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LSBS Event. July 5th 2018

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Presentation slides from the ERC-BEIS Longitudinal Small business Survey Dissemination event. July 5th 2018

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LSBS Event. July 5th 2018

  1. 1. ERC-BEIS Longitudinal Small Business Survey Dissemination Event Funded by
  2. 2. Slide 3 BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME Employers
  3. 3. Slide 4 Background • ASBS and subsequently SBS run by SBS, DTI, BERR, BIS and subsequently BEIS since 2003. • Designed to provide data on SME performance and the factors that affect this. • Decision taken in 2015 to establish a longitudinal SBS, a resurvey of the same businesses each year for five years. • Separate reports for SMEs with and without employees are published here: • https://www.gov.uk/government/collections/small-business-survey-reports BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS
  4. 4. Slide 5 Survey design • Sampled from IDBR (registered business/employers) and D&B (unregistered businesses with no employees). Sample stratified by country (x4), size of business (x6) and sector (x14). • Unregistered non-employers 12% • Registered non-employers 15% • Micro (1-9) 33% • Small (10-49) 25% • Medium (50-249) 14% • Telephone survey (average length 25 minutes). Fieldwork undertaken between July 2017 and January 2018. BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS Type of respondent Employment Total sample size Panel Top-ups Employers Non-employers 2015 15,501 15,501 N/A 11,146 4,355 2016 9,221 7,252 1,969 6,987 2,234 2017* 6,596 5,292 1,304 4,771 1,825 *Panel number includes those interviewed in 2015 and 2017, but not in 2016
  5. 5. Slide 6 Survey content • SECTION A: ABOUT THE BUSINESS • SECTION B: EMPLOYMENT • SECTION C: EXPORTS • SECTION D: SOCIAL ENTERPRISES • SECTION E: ENERGY USAGE • SECTION F: TAXATION • SECTION G: OBSTACLES • SECTION H: FINANCE • SECTION I: NATIONAL LIVING WAGE • SECTION J: INNOVATION • SECTION K: BUSINESS SUPPORT • SECTION M: PAYMENT • SECTION N: TRAINING • SECTION P: TURNOVER • SECTION R: FUTURE INTENTIONS BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS
  6. 6. Slide 7 Change in employment compared with 12 months earlier • Overall net increase in employment among panelists, but the margin was less than in 2016 (37% increased employment in 2017, compared with 45% in 2016). • 37% of SME Employers had more staff than a year previously, whilst 31% had fewer and 32% showed no change. BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 45% 27% 28% 37% 32% 31% 0% 10% 20% 30% 40% 50% Increase in employment No change Decrease in employment 2016 2017
  7. 7. Slide 8 Turnover compared with 12 months previously • Similar proportions to 2016; 36% reported increasing turnover during the preceding year with 19% reporting a decline. 43% reported no change in turnover. BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 40% 38% 34% 36% 39% 41% 44% 43% 18% 17% 20% 19% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2014 2015 2016 2017 Increase in turnover No change Decrease in turnover
  8. 8. Slide 9 Expectations of future performance – employment • One quarter of SME employers expected to increase the size of their workforce over the next year, just one in ten expect to experience a contraction. • The proportion expecting to increase employment is 2ppts lower than those reported in 2015-16. • Larger SMEs have greater expectations for employment growth. BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 24% 65% 10% 21% 67% 11% 33% 61% 6% 42% 50% 7% 0% 10% 20% 30% 40% 50% 60% 70% 80% More than now Same as now Fewer than now Total 1-9 employees 10-49 employees 50-249 employees
  9. 9. Slide 10 Expectation of future performance – turnover • Two fifths of SME Employers (40%) expected to increase their turnover in the coming year. • The proportion is the same as those seen in 2016, but lower than in 2014-2015. BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 40% 39% 45% 56% 47% 48% 44% 34% 11% 12% 9% 8% 0% 10% 20% 30% 40% 50% 60% Total 1-9 employees 10-49 employees 50-249 employees Expect turnover to increase Expect turnover to stay the same Expect turnover to decrease
  10. 10. Slide 11 Ambitions for growing future sales • 62% reported that they aimed to increase their sales over the next three years, compared with 73% in 2014 and 74% in 2010. • The decline in growth ambition is most evident among the micros (59%, down from 63% in 2016). BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 74% 68% 73% 69% 66% 62% 56% 58% 60% 62% 64% 66% 68% 70% 72% 74% 76% 2010 2011 2012 2013 2014 2015 2016 2017
  11. 11. Slide 12 Exporting • One in five SME Employers (20%) had exported goods or services in 2017. This proportion was 2ppts higher than in 2016, but the proportion has remained relatively unchanged since 2012. • Compared with 2017, there were higher proportions of exporters in the primary and administrative sectors (both up 6%). BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 20% 18% 25% 37% 11% 9% 17% 26% 12% 12% 14% 17% 0% 5% 10% 15% 20% 25% 30% 35% 40% Total 1-9 employees 10-49 employees 50-249 employees Export goods or services Export goods Export services
