Small Businesses in Rural Areas-UK-2005

8/14/2019 Small Businesses in Rural Areas-UK-2005

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Small Businesses in Rural Areas

An analysis of the Annual Small Business Survey 2004

Rosie Telford

Small Business Service Analytical Unit

October 2006 URN 06/2078


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Table of Contents

1. Introduction .............................................................................. 41.1 Summary of main findings .................................................... 4

1.2 Background ........................................................................61.3 The Annual Small Business Survey.........................................71.4 Definitions used in report...................................................... 71.4 Structure of Report..............................................................8

2. The Business P opulation ........................................................... 92.1 Locations of English businesses ........................................... 102.2 Legal status...................................................................... 112.3 Size of business ................................................................ 142.4 Turnover .......................................................................... 15

2.5 Age of business................................................................. 172.6 Sectoral patterns............................................................... 19

3. Business Dynamics ................................................................. 21 3.1 Growth ............................................................................ 223.2 Innovation........................................................................ 233.3 Obstacles to success .......................................................... 233.4 Government support.......................................................... 25

4. ICT ....................................................................................... 264.1 Uses of ICT....................................................................... 274.2 Access to broadband.......................................................... 29

5. Transport Issues ..................................................................... 305.1 Satisfaction with public transport......................................... 315.2 Public transport and recruitment.......................................... 325.3 Transport issues as an obstacle to success............................ 32

6. The Environment ..................................................................... 336.1 Action taken ..................................................................... 346.2 Government help with environmental performance................. 35

6.3 Social and environmental goals ........................................... 356.4 Promoting business as environmentally friendly ..................... 37

7. Qualif ications and skil ls .......................................................... 38 7.1 Qualification of owner ........................................................ 397.2 Skills shortages as an obstacle to success............................. 407.3 Satisfaction with marketing skills available............................ 407.4 Training of managers ......................................................... 41

8. Family businesses and businesses w ith no employees ............ 438.1 Family businesses by sector................................................ 44

8.2 Family businesses by size ................................................... 458.3 Reasons for having no employees ........................................ 46


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9. Summary/ Conclus ions ............................................................ 48 9.1 Differences between rural and urban businesses .................... 489.2 The effects of remoteness................................................... 499.3 Dispersed areas and PSA4 districts ...................................... 499.4 Dynamic potential ............................................................. 50

Annex 1Methodology ................................................................... 51A1.1 Rural and Urban Definitions ................................................ 51A1.2 PSA4 Productivity Indicator Districts..................................... 51A1.3 Adding rural and urban flags ............................................... 52A1.4 Data limitations and significance testing ............................... 52

Annex 2Addit ional Tables ............................................................ 55


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1. Introduction

A thriving small business sector is central to the vision of economic and social

regeneration of rural areas presented in Defras Rural Strategy 2004 1. Away from

urban centres, small and medium enterprises (SMEs) provide local jobs, servicesand places to trade, as well as the potential to protect and sustain the countrysideenvironment.

The Small Business Service aims to make the UK the best place in the world tostart and grow a business, with special attention paid to groups under-represented in self-employment, socially excluded groups and economically

underperforming areas. It is therefore useful to compare SMEs in rural areas withthose in urban areas in terms of their contribution to the economy and theirperceptions of and attitudes to the obstacles they encounter in doing business.

These measures are particularly pertinent in a minority of lagging rural areas

with high social deprivation, most of which are either geographically peripheral orcharacterised by industries that experienced rapid declines in the recent past, e.g.

coalmining, agriculture and fishing.

This report, produced by the Small Business Service (SBS) in collaboration with

the Department for the Environment, Food and Rural Affairs (Defra), presents ananalysis of the SBS Annual Small Business Survey (ASBS) 2004. The behaviours

and opinions of small and medium-sized business owners on matters relating tothe Rural Strategy are broken down by the type of area the business is located into give a picture of the issues that are important to rural businesses. The reportnotes differences between businesses in urban areas and rural towns, villages and

areas with dispersed dwellings and investigates how businesses in districts with apoor socio-economic performance are different from those in more prosperous

areas. The analysis presented covers England only, as this is where theRural/Urban Definition that is used applies.

1.1 Summary of main findings

The results presented do not show an overall pattern, and for some topics thelocation of a business does not appear to have any effect on responses. This istrue of: the highest qualification of the business owner; the likelihood that thebusiness introduced innovations in the previous year; and the perception that

skills shortages represent an obstacle to the success of the business.

However, in many cases there is a clear split between SMEs in rural and urbanareas and, in some instances, a clear sequence in settlement size. Businesses in

rural areas:

tend to be smaller than in urban areas, and a higher proportion have noemployees;

1 Links to the Rural White Paper and Rural Strategy 2004 can be found on Defras websiteat: http://www.defra.gov.uk/rural/default.htm
http://www.defra.gov.uk/rural/default.htmhttp://www.defra.gov.uk/rural/default.htm


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are less likely to be companies and more likely to be partnerships thanthose in urban areas;

are more likely to be in the primary sector;

are more likely to be family businesses; and

are less likely to find public transport satisfactory in helping theirworkforce to get to work.

Defras 2005-2008 PSA target 4 (productivity) is to reduce the gap inproductivity between the least well performing quartile of rural areas and theEnglish median. PSA4 indicator districts are typically remote, withunderperformance stemming from a decline in traditional industries. It was found

that businesses in PSA4 districts are similar to businesses in dispersed rural areasin that:

a higher proportion are sole proprietorships or partnerships; they are less likely to have employees; and they are less likely to use their profits to further social or environmental

goals.

Business owners in PSA4 districts are also more likely to have no qualifications.


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1.2 Background

In 2000 the Government laid out in a White Paper its vision for the future of ruralEngland, focusing rural policy around the concept of sustainable development2.This included providing high quality public services, building a prosperous and

diverse economy, giving high and stable levels of employment, protection of theenvironment and increased self-determination for rural communities. The

Government promised, among other things, to improve public transportconnections, rejuvenate market towns through Regional Development Agencies(RDAs) and European funds, improve business support through the SmallBusiness Service (SBS), widen broadband coverage and improve skills training.

The Department for the Environment, Food and Rural Affairs (Defra) was formedin 2001. Following Lord Haskins Rural Delivery Review in 2003 and a review ofthe Rural White Paper, in 2004 Defra laid out its Rural Strategy2, highlighting thelessons learnt and the many differences between rural areas. The Governments

three priorities as laid out in this strategy were:

1. Economic and social regeneration;2. Social justice for all;3. Enhancing the value of our countryside.

The first of these includes enhancing skills training (in partnership with the SBS

and other organisations), improving accessibility of business support through theSBS, RDAs and Business Links (Defra put 2m into the Business Link network),

widening the availability and use of broadband and tackling areas with economic

and social disadvantage. The Strategy emphasized the importance of markettowns as hubs for rural business.

Lord Haskins review identified lack of evidence to inform rural policy. Therefore,

alongside the Strategy, the Rural and Urban Area Definition 2004 was launched asa tool for enabling broad statistical analysis of different types of area3. Thisdefinition is based on settlement patterns and is discussed further in the Annex 1.

Following from the Rural Strategy, Public Service Agreement (PSA) targets were

introduced to measure progress against the Governments aims. Defras 2005-2008 PSA target 4 (productivity) is to reduce the gap in productivity between the

least well performing quartile of rural areas and the English median by 2008,demonstrating progress by 2006. PSA4 indicator districts are classified at theLocal Authority District (LAD) level and are typically remote, withunderperformance stemming from a decline in traditional industries. They are

characterised by low earnings, poor job opportunities, low workforce skills, healthinequalities and poor housing. In terms of rural business, Defras PSA4 target ties

2

Ibid., p. 2.

3http://statistics.defra.gov.uk/esg/rural_resd/rural_definition.asp
http://statistics.defra.gov.uk/esg/rural_resd/rural_definition.asphttp://statistics.defra.gov.uk/esg/rural_resd/rural_definition.asp


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in with the SBS PSA target 5, to encourage more enterprise in disadvantagedcommunities and under-represented groups4.

