Britain’s small businesses will generate over 200,000 jobs[i] annually from 2010 as they capitalise on changes to the marketplace brought on by the recession and fill gaps left by big business failure and the growth of new markets.

According to a new O2 report Not So Little Britain, the downturn is improving small businesses’ chances of recruiting high flying employees made redundant by large corporations helping them to overcome what is so often a barrier to their growth – the ability to attract skilled labour. It is estimated that 25 per cent[ii] of small business recruitment is now from larger businesses and one in ten SMEs (11%) plan to increase expenditure on training[iii] and upskilling their workforce in 2010.

Small businesses are also becoming ever more important for domestic employment as they recruit within the UK while many larger companies send jobs overseas - two thirds (65 per cent)[iv] of large businesses are actively considering outsourcing abroad.  O2, the largest mobile telecommunications provider to small business, commissioned the report by SQW Consulting to lift the lid on the opportunities that lie ahead for the small business sector.

Accounting for 99.9 per cent of workplaces and 68 per cent of the workforce in the UK[v], the success of small business in the next economic cycle is crucial to the recovery of the economy. O2’s report highlights the sectors in which small businesses are thriving and out-performing their larger competitors:

The future looks positive as small businesses have out-performed their larger competitors in a number of sectors with this trend predicted to continue;

·         Construction (small business accounted for 82% of job growth in the last economic cycle)

·         Hotels and restaurants (93%)

·         Real estate activities (63%)

·         Computer and related activities (63%)

·         Other business activities (65%)

·         Recreational, cultural and sporting activities (76%)[vi].

The report, which offers a comprehensive analysis of small business’ contribution to the economy over the last ten years, highlights three key opportunities for small businesses in the ‘new’ economy where they have competitive advantage over larger companies; the creative, green and health industries. SMEs' competitive strength in distribution and diversity, and their flexibility to respond quickly to commercialise emerging markets, will see them further cement their critical role in driving the ‘new’ economy and the UK’s economic recovery. These sectors are predicted to add more than 400,000 jobs and around five per cent GVA growth annually over the next three years alone.

Simon Devonshire, Head of Small Business Marketing at O2, said: "It’s fantastic to see the small business sector continuing to lead the recovery charge, playing on their strengths to overcome the challenging economic climate.

The research is vital to us as a business to help us gain insight into the role and performance of small businesses over the next economic cycle and understand their changing communications needs.”  

O2’s report is yet another reflection of their commitment to help UK small businesses succeed and thrive. Most recently, they announced their sponsorship of School for Startups.  Set up and run by Doug Richard, the former Dragons’ Den panellist and investor, School for Startups aims to empower small businesses to realise their potential through a unique programme of face-to-face courses and online events.

Hannah Bourne from Enterprise UK, the national campaign to give people in the UK the confidence, skills and ambition to be enterprising, comments: “Having talented staff is key to any successful small business owner, who has to rely on a small number of people to take forward their vision. This research from O2 shows that small businesses have reason to be optimistic about the talent out there and available to them. For anyone looking for a job, do consider applying for roles within smaller businesses, it might be just the place to flex your talents.”   

Looking to the future, the report makes a number of predictions on the contribution of small business to recovery. These are as follows:

·  Britain’s small businesses will generate over 200,000 jobs[vii] annually from 2010 as they capitalise on changes to the marketplace brought on by the recession.

·  Over the next ten years small businesses will be responsible for adding almost 700,000 more new employees than larger companies in just six ‘new economy’ sectors (IT, other business services, recycling, education, health and leisure) where they are able to innovate more quickly than larger companies.  This means that small businesses will contribute an additional £22bn GVA to the economy – more than larger companies in the same sector generate.

·  Over half of small businesses intend to innovate through new or improved products in 2010[viii]

·  VAT registered enterprises will increase by around 35,000[ix] each year in the future.

·  Perhaps unsurprisingly, London is a regional powerhouse of enterprise creation. However, when looking at the relative recent growth in VAT registered enterprises, the North East and Scotland have seen the largest growth in enterprises relative to stock.