large manufacturers’ employment share increased because they were better able to take advantage of cost advantages (economies of scale)  But some large UK manufacturers became increasingly uncompetitive leading to bankruptcy. So, did the employment share of small businesses increase because of the failings of large businesses?

Warwick Business School Still a step change in self-employment during the 1980s… Percentage of UK labour force in self-employment, 1959 – 2007

Warwick Business School …and a doubling of the enterprise population Number of UK businesses and VAT stocks, 1980 – 2006

Warwick Business School Why these changes?  Thatcher governments ideologically committed to the development of the ‘enterprise culture’  Continued restructuring of the labour market: self- employment seen as a route out of unemployment  There was an expansion of the service economy: firm’s competitive advantage increasingly based on behavioural advantages (e.g. flexibility, speed) rather than cost (price)  Macro-economic stability for much of the 1990s- 2000s

Warwick Business School Evidence against: the decline of medium-sized businesses Employment shares of small and medium-sized UK enterprises,1980 – 2006

Warwick Business School Older women are more likely to be self- employed… Percentage of the female population with a main activity classified as self- employed by age group

Warwick Business School …as are older men Percentage of the male population with a main activity classified as self- employed by age group

Warwick Business School No changes in the regional self- employment ‘league’ table

Warwick Business School Summary for Part 2  Up to the 1970s, SMEs were in decline  Changes since the 1970s due to the importance of the service sector, changes in business practice, competitive advantage and political support  Other evidence suggests more modest changes Medium sized businesses share of employment has fallen Younger people not more likely to be self-employed despite the development of an ‘enterprise culture’ Static position of regions: London always wins the ‘league’ and the North East is always bottom

Warwick Business School Part 3: Accounting for changes over time: International evidence

Warwick Business School US self-employment, Source:

Warwick Business School Per capita number of US businesses,

Warwick Business School International rates of business ownership Business ownership rates in selected EU countries, 1972 – 2004

Warwick Business School Summary  Changes in self-employment rates show little change but over time a broad ‘U’-shaped pattern evident  Could be expected that there would be more profound change because: Three world recessions, increased importance of the service sector, growth of Information technology, tertiary education and huge political support

Warwick Business School Conclusions  Have been dramatic changes in the UK enterprise population but also strong evidence of stability  International evidence supports the stability argument despite the profound economic and social changes that have occurred over the last 50 years