It should be noted that the majority of rural areas are relatively prosperous. 55%of households in rural areas have an income that is above the median average

household income, with 28% of these in the top quartile. In these areas, thegrowth and dynamics rather than survival of local businesses is a matter ofinterest. This is addressed in Section 3.

This study examines the differences between businesses in urban and differenttypes of rural area, as well as looking at the difference between businesses inPSA4 and other rural districts. It makes use of the 2004 ASBS, and therefore

describes rural areas at the time of the publication of Defras Rural Strategy andat the end of the baseline period of the PSA4 target.

1.3 The Annual Small Business Survey

The Annual Small Business Survey (ASBS) is conducted by the Small Business

Service to provide information about small and medium enterprises (SMEs),businesses with up to 250 employees. The survey began in 2003 and replacedthe Omnibus Survey, bringing greater consistency in sampling and subject areas

from year to year and being organised more explicitly around the themes of theGovernment Action Plan for Small Businesses5. Telephone interviewing of around8000 owner-managers of SMEs around the UK is used to obtain basic informationon business size, turnover, location and sector as well as business growth,

perceived obstacles to success, regulation, access to finance and a range of othertopics. The analysis presented in this paper uses data from the 2004 ASBS. Thefieldwork was carried out in the last quarter of 2004, running into early 2005, and

7505 business owners were interviewed, of which 6145 employed staff.

The ASBS 2004 report, presenting the main analysis and results of the survey, isavailable from the SBS website6. In this paper a secondary analysis of the data isproduced, as described in Annex 1.

1.4 Definitions used in report

In this analysis, business locations are classifiedby the four settlement types of

the Rural Urban Definition: urban; rural town and fringe; rural village; andrural dispersed dwelling (see Annex 1 for more detail). These three rural

classes are grouped to form the rural class used in the ASBS 2004 main report.

Analysis by whether the business is located in a PSA4 Productivity Indicator

District or not, with a third category of not PSA4 district but containsunderperforming areas, is also included. Throughout this report these districts

4 However, the SBS uses the Index of Multiple Deprivation to identify deprived areas, mostof which are urban.

5http://www.sbs.gov.uk/sbsgov/action/layer?topicId=7000000084

6 The ASBS 2004 reports and questionnaire can be viewed by following the link on: www.sbs.gov.uk/evidence
http://www.sbs.gov.uk/sbsgov/action/layer?topicId=7000000084http://www.sbs.gov.uk/evidencehttp://www.sbs.gov.uk/evidencehttp://www.sbs.gov.uk/sbsgov/action/layer?topicId=7000000084


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are referred to respectively as PSA4, non-PSA4 and non-PSA4underperforming.

It should be noted that PSA4 districts are classified at the Local Authority District(LAD) level and are therefore larger than the census Output Areas (OAs) on which

the Rural Urban Definition is based. Although predominantly rural, PSA4 districtscontain a mix of rural and urban OAs. In this report the PSA4 analysis is shown

divided into urban and rural OAs.

1.4 Structure of Report

Section 2 looks at the locations of small businesses and the basicdifferences between rural and urban areas in business size, age, legal

status, sector and turnover.

The dynamics of rural businesses are discussed in Section 3 their actualand intended growth, innovation, productivity and sources of funding.

Section 4 addresses ICT use, a focus of Defras Rural Strategy. Better public transport was a focus of Defras 2000 Rural White Paper and

ties in with social inclusion; this is looked at in Section 5.

Section 6 concerns the environment, including the measures taken toreduce the cost of water, electricity and waste.

Increasing skills is another policy area emphasised in the Rural Strategy;Section 7 investigates the qualifications of business owners and their

attitudes to the skills available in their organisation.

In Section 8 the differences in the characteristics of family-ownedbusinesses are investigated.

A summary of results is given in Section 9.


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2. The Business Population

This section gives an overview of the characteristics of the SMEs that wereinterviewed in the ASBS and how these vary with location. The legal status, size,

turnover, age and sector of the businesses are presented broken down by urbanand type of rural area and by type of district.

Key findings are:

70% of all the businesses and 74% of the employers interviewed for thesurvey are located in urban areas. 72% of the actual registered business

population (of which SMEs make up 99.5%) is located in urban areas.

There are more businesses per head in rural areas than in urban areas. Urban areas have a higher proportion of companies than rural areas.

Rural areas have a higher proportion of partnerships and this is highest indispersed dwellings.

Businesses in PSA4 districts have a higher proportion of partnerships andsole proprietorships than non-PSA4 districts.

The proportion of businesses with no employees is higher in rural thanurban areas, and higher in PSA4 districts than non-PSA4 districts. Urbanareas and rural towns also have a higher proportion of businesses with 10-250 employees than other rural areas.

Rural towns and villages have a higher proportion of businesses withturnovers of less than 250,000. Businesses with no employees tend to be younger in urban areas. In PSA4 districts a higher proportion of businesses are three years old or

less than in non-PSA4 districts.

The proportion of businesses in the primary sectors is much higher invillages (17%) and areas with dispersed dwellings (25%) than in urbanareas and rural towns (1% and 2% respectively).

In rural areas, PSA4 and non-PSA4 underperforming districts have ahigher proportion of primary sector businesses than non-PSA4 districts(18% and 17% compared to 11%) and fewer in the service sector.


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2.1 Locations of English businesses

Table 2.1 shows the locations of the businesses whose owners took part in theASBS, in terms of urban and rural areas and PSA4 Productivity Indicator Districts.The proportion in each type of area is shown as a percentage with the total

number of respondents before weighting shown alongside. These are presentedalongside working age population figures for each type of location.

Table 2.1 Locations of businesses in survey

All businesses EmployersWorking age

population

% Unweighted n % Unweighted n Thousands %

Urban 70 3933 74 3292 24,500 81

Rural, town 10 494 10 402

Rural, village 12 505 10 384

Rural, dispersed dwelling 8 304 6 226

5,700 19

non-PSA4 78 4228 81 3513 25,700 85

PSA4 13 568 11 434 2,400 8

non-PSA4 underperforming 9 440 9 357 2,200 7

Total 100 5236 100 4304 30,200 100

Source: Small Business Service Analytical Unit; Defra: PSA 4 Headline Productivity

Indicator Data http://www.defra.gov.uk/corporate/busplan/psa4headline.xls

Population total may not exactly match the sum of its parts, due to rounding.

Most SMEs in this survey (70%) are located in urban areas. Of those that are not,

around a third (10% of all) are located in rural towns, slightly more (12%) invillages and the remainder in dispersed dwellings (8%).

When businesses with no employees are excluded, the proportion of SMEs inurban areas is higher (74%). SMEs in rural villages and dispersed dwellings makeup 16% of businesses with employees, compared to 20% of all businesses.

Businesses with no employees must therefore make up a higher proportion ofbusinesses in rural areas.

Table 2.2 shows the locations of businesses on the Office for National Statistics(ONS) Inter-Departmental Business Register (IDBR)7. The IDBR holds details of

all businesses that are registered for VAT, PAYE or as limited companies. Only thesmallest zero-employee businesses will not be included on the register, and

99.5% of English businesses on the IDBR are SMEs.

7 This data was obtained by the SBS as part of its annual Service Level Agreement withONS in June 2006. It gives a snapshot of the IDBR taken during March 2006.
http://www.defra.gov.uk/corporate/busplan/psa4headline.xlshttp://www.defra.gov.uk/corporate/busplan/psa4headline.xls


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Table 2.2 Locations of English businesses

Proportion ofbusinesses

%

Urban 72

Rural, town 9Rural, village 11

Rural, dispersed dwelling 8

Source: Office for National Statistics Inter Departmental Business Register, March 2006

According to the IDBR figures, the actual proportion of businesses based in urbanlocations lies between the ASBS figure for all businesses and that for employersonly. Since not all zero-employee businesses are included on the register, thisshows that the ASBS sample is a fairly good reflection of the actual distribution of

businesses in terms of urban and rural. This is also true of rural villages, althoughrural towns are slightly over-represented in the survey and rural areas with

dispersed dwellings slightly under-represented.

