The chapter focuses on the experience of small businesses, and reviews the literature on small and medium-sized enterprise (SME) growth and productivity, discussing a range of perspectives on SME growth. It highlights a range of measurement and other issues related to the availability of appropriate data for understanding SME performance, and notes the paucity of robust studies on SME productivity. The range of issues specific to SME productivity performance is discussed. A particular concern is the difficulty of combining information on the SME as a firm organization with the attributes of the entrepreneur(s) who lead and manage that organization. A further focus of the chapter is on the disparate range of evidence on the smallest micro-businesses, where the business founder might typically be self-employed. Specific policy interventions, for example, focusing on strengthening SME leadership, are discussed, and the importance of spatial and regional variation in drivers of SME performance is also highlighted.
Andrew Henley, Tim Vorley and Cristian Gherhes
Small businesses are widely regarded as an important aspect of the productivity puzzle in the UK, representing over 98% of the business base. However, the diversity of small businesses means that supporting sole-traders and micro-businesses is not straightforward - a fact borne out in small business policy over the past three decades. The chapter will review emerging evidence and insights as to the impact of Covid-19 on the activity of sole-traders and micro-businesses, before discussing the appropriateness of the Government's response. As businesses rework their business models there remain questions concerning their survival and resilience, the implications of which will shape the economic recovery and prospect of any future productivity gains (or not). The chapter discusses the potential shake-out of the “long-tail” or “reluctant” self-employed, the differential outlook facing 'tradeable' and 'non-tradable' businesses, and implications of supply chain breakdown as key challenges facing micro businesses. Finally, we conclude with some thoughts on why productivity will still matter and remain salient, whether the term remains in favour or not.