Richard Bearman is the Managing Director of Start Up Loans, a government-backed programme, that launched in 2012 to provide loans to new and early-stage businesses throughout the UK who may have struggled to access finance (up to £25k) elsewhere.
Small businesses have always had a role to play in driving economic recovery after periods of decline. There are numerous examples of when they have stepped up to overcome challenging market conditions throughout history. I am confident that it will be no different this time around as we look for ways to boost GDP heading into 2023.
The 2008 financial crisis tipped the UK economy into a spiral that saw GDP shrink by 6% between January-March 2008 and April-June 2009. It led to hiring freezes among the companies that could protect themselves and mass redundancies among those who couldn’t. Three years later in 2011 there were up to 2.7 million jobseekers and an unemployment rate of 8.4%, the highest since 1995.
The recovery was a slow, uphill slog and GDP didn’t return to its 2008 size until 2013. However, like a coiled spring, the economy had the potential to bounce back, and by 2017 unemployment was at a record low of 4.3% and come April 2018 it was 11% bigger than it had been pre-crash. A key driver of this economic bounce-back was the tenacity and energy of small businesses, adapting to continue growing amid the significant challenges they faced.
I recently took part on a panel alongside Martin McTague, National Chair at the Federation of Small Businesses (FSB). The panel discussion centred around the importance of small businesses driving us out of economic downturns. He summarised eloquently the role they played in 2008 and what we can expect them to deliver for the nation in 2023.
He said: “Small businesses will be central to the economic recovery. We saw this after the 2008 financial crash, with some workers who lost their jobs deciding to start up their own business.
“FSB-commissioned research found nine-in-ten people who moved from unemployment back into the workplace during that period of recovery did so through a small firm or self-employment.
“More than 16 million jobs are in small firms – that’s 60 per cent of all private sector employment in the UK. It’s essential that those looking to start or grow a business have sufficient access to affordable finance.”
Those statistics speak for themselves. As home to 60 per cent of all private sector employees, how could small businesses not be central to recovery? I believe that there is a mentality within small businesses, a tenacity to overcome barriers, that is a strong factor in how they contribute to driving growth.
Any small business seeking growth has, by nature, to challenge the existing market and trading space within its field of operations to become established. Those who do so confidently and with success are the head of the spear among small businesses who lift us out of recession.
As well as 2008, we can look to Covid-19 for further evidence of how vital small businesses can be to recovery. Goldman Sachs’ Engines of Growth report, published in December 2021, examined the behaviour of 1,000 small business and how they had adapted to the pandemic – and identified the period as a hot bed of start-up and side hustle innovation.
Over the course of the disruption, 68% of respondents said they had changed their business model; 69% said they had introduced new products and services; a significant number said they had grown turnover and employment levels; 83% had increased the skills of their workforces and 79% had prioritised hiring and developing younger talent.
A further 93% said they were using data in their decision making and 88% had accelerated changes to their use of digital technologies.
All of these markers point to a group of businesses that adapt quickly and with autonomy without becoming caught in the headlights of peripheral economic disruption. It’s also why they’re so crucial to the return to growth our country hopes to see in 2023.
There is good reason why start-ups and small businesses are often associated with words that imply energy and disruption, innovation and pace. A great many institutions, employees and markets will be looking to the UK’s small business to power the engine of GDP alongside their medium and large counterparts. I for one am excited to see them show us all once again the extent of what they’re capable of.