As 81% of the total population in England is based in urban areas but only 72% of

the businesses, it is clear that there are more businesses per head in rural areas.This may be because rural businesses tend to be smaller.

SMEs with employees are slightly less likely to be located in PSA4 indicator

districts (11%) than the business population as a whole (13%). An additional 9%are located in districts which are not PSA4 indicator districts but containunderperforming areas. Again, the population figures hint that there are more

businesses per head in PSA4 districts than non-PSA4 districts.

2.2 Legal status

Tables 2.3 and 2.4 show the legal statuses of businesses in different types of area

and district.

Table 2.3 Legal status - all businesses by type of area

UrbanRural,town

Rural,village

Rural,dispersed Total

% % % % %

Company 42 40 36 33 41

Partnership 15 15 19 27 16Sole proprietor 43 45 45 40 43

Unweighted n 3933 494 505 304 5236

Source: Small Business Service Analytical Unit


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Table 2.4 Legal status - all businesses by type of district

Urban Rural Allnon-PSA4

PSA4 non-PSA4under-

performing

non-PSA4

PSA4 non-PSA4under-

performing

non-PSA4

PSA4 non-PSA4under-

performing

% % % % % % % % %

Company 45 22 29 42 26 35 44 24 32Partnership 14 26 13 16 27 22 15 27 17

Soleproprietor

41 52 59 42 47 43 41 49 51

Unweighted n 3460 238 235 768 330 205 4,228 568 440


SMEs in urban areas are most likely to have the status of limited companies(42%). In rural areas the proportion of SMEs that are companies decreases with

degree of rurality, from 40% in towns to 33% in areas with dispersed dwellings.As legal status and size are linked, this may be largely due to businesses in urban

areas tending to be bigger (see Section 2.3). The decrease in the proportion ofcompanies with decreasing settlement size corresponds to an increase in the

proportion of partnerships, with the highest proportion in the most rural areas(27%).

In both urban and rural areas businesses in PSA4 districts are less likely to be

companies than in non-PSA4 districts, with non-PSA4 underperforming districts inbetween. Partnerships are more common in PSA4 districts than in other districts.

Tables 2.5 and 2.6 show the legal statuses of businesses with employees in

different types of area and district.

Table 2.5 Legal status employers only by type of area

UrbanRural,town

Rural,village


% % % % %

Company 66 51 55 58 63

Partnership 17 24 24 27 19

Sole proprietor 16 25 22 14 18

Unweighted n 3,292 402 384 226 4,304



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Table 2.6 Legal status employers only by type of district

Urban Rural Allnon-PSA4 PSA4 non-PSA4

under-

performing

non-PSA4

PSA4 non-PSA4under-

performing

non-PSA4 PSA4 non-PSA4under-

performing

% % % % % % % % %

Company 69 40 55 61 42 47 67 41 51

Partnership 16 33 21 22 29 26 17 30 24

Sole proprietor 15 27 23 17 29 26 16 28 25

Unweighted n 2915 185 192 598 249 165 3,513 434 357


Similar patterns are repeated when businesses with no employees are excluded,the main difference being a higher proportion of companies overall. Urbanbusinesses are most likely to be companies (66%), although in rural areas the

proportion of companies increases with decreasing population settlement size.Partnerships are still most common in the most rural areas (27% of businesses).

As in the case of all businesses, employers in PSA4 districts are more likely to be

partnerships and sole proprietorships and less likely to be companies than thosein non-PSA4 districts, with non-PSA4 underperforming districts in between.


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2.3 Size of business

The sizes of businesses in the survey are shown in Tables 2.7 and 2.8.

Table 2.7 Size of businesses (number of employees) in different types of area

UrbanRural,town

Rural,village


% % % % %

None 70 70 76 79 71

Micros (1-9 employees) 25 26 21 18 25

Small (10-49 employees) 4 4 3 3 4

Medium (50-250 employees) 1 0 0 0 1

Unweighted n 3933 494 505 304 5,236


Table 2.8 Size of businesses (number of employees) in different types ofdistrict


under-

performing

non-

PSA4

PSA4 non-PSA4

under-

performing

non-

PSA4

PSA4 non-PSA4

under-

performing

% % % % % % % % %

None 69 78 73 75 77 71 71 77 72

Micros (1-9employees) 25 18 23 22 20 25 25 19 24Small (10-49employees) 5 3 4 3 3 3 4 3 4

Medium (50-250 employees) 1 1 1 0 0 0 1 0 0

Unweighted n 3460 238 235 768 330 205 4,228 568 440


The difference in legal status of businesses in different types of area can in partbe explained by differences in the sizes of the businesses. Businesses with

employees are more likely to incorporate and so areas with a higher proportion ofno-employee businesses will also have a lower proportion of companies.

This difference is evident in the size distributions in different areas. In urbanareas 70% of businesses have no employees. In rural areas, the proportion ofzero-employee businesses increases with decreasing settlement size to 79% inareas with dispersed dwellings. Conversely, the proportion of small and medium

businesses decreases in more rural areas.

PSA4 indicator districts appear to have a higher proportion of zero-employeebusinesses and lower proportion of smalls and mediums than non-PSA4 districts,but these differences are not significant.

When zero-employee businesses are excluded, the differences between areas are

smaller. There is little difference between the proportion of micros in rural towns,villages, and areas with dispersed dwellings (86%, 88% and 85% respectively),


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although the proportion is smaller in urban areas (83%). As the differences aresmall, detailed results have not been shown but can be found in Tables A2.1 and

A2.2 in Annex 2.

2.4 Turnover

Respondents were asked for the approximate turnover of their business in theprevious 12 months. The answers are shown in Tables 2.9 by type of area and

2.10 by type of district.

Table 2.9 Turnover in different types of area, all businesses

UrbanRural,town

Rural,village


% % % % %

99,999 or less 38 43 42 35 39

100,000 -

249,00013 16 17 15 14

250,000 -499,999

5 5 6 4 5

500,000 -999,999

5 4 4 3 4

1m or more 6 4 3 7 6

Dont know 11 9 10 8 11

Refused 22 19 18 28 21

Unweighted n 3,933 494 505 304 5,236


Table 2.10 Turnover in different types of district, all businesses


under-

performin

g


performin

g


performin

g

% % % % % % % % %

99,999 or less 37 42 43 41 39 42 38 40 43

100,000 -249,000

13 15 11 17 16 14 14 16 13

250,000 -

499,999 6 4 5 6 4 6 6 4 6

500,000 -999,999

5 1 2 4 3 4 5 2 3

1m or more 7 4 4 5 2 5 6 3 4

Dont know 11 12 11 9 9 9 11 10 10

Refused 21 22 23 18 27 20 21 25 21

Unweighted n 3,460 238 235 768 330 205 4,228 568 440


Given the high proportion of respondents that said they didnt know their turnoveror refused to answer, these figures are highly uncertain.


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It appears that a higher proportion of businesses in urban and dispersed ruralareas have turnovers of over 1 million and a lower proportion have turnovers of

less than a quarter of a million compared to businesses in rural towns andvillages. In urban areas this is probably because businesses tend to have moreemployees, whereas in dispersed areas it is more likely to be due to the higher

proportion of capital-intensive primary industries (see Section 2.6).

Urban businesses in non-PSA4 districts tend to have higher turnovers than thosein PSA4 districts, but there is no significant difference in rural areas.

Tables 2.11 and 2.12 show the turnovers of businesses in different types of areaand district when businesses with no employees are excluded.

