According to the Department for Business Innovation and Skills there were an
estimated 4.8m private sector enterprises in the UK at the start of 2009,
an increase of 51,000 (1.1%) since the start of 2008.
These enterprises employed an estimated 22.8m people, and had an
estimated combined annual turnover of £3,200bn.
Small and medium-sized enterprises (SMEs – defined as having fewer than 200
employees) together accounted for 99.9% of all enterprises, 59.8% of private sector employment and 49% of private sector turnover.
Using VAT registrations the Office for National Statistics estimates there was
a ‘birth rate’ of 11.5% in new businesses in 2008. During 2009 the birth rate
decreased while there was an increase in the number of business ‘deaths’.
Food service has one of the highest business birth and death rates as a
sector. London has the highest business birth and death rate geographically.
Food and drink manufacturing
Some 99% of food and drink businesses were SMEs. However these businesses
only account for 24% of turnover in the sector as a whole. In contrast,
enterprises with more than 500 employees account for 66% of turnover but
represent less than 1% of the number of enterprises.
In 2009 (see table below) there were 18,780 food and drink manufacturing
enterprises compared with 9,375 in 2001. Almost all of this increase can be
attributed to 9,885 new enterprises which employ no people (self-employed).
Number
Turnover £m
All enterprises
18,780
77,959
With no employees
12,940
683
1
485
76
2-4
1,765
772
5-9
1,160
827
10-19
840
1,241
20-49
720
3,080
50-99
365
5,456
100-199
235
6,602
200-249
45
1,901
250-499
95
5,848
500 or more
130
51,473
Source: ONS
Although the self employed account for 69% of all food and drink
manufacturing enterprises, they only produce 0.9% of turnover.
We do not fully understand the reasons for the increase in self employed food
and drink businesses, the extent of ‘churn’ (i.e. how many have started and
failed during the period), and how well these businesses are faring during the
current economic austerity.
The number of food and drink enterprises with employees declined from 6,230 in
2001 to 5,840 in 2009 (-8% decline). All business size groups were affected by a
decline in employment.
Many small food producers, often called ‘micro-businesses’ with less than 50
employees, are characterised by:
Multiple customers with different requirements making production
planning more challenging
Use of high quality, natural ingredients including an element of
‘handmade’ manufacturing which increase cost
Close links to farm-based production using inputs grown or sourced
locally
Economic impact
Recent research involving over 300 small businesses (all sectors) located in
London showed that many had successfully adapted to the recession and as a
result improved their performance. The small businesses had adapted in different
ways which are summarised in the table below.
Main adaptations
% of sample experiencing change
Sales and marketing (including increased sales effort)
83
New markets (including new types of customer)
77
Employment changes (including reducing numbers of employed)
73
Products and/or services developed (including new products/services)
64
Finance (including costs of supplies)
64
Source: Kingston University (Small Business Research Centre)
The main way that small businesses were adapting was through changes to sales
and marketing. A quarter (25%) of
small firms in the sample increased their sales and sold more to existing
customers while also trying to sell to new types of customers. Some firms worked at improving their
products to target new markets.
Overall the research shows that small firms’ responses are highly diverse
under recession conditions although most combine judicious cost-reduction
activity (in order to conserve resources) with equally carefully chosen
revenue-generating activities.
Although many commentators advocate cost-cutting during recession, the survey
findings show that small businesses are just as likely to take action seeking to
win new business as they are to cut costs.
Looking to 2011, research conducted by Barclays Business and Kingston
University’s Small Business Research Centre investigated the views, ambitions
and plans of 1000 small business owner-managers across the UK.
Their analysis suggests:
43% of firms are planning to increase their investment in marketing to
increase sales
66% are seeking to maintain their investments in innovation
24% are planning to increase their spending in product development and
innovation
SME owner-managers are concerned about the weak level of demand in the
economy for their goods and services but are being pro-active in planning for
the survival, development and growth of their businesses. Access to finance is
comparatively viewed as a much less significant problem.
The authors conclude that SMEs are able to make a significant contribution to
the economy in terms of their employment, sales and innovative activities.
IGD support
IGD helps small food businesses by:
Providing access to free information on shopper trends and market
developments, including best practice guides on working with retailers and
foodservice businesses
Through training on open courses such as 'Sell more: waste less’ and
‘Introduction to marketing’ (both specifically aimed at small businesses), through more general courses like ‘Introduction to supply chain’,
and through bespoke courses delivered at the workplace
Managing programmes that support supply chain collaboration to help
partners reduce costs and increase value
Find out how more about how IGD helps small food businesses here.
