What is a micro business?

UK Micro BusinessAs we reported last week 76% of businesses in the UK are owned and operated by a single person. This kind of very small business has been one of the main growth areas of UK businesses in the last 10 years as increasing numbers of people have become self employed.

Often referred to as a micro business, these very small enterprises are increasingly being recognised as a distinct business class with their own needs. As with SMEs there is no single definition of what a micro business is and different parts of the UK government use their own terminology and to describe them. The main definitions used by the UK government are:

 

ONS Definition

The Office for National Statistics (ONS) publish figures every year on the number and size of business in the UK. Theirs are the definitive stats on UK businesses. The ONS don’t really talk about micro businesses but they do classify businesses by the number of employees. Their Business Population Estimates for 2015 show 4,077,590 businesses with a single owner operator and then a further 1,068,815 businesses with between 1 and 9 employees. The ONS figures on the number of businesses have been used as part of Parliamentary reports on micro businesses. In these reports a micro business has been defined as having between 0 and 9 employees.

 

Companies House Definition

Companies House introduced simplified filing requirements for micro businesses a couple of years ago but they refer to them as micro-entities. Their definition of a micro-entity is a business that meets at least two of the following conditions:

  • turnover must be not more than £632,000
  • the balance sheet total must be not more than £316,000
  • the average number of employees must be not more than 10

 

HMRC Definition

For most purposes HMRC don’t distinguish micro business from other types of small business. One of the few exceptions is with payroll where they do have some simplified procedures for what they term ‘micro employers’. They define a micro employer as businesses with 9 or fewer employees.

 

EU Definition

Several parts of the UK government use the EU definition of a microenterprise when discussing micro businesses. For the EU a microenterprise is a business which employs fewer than 10 persons and whose annual turnover does not exceed 2 million Euros.

 

Why does this matter?

A general definition of a micro business based on the above would be a business with less than 10 employees. Using the ONS stats on the size of UK businesses this means that 95.49% of businesses in the UK would match the definition of a micro business. However most of the business legislation in the UK, and much of the government’s business support, is aimed at much larger entities. Having a single recognised definition of a micro business would help to solidify the importance of these businesses. It would also make it easier to track the contribution they make to the UK economy and perhaps focus the mind of policy makers on their needs.

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