Table 2.11 Turnover in different types of area, employers only

UrbanRural,town

Rural,village


% % % % %99,999 or less 11 14 17 12 12

100,000 -

249,00014 18 16 12 15

250,000 -499,999

14 16 13 15 14

500,000 -999,999

12 8 12 11 12

1m or more 18 12 11 18 16

Dont know 12 14 14 10 12

Refused 19 18 18 23 19

Unweighted n 3,292 402 384 226 4,304


Table 2.12 Turnover in different types of district, employers only


under-

performin

g


performin

g


performin

g

99,999 or less 11 16 16 13 14 22 11 15 19

100,000 -249,000 14 20 17 14 20 18 14 20 18

250,000 -499,999

14 11 12 15 11 16 14 11 14

500,000 -999,999

13 5 7 12 9 8 13 7 8

1m or more 18 13 14 15 10 11 18 11 12

Dont know 11 15 17 13 13 13 12 14 15

Refused 19 20 17 19 23 12 19 22 15

Unweighted n 2,915 185 192 598 249 165 3,513 434 357



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When zero-employee businesses are excluded, the pattern of turnover is evenclearer. Again, urban and dispersed rural areas appear to have a higher

proportion of businesses with turnovers of 1 million or more, and rural towns andvillages have a higher proportion with turnovers of less than 250,000.

Businesses in PSA4 districts tend to have lower turnovers than those in non-PSA4districts for both urban and rural areas. The proportion of businesses with

turnovers of over 1 million is around 5 percentage points lower in PSA4 districtsin each case.

2.5 Age of business

Tables 2.13 and 2.14 show the age distribution of businesses in different types of

area and different types of district.

Table 2.13 Age of business in different types of area, all businesses

UrbanRural,town

Rural,village


% % % % %

Three years or less 20 18 14 18 19

4-10 years 29 35 27 21 28

More than 10 years 51 48 59 61 53

Unweighted n 3933 494 505 304 5236


Table 2.14 Age of business in different types of district, all businesses


under-

performing


performing


performing

% % % % % % % % %

Three years or less 19 34 15 17 16 13 19 23 14

4-10 years 30 12 33 32 21 23 30 18 28

More than 10 years 51 54 52 51 62 65 51 59 58

Unweighted n 3460 238 235 768 330 205 4,228 568 440


The proportion of new businesses is highest in urban areas, with a fifth less thanfour years old8. In urban areas and rural towns around half of businesses are

more than ten years old, compared to around 60% in other rural areas.

In urban PSA4 indicator districts businesses are much more likely to be new thanin non-PSA4 districts (34% compared to 19%). The pattern is different in rural

areas, where the proportion of new businesses is the same for PSA4 and non-

8 The sampling frame used in the survey is known to under-cover very new businesses. Itis therefore possible that differences in the proportion of businesses aged three years or

less in different types of area are entirely due to differences in how quickly they find theirway into the sampling frame.


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PSA4 districts. In these areas the proportion of businesses older than 10 years ismuch higher in PSA4 than in non-PSA4 districts (62% compared to 51%). The

main difference here is between urban and rural PSA4 indicator districts, with theformer home to a much higher proportion of new businesses.

Tables 2.15 and 2.16 show the age distribution of businesses in different types ofarea and district when businesses with no employees are excluded.

Table 2.15 Age of business in different types of area, employers only

UrbanRural,town

Rural,village


% % % % %

Three years or less 13 18 14 18 14

4-10 years 28 29 35 24 28

More than 10 years 59 53 51 58 58

Unweighted n 3292 402 384 226 4304


Table 2.16 Age of business in different types of area, employers only


under-

performing

non-PSA4 PSA4 non-PSA4

under-

performing

non-PSA4 PSA4 non-PSA4

under-

performing

% % % % % % % % %

Three years or less 13 19 7 15 18 20 14 18 13

4-10 years 28 28 28 32 31 23 28 30 25

More than 10 years 59 53 66 53 52 58 58 52 62

Unweighted n 2915 185 192 598 249 165 3,513 434 357


When the zero-employee businesses are removed, urban areas go from havingthe highest proportion of new businesses to having the lowest proportion, with13% less than four years old. The proportion of businesses older than 10 years

is greatest, at 59%, for urban employers, whereas in rural villages the proportiondrops to 51%.

These differences hint at an underlying difference in business populations. Inurban areas it appears that new businesses start as sole traders and take on newemployees over time. In contrast, rural villages have a large population of long-term sole traders, with a smaller, separate population of established, but younger,employers. In rural towns and areas with dispersed dwellings there is little

difference in the ages of businesses with and without employees.

With zero-employee businesses removed, the age distribution in rural PSA4districts becomes much more similar to that in the non-PSA4 districts, showingthat in PSA4 districts new businesses tend have no employees.


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2.6 Sectoral patterns

The sample of businesses in the ASBS is not large enough to enable a detailedsectoral breakdown. However, businesses can be grouped into a broadclassification of primary (SIC codes A and B agriculture, hunting and fishing),

production (C-E mining and quarrying, manufacturing and electricity, gas andwater supply), construction (F) and service (G-O all other) industries. Tables

2.17 and 2.18 show the sectors of businesses in different types of areas anddistricts.

Table 2.17 Industry sector by type of area, all businesses

UrbanRural,town

Rural,village


% % % % %

Primary 1 2 17 25 5

Production 12 7 8 10 11

Construction 9 11 11 8 9Services 78 80 64 57 75

Unweighted n 3933 494 505 304 5236


Table 2.18 Industry sector by type of district, all businesses

Urban Rural Allnon- PSA4 PSA4 non-PSA4

under-

performing

non PSA4 PSA4 non-PSA4under-

performing

non-PSA4 PSA4 non PSA4under-

performing

% % % % % % % % %Primary 1 1 2 11 18 17 4 12 9

Production 13 7 8 8 9 8 12 8 8

Construction 9 8 5 10 9 12 9 8 8

Services 77 84 85 70 64 63 75 72 74

Unweighted n 3460 238 235 768 330 205 4,228 568 440


Unsurprisingly, urban areas and rural towns have a very low proportion of primaryindustries (1% and 2% respectively), with the proportion much higher in villages

(17%) and areas with dispersed dwellings (25%).

The proportion of businesses in production and construction does not vary muchbetween types of area, the difference mainly being made up by services, whichmake up 78% and 80% in urban and rural areas respectively, compared to 64%

and 57% in rural villages and areas with dispersed dwellings.

Urban PSA4 districts appear to have a lower proportion of production andconstruction businesses than non-PSA4 districts, the difference being made up by

a greater proportion of service sector businesses. This is also true of non-PSA4underperforming districts. In rural areas, PSA4 and underperforming areas havea higher proportion of primary sector businesses than non-PSA4 districts (18%compared to 11%) and fewer in the service sector, confirming that these districts

are indeed dominated by traditional industries.


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Within PSA4 districts, the mix of sectors in rural areas is very different from thatin urban areas, with the former home to a much higher proportion of primary

sector businesses. As PSA4 districts tend to be characterised by a large primarysector, this may mean that businesses in the urban parts of PSA4 districts are nottypical of those found in PSA4 districts in general.

Table 2.19 shows the sectors by type of area for employers only.

Table 2.19 Industry sector by type of area, employers only

UrbanRural,town

Rural,village


% % % % %

Primary 0 3 6.5 13 2

Production 14 13 9 15 13

Construction 10 14 9 8 10

Services 75 71 76 64 74

Unweighted n 3292 402 384 226 4304


When zero-employee businesses are excluded, the proportion of rural businessesin primary sectors drops markedly (13% compared to 25% for all businesses indispersed areas), showing that in these industries a high proportion of businesses

have no employees. (The reasons given for a businesses having no employees isdiscussed in Section 8). Rural areas with dispersed dwellings still have thehighest proportion of both primary industries and also, in this case, productionindustries.

In PSA4 districts the results are similar to those for all businesses. These are not

shown as the smaller sample size results in the differences not being statisticallysignificant.


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3. Business Dynamics

A perennial problem of small business policy is in defining what constitutes a successful business. One aspect often considered is business growth, and this

section looks at recent as well as anticipated growth, comparing the expectationsof respondents with the past behaviour of their business. Another aspect iswhether a business innovates and this section gives a summary of the responsesto questions asked on innovation. It also reports on perceived obstacles to

business success and Government support in the form of grants and loans.

Key findings are:

Businesses in dispersed rural areas have the highest growth aspirations,but are actually the most likely to have stayed the same size.

Urban areas and rural villages have the highest proportion of businesseswith recent employment growth.