  12. 12. Slide 13 Innovation • Two in five of SME Employers reported undertaking any form of innovation over the previous 3 years (new or significantly improved goods, services or processes). The proportion is similar to that seen in 2016, but 9ppts lower than in 2015. • Breaking it down further; 16% had innovated goods, 29% services and 20% processes. BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 50% 48% 55% 61% 39% 37% 47% 55% 41% 40% 45% 55% 0% 10% 20% 30% 40% 50% 60% 70% Total 1-9 employees 10-49 employees 50-249 employees 2015 2016 2017
  13. 13. Slide 14 Access to finance • In 2017, just 13 percent of SME Employers sought finance over the year. This is the same proportion seen in 2016, half the 2010 level. • Compared to 2016, businesses were more likely to seek finance for investment (46% vs. 41%) than working capital (57% vs. 66%). • 77% obtained any finance and 58% obtained all they wanted (compared with 75% and 47% in 2016, respectively). BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 26% 24% 19% 17% 13% 13% 0% 5% 10% 15% 20% 25% 30% 2010 2011 2012 2013 2014 2015 2016 2017
  14. 14. Slide 15 Major obstacles to the success of the business • More major obstacles to the success of the business reported in 2017. • The biggest increases were in the proportions mentioning recruitment (+7ppts) and EU exit (+6ppts). BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 15% 17% 18% 20% 21% 30% 30% 36% 42% 47% 18% 18% 20% 21% 27% 33% 37% 41% 46% 51% 0% 20% 40% 60% Obtaining finance Availability/cost of premises National Living Wage Workplace pensions UK exit from the EU Late payment Staff recruitment and skills Taxation, VAT, PAYE, NI,… Regulations/red tape Competition in the market 2017 2016
  15. 15. Slide 16 Use of business support • 29% of SME employers sought information or advice. • This proportion is 3ppts higher than in 2016, but the long-term trend is downwards. BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 49% 45% 44% 33% 26% 29% 46% 42% 43% 31% 24% 27% 59% 59% 51% 40% 34% 38% 68% 68% 61% 50% 45% 46% 0% 10% 20% 30% 40% 50% 60% 70% 80% 2010 2011 2012 2013 2014 2015 2016 2017 Total 10-49 employees 1-9 employees 50-249 employees
  16. 16. Slide 17 Training • Just under half of SME Employers had arranged some form of training over the previous year, and one in three had provided any management training. • Over time, there is a downward trend in the proportions of businesses providing training BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS 60% 60% 57% 55% 55% 49% 56% 54% 52% 50% 48% 43% 85% 86% 80% 80% 82% 77% 94% 92% 89% 89% 91% 85% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2011 2012 2013 2014 2015 2016 2017 Total 50-249 employees 10-49 employees 1-9 employees
  17. 17. Slide 18 • Overall, SME employers appear quite stable in terms of performance i.e. numbers employed and turnover. • However, there may be concerns that many SMEs are not investing in the future – for example, downward trends over time in innovation, ambition for growth, use of business support, seeking finance and training. • The 2018 (Year 4) LSBS will start fieldwork in July. This will have a significant boost of new top-ups, and the overall sample size will be 15,000. • Of these, c. 3,700 are predicted to be full panellists (interviewed in 2017), c. 350 previous panellists, and c. 10,950 top-ups. BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME EMPLOYERS
  18. 18. Slide 19 BEIS LONGITUDINAL SMALL BUSINESS SURVEY 2017 SME Employers
  19. 19. LSBS Longitudinal report: 2018 - a look back through the first three waves of the survey Stephen Roper and Areti Gkypali
  20. 20. LSBS – timing of the first three waves Source: ONS Quarterly GDP growth (IHYQ) and £:Euro exchange rate
  21. 21. Cross-section and panel • Of the 15,000 firms in the original (2015) survey 4165 responded in all three years • This is pretty much what was anticipated in the original attrition projections • But… the panel is not typical of the original pattern of respondents (unweighted) • Panel firms seem ‘better’ on a number of strategic criteria Non- panel Panel N=11336 N=4165 Aiming to grow turnover (3 years) 67.7*** 72.7 Women-owned firm 23.4*** 19.8 BAME-owned firm 5.1 4.0 Exporting firm (%) 20.4*** 24.5 Innovating firm (%) 41.6*** 48.0 Accessing business support (%) 34.2*** 41.6 Accessing external finance (%) 18.6*** 20.7 Providing training (%) 73.9*** 77.1
  22. 22. Export persistence • One key features of the LSBS panel is our ability to track firms’ activity through time. Here what happened to those exporting in 2015? • 1:5 firms drop out of exporting in 2016. 1:3 of these resumed exporting again in 2017 • What do these patterns mean for performance?
