Microbusinesses: Fuelling local economies

The microbusiness sector in the UK has experienced significant growth over the last two decades.

Microbusinesses (employing 0-9 people – excluding the owner)have increased from 3.5 million in 2000 to 5.2 million today. In contrast, other business sizes have seen minimal growth or a decline during the same period. As a result, microbusinesses now contribute to 32% (8.7 million employees) of private sector employment and 19% of total economic output (£808 billion).

Data on microbusinesses is generally scarce As a result, microbusinesses, especially digital ones, are often overlooked in the public debate and the crucial role that they play in the economy is rarely acknowledged by policymakers and researchers.

Using a new and unique dataset on the density of digital microbusinesses across the UK offered by GoDaddy through the Venture Forward research initiative, Frontier’s study contributes to closing the knowledge gap on the importance of digital microbusinesses to local economies.

Our analysis provides valuable insights into the relationships between digital microbusinesses and economic performance outcomes. Digital microbusinesses are associated with a higher number of jobs available for each resident, higher annual pay for residents, and an increase in general economic activity, as measured by GDP. In particular, we find that, everything else being equal:

  • Each new digital microbusiness is associated with an average of 7 additional jobs. This reflects a direct employment effect, such as hires by the business itself, and indirect effects such as increased demand for products and services from suppliers and higher disposable income in the local community, which lead to further hires.
  • A 1% increase in the number of active digital microbusinesses is, on average, associated with a £1,400 higher median annual pay for full-time workers.
  • Each additional digital microbusiness per 100 residents is, on average, associated with an increase of £37,000 to local GDP

Click here to see the full report.

Frontier regularly advises on public policy issues in the financial services and digital sectors.

For more information, please contact media@frontier-economics.com or call +44 (0) 20 7031 7000.