There is little difference across types of area in the proportion ofbusinesses that had introduced innovation in the previous 12 months.

In rural areas businesses in non-PSA4 districts were almost twice as likelyas those in PSA4 districts to have introduced new products in the previous12 months (40% compared to 23%).

For businesses in all types of area the four most commonly perceivedobstacles are competition, regulations, the economy and taxation.

Businesses in rural areas are more likely than those in urban areas to citetaxation and regulation as obstacles to success.

Businesses in dispersed rural areas are twice as likely as those in otherareas to be claiming Government grants and loans.

Rural businesses in non-PSA4 underperforming districts are more thantwice as likely as those in other districts to be claiming Government grantsand loans.


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3.1 Growth

Respondents were asked several questions regarding their business growth andgrowth aspirations. One of these was simply whether they aimed to grow theirbusiness in the next 2 to 3 years. They were also asked to give the number of

employees 12 months previously and the number expected 12 months in thefuture. From this, past and future behaviour could be classified into

employment growth, employment the same and employment less. Theresults of this analysis are presented in Table 3.1.

Table 3.1 Growth aspirations, past grow th and expected grow th by type ofarea, employers only

Urban

Rural,

town

Rural,

village

Rural,

dispersedTotal

% % % % %

Aims to grow business in next 2-3 years 67 64 68 73 67

Employment growth 28 22 29 25 27

Employment same 57 62 56 64 58

Change in employment

in past year

Employment less 15 14 15 10 14

Employment growth 27 26 24 28 27

Employment same 66 68 71 65 67

Change in employment

expected next year

Employment less 6 4 5 6 6

Unweighted n 3292 402 384 226 4304


Business owners in areas with dispersed dwellings have the highest growth

aspirations, with 73% saying they aim to grow their business. Those in ruraltowns have the lowest, with 64% saying they aim to grow. However, thesedifferences are only significant at the 90% level.

Businesses in areas with dispersed dwellings are, however, most likely to havestayed the same size in employment in the past year (64%), followed by those in

rural towns (62%). Those in urban areas and rural villages are most likely tohave grown (28% and 29% respectively) and to have shrunk (15% in each case)

in number of employees.

In rural areas businesses in PSA4 districts have lower growth aspirations thanthose in non-PSA4 districts, with a significance of 90%9.

9 Growth characteristics for different types of district are shown in Annex 2, in Table A2.3,since very few of the differences in this analysis are statistically significant.


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3.2 Innovation

As a measure of innovation, respondents were asked in turn whether they hadintroduced new products or services or new processes in the past 12 months. Ifso, they were then asked whether these were new to the business or completely

new. Tables 3.2 and 3.3 show the proportion of businesses that had introducednew products or processes.

Table 3.2 Innovation in past 12 months by type of area, employers only

UrbanRural,

town

Rural,

village

Rural,

dispersed Total

% % % % %

Introduced new products 34 33 35 33 34

Introduced new processes 25 21 23 25 25

Unweighted n 1668 196 191 111 2166


Table 3.3 Innovation in past 12 months by type of district, employers only

Urban Rural Total

non-PSA4 PSA4

non-PSA4

under-performing non-PSA4 PSA4

non-PSA4

under-performing non-PSA4 PSA4

non-PSA4

under-performing

Introduced newproducts 35 35 30 40 23 28 36 28 29Introduced newprocesses 25 24 22 23 28 14 25 27 18

Unweighted n 1465 96 107 307 112 79 1772 208 186


There is no significant difference across types of area in the proportion ofbusinesses that introduced new products or processes. In total 34% introducednew products or services and 25% introduced new processes.

In rural areas businesses in non-PSA4 districts were almost twice as likely as

those in PSA4 districts to have introduced new products in the previous 12months (40% compared to 23%). Conversely, businesses in PSA4 districts were

slightly more likely to have introduced new processes than in non-PSA4 districts

(28% compared to 23%).

3.3 Obstacles to success

Respondents were asked, first unprompted, then from a list of possible answers,which factors presented obstacles to the success of their business. Chart 3.1shows the most popular answers, where the unprompted and prompted responses

have been added together. Several of these factors are discussed in the sectionsthat follow.


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Chart 3.1 Obstacles to the success of the business, employers only

0 5 10 15 20 25 30 35 40 45

Competition

The economy

Regulations

Taxation

Recruiting staff

Cash flow

Shortage o f skills generally

Availability or c os t o f suitable

premises

Obtaining finance

Keeping staf f

No opinion

Keeping up with new

technology

Transport issues

Crime

Shortage o f managerial skills

or expertise

Lack o f financial

understanding

Lack o f broadband access

Lack of c ustom er demands

PercentUrban Rural , town Rural , v il lage Rural , d ispersed dwel ling


For businesses in all types of area the four most commonly perceived obstacles

are competition, regulations, the economy and taxation, and there are significantdifferences between types of area in how commonly each of these are cited. Inurban areas competition is around five percentage points more likely to be citedthan in rural areas, whereas taxation and regulation are much more likely be

considered an obstacle in rural areas than in urban. The economy is most likelyto be perceived as an obstacle in rural villages.

Other significant differences were for transport issues (discussed in Section 6.3)and access to broadband (Section 5.3), shortage of managerial skills (Section 8.1)

and crime.


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3.4 Government support

It is relevant to look at the distribution of Government funded financial aid tobusinesses. The ASBS does not contain any direct questions about funding fromGovernment grants, but does ask whether the business owner has had any

contact with Government in the last 12 months. Yes - claiming grants and loansis one of the options for responses, and this is used as a proxy measure. Tables

3.4 and 3.5 show the proportion of businesses which had contact withGovernment through claiming grants and loans.

Table 3.4 Contact w ith Government through claiming grants and loans by typeof area, employers only

Urban

Rural,

town

Rural,

village

Rural,

dispersed Total

% % % % %

6 5 4 11 6

Unweighted n 3,292 402 384 226 4,304


Table 3.5 Contact w ith Government through claiming grants and loans bydistrict, employers only

Urban Rural All

notPSA4 PSA4

not PSA4under-

performing

notPSA4 PSA4

not PSA4under-

performing

notPSA4 PSA4

not PSA4under-

performing

% % % % % % % % %

5 6 7 4 6 12 5 6 10

Unweighted n 2915 185 192 598 249 165 3513 434 357


Around one in 20 businesses in urban areas and rural towns and villages haveclaimed grants and loans in the last 12 months. In rural areas with dispersed

dwellings this fraction is significantly higher, at just over one in 10. This maypurely be a reflection of the farm subsidy system, with no real difference for other

grants or loans. However, it is interesting that the type of area in which SMEshave higher turnovers (see Section 2.4) is the same as that where they receivethe highest proportion of grants, which are included in calculations of turnover.

Rural PSA4 districts do not have a much higher proportion of businesses claiminggrants and loans than non-PSA4 districts, but in non-PSA4 underperforming

districts the proportion claiming grants and loans is 12% more than double thatin PSA4 districts.


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4. ICT

As identified in the Rural Strategy, the Government aims to ensure that the fullpotential of broadband for delivering public services and increasing the

productivity of businesses is realised in rural areas. This links in with the SBSobjective of increasing the use of ICT by small businesses. Part of the ASBSaddresses the use of ICT, and this section presents a summary.

Key findings are:

The most common uses for ICT are record keeping, accounts, wordprocessing and e-mail, which are all used by more than 70% ofrespondents.

Businesses in dispersed rural areas are significantly more likely than thosein other types of area to use ICT. Those in rural towns are least likely.

Lack of broadband access is cited as an obstacle to success in around 1 in20 businesses based in rural villages or areas with dispersed dwellings.


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4.1 Uses of ICT

Businesses owners were asked for what purposes they used ICT. Chart 4.1 showsthe most popular uses.

Chart 4.1 Most popular uses of ICT by type of area, employers only

0 10 20 30 40 50 60 70 80 90

Record keeping

Accounts

Word processing

Com m unication by email

Research

Business website

Purchasing via Internet

Sales via Internet

Internet - int with Gov

Designing p roducts

Sales via other e-networks

Percent

Urban Rural , town Rural, vil lage Rural , d ispersed


The most common uses for ICT are record keeping, accounts, word processingand communication by e-mail. ICT is also used for research or a business website

by more than half of employers.