  23. 23. Persistence in ambition (employment growth, one year) Persistence of ambition seems a bit weaker with around two thirds of firms with growth ambition in 2015 keeping this in 2016 Some firms return to having growth ambition in 2017 But…. relatively few firms go from having growth ambition to anticipating falling employment
  24. 24. Thinking high growth… • 7.6 per cent of firms in longitudinal sample are high growth (OECD definition) in terms of employment • 7.6 per cent of firms in longitudinal sample are also high growth (OECD definition) in terms of turnover • But these are not the same firms. Only 1:4 of the ‘employment high growth firms’ are also in the ‘turnover high growth group’. • It is also interesting to consider ‘small high growth firms’ and we do so over the next couple of slides
  25. 25. Exploring high growth: Characteristics of high growth firms Employment definition Turnover definition Non-high growth High- growth Non-high growth High- growth Employment 2015 21.2 28.9 20.1 41.1 Exporting firm 2015 24.3 27.5 24.5 24.7 Innovator 2015 47.1 58.0 47.0 59.5 Women-owned business 19.7 20.8 19.4 24.5 BAME owners or directors 3.8 6.0 3.8 7.0 Business support use 2015 40.6 53.2 40.7 52.8 External finance use 2015 19.8 31.5 20.1 27.2 Provided staff training 75.6 89.1 75.6 89.3
  26. 26. Predicting high (OECD) growth… (Firms with 10+ employees in 2015) Employment definition Turnover definition Employment definition Turnover definition Unweighted Unweighted Weighted Weighted Employment 2015 -0.001 0.003*** 0.005*** 0.008*** Exporting firm 2015 0.01 -0.071 0.133 0.113 Innovator 2015 0.162** 0.098 0.131* 0.084 Women-owned business 0.024 0.093 0.036 0.065 BAME owners or directors 0.016 0.036 0.051 0.171 Business support use 2015 0.056 0.139* 0.073 0.137* External finance use 2015 0.170** 0.009 0.183** -0.033 Provided staff training 0.451*** 0.313*** 0.512*** 0.378*** No of observations 2262 2262 2262 2262 Chi2 60.082 78.235 87.885 74.64 R2 0.04 0.056 0.074 0.091 BIC 1609.226 1497.585 733.881 689.517
  27. 27. Predict high growth among smaller firms (Firms 1-9 employees, add 8 employees) Unweighted Unweighted Employment 2015 0.062** 0.090*** Exporting firm 2015 -0.206 -0.431** Innovator 2015 0.372** 0.502** Women-owned business 0.104 0.246 BAME owners or directors -0.188 0.091 Business support use 2015 0.227 0.107 External finance use 2015 0.108 -0.132 Provided staff training 0.16 -0.067 No of observations 1022 1022 Chi2 22.535 64.265 R2 0.077 0.118 BIC 421.416 320.875
  28. 28. Link to the report: Read more at: https://www.gov.uk/government/statistics/small-business- survey-2017-panel-report
  29. 29. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus Management capability, business support and the performance of micro-businesses in the UK Andrew Henley, Cardiff Business School and ESRC Productivity Insights Network Meng Song, Cardiff Business School
  30. 30. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Background – Micro-business numbers have been growing fast, particular in metropolitan areas – We know relatively little about their performance, its potential contribution to the UK productivity gap, and how this might correlate to business capabilities and access to support – Analysis uses the sole-trader and micro-business sub-sample from Waves 1 and 2 to address these questions
  31. 31. a) changes in self- employment across Great Britain 2009-2016 b) changes in micro-business population across Great Britain 2010-2016
  32. 32. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Research questions • Is the performance of micro-businesses associated with – better self-perceived management capability? – business planning practice? – awareness and use of business support? • Three performance domains – Innovation activity – Exporting activity – Productivity (turnover per employee)
  33. 33. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Context – Within a resource-based view of SMEs, access to external advice and support can fill skills deficiencies and improve capabilities to access and utilise knowledge – Improved awareness of support may indicate increased entrepreneurial intention and growth orientation – Formal business planning can facilitate goal achievement and raise performance (although it may also confer misplaced over-confidence)
  34. 34. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Data – 7279 businesses in Waves 1 and 2 of BEIS LSBS – 3883 of these were micro-businesses (49% sole-proprietors) – 161 (4.1%) grew to 10+ employees by Wave 2 – Innovation: 49.5% had engaged in some form of product/process/service innovation in past 3 years; 17% had developed new-to-market products/services/processes – Exporting: 9% had exported products in past year (accounting for 23% of sales); 13% had exported services (27% of sales) – Mean turnover per employee (2015) £150k (median £80k)
