Last updated on June 18th, 2024 at 04:10 pm

Why Microbusinesses Are Crucial to Levelling Up in the UK

If you have read the news over the past few years you will have read about the concept of “levelling up” that has become a cornerstone of contemporary UK policy, referring to the ambition to reduce regional disparities and foster economic growth across all parts of the country. Central to this vision is the empowerment of microbusinesses—enterprises with fewer than 10 employees. Often overlooked in favour of their larger counterparts, microbusinesses possess unique qualities that render them indispensable to the levelling up agenda. Their contribution to local economies, innovation, and community cohesion is profound, making them pivotal to achieving a balanced and inclusive economic landscape.

Economic Diversification and Local Resilience

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Microbusinesses play a critical role in diversifying local economies. Unlike larger corporations that may dominate a single sector, microbusinesses span a wide array of industries, from artisanal crafts to digital services and even professional services. This diversification is crucial for economic resilience, particularly in regions that have historically relied on a single industry. For example, areas in the North of England that were once dependent on manufacturing have suffered economically due to the decline of these industries. Microbusinesses can fill this void by fostering new sectors and creating a more balanced economic environment.

Furthermore, microbusinesses are often more adaptable and innovative than larger firms. Their smaller size allows for greater flexibility, enabling them to pivot quickly in response to market changes. This adaptability was evident during the COVID-19 pandemic, where many microbusinesses rapidly adjusted their operations to meet new demands, such as producing personal protective equipment or shifting to online sales. This agility not only helps microbusinesses survive economic shocks but also contributes to the overall resilience of local economies.

Job Creation and Skill Development

Microbusinesses are significant job creators. Collectively, they employ a substantial portion of the UK workforce.  In fact, according to this UK Parliament briefing file (page two of the pdf file) in 2023 there were about 5,555,000 total private businesses in the UK broken down as follows :

• Micro businesses : 5,287,000 businesses, employing 8,773,000 people (32% of all employees)
• Small businesses that employ between 10 and 49 staff : 223,000 businesses, employing 4,346,000 people
• Medium businesses (50 – 249 employees) : 37,000 businesses, employing 3,596,000 people
• Large businesses (250+ employees) : 8,000 businesses, employinh 10,809,000 people (39% of all employees)

In many rural and disadvantaged urban areas, microbusinesses provide essential employment opportunities that might not be available otherwise. By offering jobs within local communities, microbusinesses help to reduce unemployment and underemployment, key factors in the levelling up agenda.

Moreover, microbusinesses often provide unique opportunities for skill development. Employees in these firms frequently take on multiple roles, gaining a broad set of skills and experiences. This can be particularly valuable for young people and those re-entering the workforce, who benefit from the hands-on learning and diverse responsibilities offered by microbusinesses. This holistic skill development is essential for creating a versatile and capable workforce, ready to meet the demands of a dynamic economy.

Community Engagement and Social Capital

Beyond their economic contributions, microbusinesses are integral to community cohesion and social capital. These businesses are typically rooted in their local areas and maintain close relationships with their customers and communities. This localised focus fosters a sense of belonging and mutual support, which is vital for social well-being. For example, a local bakery or coffee shop can become a community hub, bringing people together and supporting local initiatives.

Microbusinesses also tend to reinvest profits locally, further amplifying their impact on regional development. By sourcing materials locally, collaborating with other local businesses, and supporting community events, microbusinesses create a virtuous cycle of economic and social benefits. This local reinvestment is a key aspect of levelling up, as it ensures that wealth generated within a community remains there, supporting sustainable growth and development.

Supporting Microbusinesses for a Brighter Future

To harness the full potential of microbusinesses in the levelling up agenda, it is essential to provide targeted support. This includes improving access to finance, offering business mentoring and training, and creating a favourable regulatory environment. For instance, simplified tax systems and reduced bureaucratic burdens can significantly ease the operational challenges faced by microbusinesses whereas, conversely increasing the bureaucracy around small businesses are likely to increase pressures on them.

Additionally, investment in digital infrastructure such as fast broadband is crucial. As the economy becomes increasingly digital, microbusinesses must be equipped with the necessary tools and skills to compete. Government initiatives aimed at enhancing digital literacy and providing affordable access to technology can empower microbusinesses to thrive in the digital age.

In conclusion, microbusinesses are a vital component of the UK’s levelling up strategy. Their ability to diversify local economies, create jobs, foster skills, and strengthen community bonds makes them indispensable to achieving regional equity. By recognising and supporting the unique contributions of microbusinesses, policymakers can ensure a more balanced, resilient, and inclusive economic future for the UK.