For almost all purposes businesses in rural areas with dispersed dwellings are

significantly more likely than those in other types of area to use ICT. Out of allrural businesses, those in rural towns are nearly always least likely to use ICT,

giving a clear sequence towards higher ICT use in more remote areas. The use of

ICT in urban areas tends to fall between the rural extremes. These results mayindicate that in remote areas ICT is used to compensate for lack of direct contact,


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or that business owners in remote areas are more likely to be running a home-based enterprise or performing their own administration rather than employing

professionals.

Chart 4.2 show the most popular uses of ICT by type of district. For ease of

comparison between PSA4 and non-PSA4 districts, the rural and urban distinctionhas been suppressed.

Chart 4.2 Most popular uses of ICT by type of district, employers only

0 10 20 30 40 50 60 70 80

Record keeping

Accounts

Word processing

Com m unication b y email

Research

Business w ebsite

Purchasing via Internet

Sales via Internet

Internet - f or int with Gov

Designing products

Sales via other e-networks

Percent

PSA4 indicator district not PSA4 but underperforming not indicator district


Overall, the use of IT for each purpose given is always lower for businesses inPSA4 districts than in non-indicator districts, with underperforming non-PSA4districts usually in between the two. It is possible that this reflects lower skilllevels in PSA4 districts, but it could also be due to fewer businesses being able to

afford ICT.


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4.2 Access to broadband

The proportion of respondents that said lack of broadband access is an obstacle,either prompted or unprompted, is shown in Chart 3.1 in Section 3.

Businesses in rural villages and areas with dispersed dwellings are far more likelyto cite lack of broadband access as an obstacle (6% in each case) than those intowns or urban areas (2% and 3%). However, in all cases the proportion that

said this is very small.


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5. Transport Issues

Acknowledging the lack of public transport in rural areas, in its 2000 White Paperthe Government made a commitment to better public transport, promising

increased subsidy for rural buses and increasing its funding of the rural transportpartnership scheme. The ASBS 2004 contained questions on respondentsexperiences of public transport.

Key findings are:

Despite the Governments commitment to better public transport in ruralareas, businesses in rural areas find public transport less satisfactory thanthose in urban areas in helping their workforce get to work.

The level of satisfaction may be linked with perceived need. In ruralvillages more than one third of respondents say that public transport

affects their ability to recruit staff, with just under a quarter of those inother rural areas saying this.

Transport issues are more likely to be considered an obstacle to thesuccess of the business in rural villages and areas with dispersed dwellingsthan in urban and rural towns.


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5.1 Satisfaction w ith public transport

Chart 5.1 shows the responses of business owners when asked how satisfactorypublic transport is in helping them or their workforce get to work.

Chart 5.1 How satisfactory public transport is in helpingworkforce/ respondent get to work, employers only

Urban Rural, town

7.3%

18.0%

8.2%

11.1%

19.3%

35.0%

Very satisfactory

Quite satis factory

Neither

Quite unsatis factory

Very unsatisfactory

Public transport not

used

Unwilling to answer

1.8%9.3%

7.5%

8.1%

30.0%

42.6%

Rural, village Rural, dispersed

3.4%11.4%

3.1%

11.6%

27.8%

41.6%

1.2%10.5%

5.9%

6.8%

30.9%

44.4%


As might be expected, the more rural the area, the less likely theworkforce/respondent is to use public transport to get to work. In all areas ahigher proportion of respondents say that public transport is unsatisfactory thansatisfactory. Business owners in rural areas are more likely than those in urban

areas to say that public transport is either quite or very unsatisfactory (39%, 38%and 38% respectively for towns, villages and dispersed, compared to 30% for

urban). Respondents in urban areas are more likely to say that public transport iseither quite or very satisfactory (25%), followed by rural towns, where theproportion is only 15%.

In urban PSA4 districts respondents are less likely to say that public transport is

satisfactory (20%) and more likely to say it is unsatisfactory (40%) than in non-PSA4 districts (26% and 30% respectively). Those in rural PSA4 districts are


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even less likely to say public transport is satisfactory (13%), but more likely thanthose in rural non-PSA4 districts (12%). In rural PSA4 and non-PSA4

underperforming districts a higher proportion use public transport than in non-PSA4 districts (40% and 34% compared to 46% do not use).

5.2 Public transport and recruitment

Respondents were also asked whether public transport affects their ability to

recruit staff. The responses given are shown in Table 5.1.

Table 5.1 Whether public transport affects the ability to recruit staff,employers only

Urban

Rural,

town

Rural,

village

Rural,

dispersed Total

% % % % %

Yes 15 24 34 23 19No but other

recruitment problems 5 4 1 4 4

No - no recruitment

problems 77 68 60 66 73

Unweighted n 3292 402 384 226 4304


In urban areas public transport is less likely to affect recruitment, with 15% ofrespondents saying that it does. Businesses in rural villages are most likely to

find that public transport affects recruitment, with more than one third (34%)saying it does.

Results for PSA4 districts are not shown, as in both urban and rural areasbusinesses in PSA4 districts public transport is only slightly more likely to affectrecruitment than in non-PSA4 districts.

5.3 Transport issues as an obstacle to success

In Chart 3.1 in Section 3, the proportion of respondents giving transport issues

as an obstacle to the success of the business is just over ten percent.

Transport issues are more likely to be considered an obstacle to the success of the

business in urban areas than in rural towns (10% compared to 7%). However, inrural villages and areas with dispersed dwellings an even higher proportion of

businesses consider transport issues to be an obstacle (14% in each case). Thefact that transport issues are an obstacle in both urban and remote rural areashighlights the different needs in these areas while urban businesses faceproblems such as congestion and parking, remote rural areas may suffer from a

lack of access.

In both urban and rural areas PSA4 districts are not significantly different fromnon-PSA4 districts in the proportion of businesses that considers transport issues

an obstacle to success.


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6. The Environment

The attitude of a business to environmental issues will be shaped by its location.Several parts of the ASBS deal with environmental issues or related subjects,

including action taken to reduce the costs of energy, water and waste disposal,the goals of the business and the effect that promoting the business asenvironmentally friendly would have on growth.

Key findings are:

In all types of area, the majority of businesses have not taken, and arenot planning to take, any action to reduce the cost of energy, water orwaste disposal.

Nearly three quarters of businesses in urban PSA4 districts have taken noaction. In contrast, over 60% of businesses in rural PSA4 districts have

taken some action.

Around 30% of businesses say that they would like the Government to dosomething to help them improve their environmental performance.

Businesses in rural villages are most likely to have a social orenvironmental goal as their main purpose (42%) and are most likely toreinvest their profits this way.

Businesses in rural areas with dispersed dwellings are least likely to havea social or environmental purpose, and those that say they do are least

likely to reinvest their profits this way.

Rural businesses in non-PSA4 districts are much more likely to reinvesttheir profits to further their social or environmental goals (38%) than

those in either PSA4 (23%) or underperforming (17%) districts.

In rural villages around a third of respondents say that promoting theirbusiness as environmentally friendly would have a positive effect on itsgrowth.


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6.1 Action taken

Respondents were asked whether they had taken or planned to take any action toreduce the cost of energy, water or waste disposal to their business. The threemost common actions taken were starting or improving recycling, reducing water

or electricity consumption, and improving the energy efficiency of buildings.Actions taken for different types of area are shown in Chart 6.1.

Chart 6.1 Action taken to reduce cost of energy, water or waste disposal,employers only

0

5

10

15

20

25

30

35

40

45

50

55

60

None Start or

improve

recycling

Reduce w ater

or elec

consumption

Energy

efficiency of

buildings

Reduce

w aste

Other

Percent

Urban

Rural,

tow n

Rural,

village

Rural,

dispersed


In all types of area, the majority of businesses had not taken and were notplanning to take any action at all. This proportion is highest in urban anddispersed rural areas (57% and 56% respectively) and lowest in rural towns and

villages (52% and 51%). In all areas except rural villages, recycling is more

common than reducing water or electricity consumption. Overall, a similarproportion of businesses in all types of area (around 16%) had started or were

planning to start or improve recycling.

