Latest Statistics Indicate Sole Proprietors Are the Backbone of UK SME Growth
Although the Department for Business, Energy & Industrial Strategy will not be releasing statistics for the fiscal year 2018 until late November, the most recent statistics from 30 November 2017 clearly indicate that small to medium size enterprises currently account for 99.5 percent of all businesses in every industry.
Of those, more than 75 percent are sole proprietors with no employees other than the business owner. In other words, they are non-employers and are not registered with PAYE or VAT. This doesn't appear to bode well for HMRC but there is much to be said for their contribution to the economy as it stands today. Here is some of what we know.
Major Growth in Non-Employing SMEs
When compared side-by-side in the private sector, employing SMEs grew year-on-year by approximately 23 percent whilst non-employing SMEs grew by a massive 84 percent. If you take into consideration the huge number of people who might be otherwise unemployed if they were not self-employed, this is a real boon to the economy according to a great number of economists.
In terms of total growth, non-employing SMEs are credited with almost 90 percent of the total growth in the private sector. That figure alone indicates just how important sole proprietors are to the economy as a whole. Also, although they may not be registered with VAT or PAYE, the businesses they get supplies and materials from may very well be, and so HMRC does get its fair share of tax money in one way or another.
Two Industries Account for a Major Portion of Growth
When it comes to small to medium size businesses in the UK, of which a major portion are sole proprietorships as mentioned above, construction held the top position in terms of numbers but retail/wholesale in the trade and repair sectors had the largest portion of turnover and employment.
The consensus is that much of the retail/wholesale handled by sole proprietors is in online revenue and this is why it is important to now factor in what this means to HMRC. Whilst these individuals may not be registered for VAT or PAYE, customs tariffs should be factored into the equation in terms of economic growth in the nation.
Many of these online retailers ship products throughout Europe and the Americas through companies like Parcel2Go and these companies are large enough to have employees and are required to register for VAT. This, then, accounts for major growth in the retail/wholesale sector even though each individual sole proprietor may not be collecting VAT.
Looking at the Whole Picture
With a growing number of new businesses being registered in the UK, and the majority of them being sole proprietors, it is forecast that these SMEs will be the 'saving grace' during the final leaving in Brexit. While it is true that many of their suppliers are on the continent, they are not dependent on EU members as a labour force because the vast majority are non-employing businesses. As the backbone of the UK's business growth, it is thought that Brexit will not have the devastating impact many had feared, and that is good news going forward.