  35. 35. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Data – Business capabilities (2015, 5 point item scales): • 58% report strong or very strong capability for developing and implementing a business plan and strategy • 55% for developing and introducing new products or services • 39% for access to external finance • 66% for operational improvements towards industry best practice – Business support • 61% report awareness of a range of UK government business advice/information schemes but only 32% report using a source of advice for operational or strategic purposes in the past year. This falls to 23% in 2016. Vast majority report using support for operational rather than strategic purposes. – Business planning • 36% report having a formal business plan, rising to 47% in 2016
  36. 36. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Modelling (1) – Multivariate regression to explain innovation (logit), export intensity (Tobit), productivity (semi-log) – Covariates: • perceived business capabilities, size, age, location, sector, • Innovation (for exporting models) • Innovation, exporting, lagged performance (for productivity model) – Exploits longitudinal data by using behaviours in 2015 to explain performance in 2016, to address potential causality concerns
  37. 37. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Modelling (2) – Matching models/treatment analysis to address potential self-selection concerns • Average treatment effect on the treated (ATT) can be expressed as: 𝐸 𝑤1 − 𝑤0 𝑡𝑟𝑒𝑎𝑡𝑚𝑒𝑛𝑡 = 1 = 𝐸 𝑤1 𝑡𝑟𝑒𝑎𝑡𝑚𝑒𝑛𝑡 = 1 − 𝐸 𝑤0 𝑡𝑟𝑒𝑎𝑡𝑚𝑒𝑛𝑡 = 1 • propensity score matching: Pr 𝑡𝑟𝑒𝑎𝑡𝑚𝑒𝑛𝑡𝑖 = 1 = Φ(ℎ(𝑋𝑖)) – 3 treatments: • gaining awareness of business support (Aware) • acquiring external advice or information (Advice) • using a formal business plan (Plan).
  38. 38. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Findings (1) - regression – Having a business plan or use of business support raises likelihood of innovating by 12%, and of having new to market innovation by 4-5% • Some evidence that general advice on growth/marketing/employment is more effective that specific innovation support – Awareness of government business support raises raises likelihood of innovating by 3% and likelihood of exporting by 5% – Further effects on exporting and productivity performance are indirect, via improved innovation and exporting: • having innovation raises export sales share by 3-4%; • being an exporter raises productivity by 9%.
  39. 39. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus Summary of the results (arrows indicate significantly positive effects)
  40. 40. Treatment: Aware of business support Treatment: Formal Business Plan Treatment: Use external Advice or information Whether or not has product/service/process innovation 0.038 0.118 0.127 Whether or not has new to the market innovation (products/services/processes) 0.029 0.041 0.061 Whether export goods 0.027 0.011 0.009 Export sales from goods 1.721 0.875 -0.362 Whether export services 0.032 0.015 0.020 Export sales from services 0.980 -0.848 0.289 Whether export goods and/or services 0.052 0.024 0.032 Turnover per employee in logarithm form 0.042 -0.012 0.103 Semi-parametric Kernel matching: Average Treatment Effect for the Treated (ATT) BOLD denotes that treatment effect is statistically significant at <5%
  41. 41. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Findings (2) – treatment effects – Awareness of business support raises both likelihood of new-to-market innovation and exporting by 3%, and a 1.7% uplift to goods export sales proportion – Use of a business plan raises likelihood of innovation by 12% and new-to-market innovation by 4% – Use of business support raises likelihood of innovation by 13% and new-to- market innovation by 6%
  42. 42. The Public Value Business School | Yr Ysgol Busnes Gwerth Cyhoeddus • Conclusions – Both methods of analysis produce very similar conclusions – Micro-businesses seem (over)optimistic about business capabilities which is not entirely borne out by performance outcomes – Support for innovation in micro-businesses is key – this in turn yields second order benefits for exporting activity and productivity – Supports other research showing international business exposure raises SME productivity – Micro-business productivity policy should focus on identifying and supporting potential innovators, especially where that innovation has export-enhancing potential. In other cases business support/planning may not have much effect.
  43. 43. Thank you

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