There are more marked differences in action taken or planned between PSA4 andnon-PSA4 districts. The top three responses in each type of district are shown in

Table A2.4 of Annex 2. In urban PSA4 districts three quarters of businesses hadtaken no action to reduce the cost of energy, water or waste disposal, comparedto 56% in non-PSA4 and PSA4 underperforming districts. In rural areas thisdifference is reversed, with 39% of businesses in PSA4 districts having taken no

action, compared to 59% in non-indicator districts and 47% in underperformingdistricts. Again, in all areas the most popular actions to take are recycling or

reducing energy/water consumption.


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Across all types of area, improving the energy efficiency of buildings is always thefourth most popular action.

6.2 Government help w ith environmental performance

Respondents were asked whether they would like the Government to dosomething to help their business environmental performance. In general, theproportion that answered yes to this question was just under 30%, with no

significant differences between different types of area.

This question was followed-up by asking businesses how they would like the

Government to help them. However, due to the variety of answers that weregiven and the fact that only a minority of businesses said they would like help, the

counts were far too low to give robust results.

6.3 Social and environmental goals

Respondents were asked whether the main purpose of their organisation was

social or environmental. If it was, they were then asked a multiple choicequestion on what they did with any profit or surplus generated by their business,

one option being that profit is reinvested to further your social, includingenvironmental, goals10. The proportions answering yes to these questions indifferent types of area are shown in Tables 6.1 and 6.2 and in different types ofdistrict in Tables 6.3 and 6.4. Since it is not possible to separate businesses that

have environmental goals from those that have social goals, these figures alonecannot be used as a measure of environmental behaviour.

Table 6.1 Main purpose of the business is social or environmental, employersonly

Urban Rural, townRural,village


% % % %

34 33 42 31 35

Unweighted n 3,292 402 384 226 4,304


Table 6.2 Percentage of those whose main purpose is social or environmental

whose profit is mainly reinvested to further these goals, employers only

UrbanRural,

town

Rural,

village

Rural,

dispersed Total

% % % %

26 25 28 19 26

Unweighted n 1,076 131 151 69 1,427


10 These conditions are used in the definition of social enterprises. However, they are notin themselves sufficient for identifying a business as a social enterprise.


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Businesses in rural villages are most likely to say that the main purpose of theirbusiness is social or environmental (42%). They are also most likely to say that

their profit is reinvested to further their social or environmental goals (28% ofthose with a mainly social or environmental purpose). Those in areas withdispersed dwellings are least likely to do either (31% say their purpose is social or

environmental, 19% reinvest their profits to further these goals). This is notsurprising since businesses with social aims tend to need to be located close togroups of people. Businesses in rural towns and urban areas fall between theextremes.

Table 6.3 Main purpose of the business is social or environmental, employers

only

Urban Rural All

non-PSA4 PSA4

non-PSA4

under-

performing non-PSA4 PSA4

non-PSA4

under-


non-PSA4

under-

performing

% % % % % % % % %

34 33 39 36 35 39 34 34 39

Unweighted n 2915 185 192 598 249 165 3513 434 357


Table 6.4 Percentage of those whose main purpose is social or environmentalwhose profit is mainly reinvested to further these goals, employers only

Urban Rural All

non-PSA4 PSA4

non-PSA4under-


non-PSA4under-


non-PSA4under-

performing

% % % % % % % % %27 26 21 23 38 17 26 33 19

Unweighted n 938 66 72 203 89 59 1141 155 131


Businesses in urban PSA4 and non-PSA4 districts are similarly likely to have asocial or environmental purpose (34% and 33% respectively). However, those in

PSA4 underperforming districts are significantly more likely to have a social orenvironmental purpose (39%).

In rural areas the difference between districts in the proportion who say theirpurpose is social or environmental is not significant. However, businesses in non-

PSA4 districts are much more likely to reinvest their profits to further their socialor environmental goals (38%) than those in either PSA4 (23%) or non-PSA4underperforming (17%) districts.


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6.4 Promoting business as environmentally friendly

Business owners were also asked how the growth of their business would beaffected by promoting it as environmentally friendly. Their responses in differenttypes of area are shown in Table 6.5.

Table 6.5 Effect on grow th of promoting business as environmentally friendly,employers only



% % % % %

Positive effect 28 25 32 27 28

Negative effect 4 7 2 1 4

No effect 68 68 66 72 68

Unweighted n 1,682 191 186 115 2,174


In all types of areas most respondents said that promoting their business as

environmentally friendly would have no effect on its growth. Those in rural townswere least likely to say that they thought it would have a positive effect onbusiness growth (25%), while respondents in rural villages were most likely to say

that it would have a positive effect (32%). Businesses in dispersed rural areaswere most likely to say they thought it would have no effect. These differencesare just outside the 95% level of significance.


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7. Qualifications and skills

Because the sectors that are more common in different types of area requiredifferent skills sets, it might be expected that variables such as the highest

qualification of a business owner and skills available in the organisation, includingmanagement skills, vary a great deal between different types of area.

Respondents were asked to give their highest qualification, in addition toanswering several questions regarding the skills available in their workforce.

Key findings are:

There is little difference in the highest qualification of business owners inurban and different types of rural areas.

Business owners in PSA4 districts are more likely to have no qualificationsthan those in non-PSA4 districts.

In urban and dispersed rural areas the perception of shortage ofmanagerial skills as an obstacle to success was higher than in rural townsand villages.

Marketing skills appear to be more readily available in more highlypopulated areas, as the proportion who are very satisfied with the skillsavailable increases with increasing settlement size.

There is little difference in the proportion of businesses seeking generaladvice across different types of area and district.

In dispersed rural areas the proportion of businesses using Business Linkfor advice on regulations is more than double that in all other areas.


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7.1 Qualification of owner

Table 7.1 shows the highest qualification of respondents for urban and ruralareas.

Table 7.1 Highest qualification of business ow ner, employers only

UrbanRural,town

Rural,village


% % % % %

None 32 32 33 35 32

Postgraduate degree orequivalent

12 8 8 11 11

Degree, higher degreeor equivalent

24 24 22 22 24

A levels or equivalent 10 12 13 12 11

GCSEs or equivalent 14 13 16 13 14

Other 7 11 7 7 7

Unweighted n 3,292 402 384 226 4,304


There is little difference in the highest qualification of business owners in different

types of area, although those in rural towns and villages are slightly less likelythan those in urban or dispersed rural areas to have postgraduate degrees.Business owners in rural villages are most likely to have only GCSEs and those inareas with dispersed dwellings most likely to have no qualifications. The

statistical significance of these differences is above 90%.

There is slightly more variation when businesses are grouped into those in PSA4and non-PSA4 districts. Table 7.2 shows highest qualification by type of district.

Table 7.2 Highest qualification of business ow ner, employers only

Urban Rural All

non-PSA4 PSA4

non-PSA4

under-

performing non PSA4 PSA4

non PSA4

under-

performing non PSA4 PSA4

non PSA4

under-

performing

% % % % % % % % %

None 32 37 27 32 34 34 32 35 31Postgraduate degreeor equivalent

12 9 9 8 9 9 11 9 9

Degree, higherdegree or equivalent

25 22 19 24 21 22 25 21 21

A levels or

equivalent10 11 17 12 16 8 10 14 12

GCSEs or equivalent 13 17 17 15 13 10 14 14 13

Other 7 3 8 7 7 16 7 6 12

Unweighted n 2,915 185 192 598 249 165 3,513 434 357



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Business owners in PSA4 districts are more likely to have no qualifications thanthose in non-PSA4 districts in both urban and rural areas. They are also less

likely to be qualified to degree level or above. In rural areas, the highestqualifications of those in not PSA4 but underperforming districts resemble those inthe PSA4 districts.

