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British Enterprise: Surviving, Thriving - or Dying?

Venue: Conference Room, The Royal Academy of Engineering, 29 Great Peter Street, London SW1P 3LW.

This event was held as part of ESRC Social Science Week 06.

New research unveiled at this half-day conference cast a fascinating light on how the fortunes of Britain’s smaller firms have changed over the last 15 years.

At “British Enterprise: Surviving, Thriving - or Dying?” on 15 March 2006, researchers from Cambridge University’s Centre for Business Research revealed that the competitive environment has got tougher for these firms, and that the profit margin on sales has declined.

They also showed that while more of Britain’s smaller firms are going into collaboration with other businesses, suppliers or universities, a growing number are doing so not just to expand their product range but simply in order to retain customers.

Researchers revealed that survival rates among the sample of firms have fallen from 59 per cent to 54 per cent between 1991 and 2004. And they showed evidence of a marked decline in the proportion of firms carrying out research and development, though R&D investment is considered vital to the health of this sector of the UK economy.

“British Enterprise: Surviving, Thriving - or Dying?” was held to unveil the findings from the latest panel survey of the UK’s small and medium-sized enterprises conducted by Cambridge University’s Centre for Business Research (CBR). Since 1991, the CBR has carried out a regular series of these large-scale surveys (of more than 2,000 firms), funded by the ESRC, to put a finger on the pulse of Britain’s smaller businesses and find out how they are faring. And the results provide a detailed, authoritative picture of this vital sector of the UK economy.

At the event, CBR researchers presented findings on:

  • The number of smaller firms failing, surviving and being acquired. The number of businesses being acquired over the period 1991 to 2004 has stayed level at 14 per cent; but the number of failures has risen. Between 1991 and 1997, 28 per cent of the firms in our survey had failed; between 1997 and 2004, that proportion rose to 32 per cent.
  • Levels of innovation amongst different sectors and size classes. The research from the 2004 survey shows that introducing innovative new products and services has a positive impact on job creation and turnover - both increase as a result - but has the opposite effect on profitability. Innovative firms are significantly less profitable than non-innovators. “It’s a very simple story,” says researcher Dr Xiaolan Fu. “Innovation is intimately associated with growth, but not with profitability.”
  • Amongst its more worrying findings, the research reveals a very significant decline since 1997 - from 52 per cent to 38 per cent - in the proportion of firms carrying out research and development activities. This finding will concern innovation policy-makers, as the ten-year Science and Innovation investment framework commits the UK to raise R&D to 2.5 per cent of GDP. Researcher Professor Alan Hughes says “Our research suggests it will be an enormous challenge for the private sector, and particularly smaller firms, to reach this level, and that major behavioural changes are required.”
  • The impacts, and use, of Business Link. The research shows that while government support to smaller businesses generally and Business Link in particular has made some important advances, average customer satisfaction levels - with about 79 per cent of clients reporting they are fully or partly satisfied with the service they receive - still fall short of the 90 per cent target sought by the DTI.
  • On the other hand, while the DTI has a strategic objective that 50 per cent of businesses should improve productivity or competitiveness after receiving intensive advice, small businesses themselves use it for ‘softer’ outcomes such as reassurance, confirmation of prior expectations, and adding value to management skills/knowledge base, rather than providing an immediate impact on the bottom line. Researcher Professor Bob Bennett, who spoke at the event, says “This suggests that many of the impact targets sought by government, which emphasise productivity and output benefits are inappropriate; and that Business Link needs to be far more sensitive to client needs, and to be client-driven, rather than policy or political-driven.”

    • Social Science Week is run by the Economic and Social Research Council to give people an insight into some of the country's leading social science research and how it influences our social, economic and political lives both now and in the future.

    This year, it was moved alongside National Science Week, co-ordinated by the BA (British Association for the Advancement of Science) , in order to highlight just how integral the social sciences are to the to the wider science world.

    The ESRC is the UK's largest funding agency for research and postgraduate training relating to social and economic issues. It provides independent, high quality, relevant research to business, the public sector and Government. The ESRC total expenditure in 2005/6 is £135million. At any time the ESRC supports over 4,000 researchers and postgraduate students in academic institutions and research policy institutes. More at http://www.esrcsocietytoday.ac.uk

    For further information about the event, please contact: Rachel Simpson.


    		  
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