7.2 Skills shortages as an obstacle to success

Two of the obstacles to success discussed in Section 3 relate to the skills availablein the business. Overall, 8% of respondents said that shortage of managerial

skills was an obstacle and 15% cited shortage of skills generally (Section 3,Chart 3.1).

The proportion of respondents citing shortage of managerial skills shortages as an

obstacle is highest in urban and dispersed rural areas (8% and 12%) and lowestin rural villages (5%).

Although the results follow a similar pattern to those for managerial skills, there is

no significant difference between types of area in the proportion citing generalskills shortages as an obstacle. Despite being reported by a similar proportion ofrespondents, the reasons skills shortages are encountered in urban areas and in

dispersed rural areas may be quite different. For example, the sectoral mix inurban areas may require more specialist skills, whereas in remote rural areasthere may be a more general problem with recruitment.

There are no significant differences between PSA4 and non-PSA4 districts in the

proportion of businesses who cite skills shortages, either managerial or general,as an obstacle to success.

7.3 Satisfaction w ith marketing skills available

In another question business owners were asked how satisfied they are with themarketing skills available in their organisation. The responses are shown in Table

7.3.

Table 7.3 Satisfaction w ith marketing skills available in organisation,

employers only

UrbanRural,town

Rural,village


% % % %

Very satisfied 32 29 26 24 30

Quite satisfied 44 41 46 49 44

Neither satisfied nor dissatisfied 13 15 16 13 13

Quite dissatisfied 6 6 8 10 6

Very dissatisfied 1 3 1 2 2

Don't know 5 5 3 1 4

Unweighted n 3,292 402 384 226 4,304


The proportion who are very satisfied with the marketing skills available in their

organisation is highest in urban areas (32%) and decreases with settlement size,


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to 24% for dispersed rural. However the proportion who are eitherquite or verysatisfied with the skills available varies less, from 76% in urban areas to 71% in

rural towns.

7.4 Training of managers

Respondents were also asked to estimate the proportion of their managers thathave had training to improve their leadership and management skills. Tables 7.4

and 7.5 show the proportion who trained less than 10%, 10-49%. 50-89% andgreater than 90% of their managers.

Table 7.4 Proportion of managers that have had training to improveleadership and management skills, employers only



% % % %

=90% 11 13 18 8 12

Unweighted n 1,641 206 195 121 2,163


Responses were similar in urban areas, rural towns and rural areas with disperseddwellings, with around three quarters of businesses training fewer than 10% oftheir managers, and around one in 10 businesses training more than 90% of their

managers. In rural villages business owners train a higher proportion of theirmanagers, nearly one in five training 90% or more and two-thirds training less

than 10%.

Table 7.5 Proportion of managers that have had training to improveleadership and management skills, employers only

Urban Rural All

non-PSA4 PSA4

non-PSA4

under-performing non PSA4 PSA4

non PSA4

under-performing non PSA4 PSA4

non PSA4

under-performing

% % % % % % % % %

less than

10% 76 68 77 71 76 73 75 74 7510% - 49% 7 4 8 6 6 2 7 6 4

50% - 89% 7 4 6 7 6 14 7 5 10

90% or more 11 24 9 16 11 12 12 15 11

Unweighted n 1,456 85 100 305 132 85 1,761 217 185


In urban PSA4 districts nearly a quarter (24%) of businesses provided training formore than 90% of their managers, compared to only 10% in non-PSA4 districts.In rural areas this is reversed, with 11% of PSA4 district businesses training more

than 90% of their managers compared to 16% in non-PSA4 districts.


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7.5 Seeking advice

Respondents were asked whether they had sought general advice and informationfor running the business in the last twelve months. Overall, 29% of businesseshad sought general advice, a proportion that does not vary significantly between

types of area and district.

Businesses were also asked from which sources they had sought advice on

regulations. The proportion who had sought advice from each source is alwayssmall (less than about 10%), except in the case of accountants, which are used

by around 30% of employers. There is little difference between types of area inthe sources of advice used, with the exception of Business Link. More than double

the proportion of businesses in dispersed rural areas had used Business Link foradvice about regulations than in all other types of area (10% compared to 3% to5% in the other areas).


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8. Family businesses and businesses w ith noemployees

In the preceding sections the analyses performed have been for businesses withemployees. This section focuses mainly on the smallest of businesses thosewith no employees and the reasons for this. A common reason given for abusiness having no employees is that the owner uses family instead. Thereforethis section begins with an analysis of the locations and sectors where family-

owned businesses are most likely to be found.

Key findings are:

There is not a large variation between sectors in the proportion ofbusinesses that are family owned. However, in rural towns and villagesbusinesses in primary industries are more likely to be family owned than

those in other sectors.

Businesses in urban areas are always less likely to be family owned thanrural businesses.

For businesses with no employees, the proportion that are family ownedincreases with increasing rurality, to 82% in dispersed dwellings.

The main reasons for a business having no employees are that there is notenough work to require them or that the owner prefers to work on theirown.

In rural villages and areas with dispersed dwellings another main reasonfor having no employees is that family area used instead. In disperseddwellings it may also be too expensive to employ anyone.


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8.1 Family businesses by sector

Chart 8.1 shows the proportion of businesses that are family owned, comparingbusinesses across different locations and sectors.

Chart 8.1 Business is family owned, all businesses

0 10 20 30 40 50 60 70 80 90 100

Prim ary

Production

Construction

Services

Percent

Urban Rural, town Rural, village Rural, dispersed dwelling


Across all sectors more than half (and in most cases more than two thirds) ofSMEs are family owned. In general, there is not a large variation between sectorsin the proportion that are family owned. In rural towns and villages businesses in

primary sectors are more likely to be family owned than those in other sectors.However, in urban and dispersed rural areas there is no significant differencebetween sectors.

The location of the business appears to be a more important factor in whether it is

family owned. In urban areas 67% of businesses are family owned, compared to82% in rural areas with dispersed dwellings. The difference is most apparent in

primary industries, where businesses are around 30 percentage points more likelyto be family owned in rural areas than urban areas. In all industries exceptprimary, businesses in dispersed rural areas are most likely to be family owned.


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8.2 Family businesses by size

Chart 8.2 shows the proportion of businesses of different sizes and in differentlocations that are family owned.

Chart 8.2 Business is family owned, all businesses

0 10 20 30 40 50 60 70 80 90 100

None

Micro (1-9

employees)

Small (10-49

emp loyees)

Mediu m (50-249

employees)

Percent



As may be expected, the larger a business is the less likely it is to be familyowned. In all size bands, businesses in rural areas are more likely to be family

owned, with the proportion clearly increasing with increasing rurality.

It can be seen that businesses with no employees are more likely to be familyowned than businesses with employees. In dispersed rural areas 82% of

businesses with no employees are family-owned. This figure is 78%, 74% and70% for rural villages, towns and urban areas respectively.


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8.3 Reasons for having no employees

Owners of businesses with no employees were asked why this was. The mainreasons given are shown in Chart 8.3, broken down by type of area.

Chart 8.3 Why business does not have any employees, zero-employeebusinesses

0 5 10 15 20 25 30 35 40

Not enough work to

require em ployees

Prefer to work on

ow n

Use fam ily

Too expensive

Use casual staff

when needed

Employmentregulations

Percent



In general the main reason for a business having no employees is that there is

not enough work to require them, with the proprietors preference for working ontheir own the second most popular reason (except in rural towns). In ruralvillages and areas with dispersed dwellings businesses are more likely than intowns or urban areas to have no employees because the proprietor uses family

instead (21% and 22% compared to 15% and 8%). In areas with disperseddwellings another main reason is that it is too expensive.

It appears that in populated areas the reason for having no employees is mostly

preference, whereas in remote rural areas having no employees is equally likely tobe due to financial constraints.

In PSA4 districts owners are less likely to say they prefer to work on their own(20% compared to 26% for non-PSA4 districts and 33% for non-PSA4

underperforming). Businesses in PSA4 and non-PSA4 underperforming districtsare slightly more likely to use family. There are no marked differences in other

reasons.


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In Table 8.1 the proportion of businesses saying they have no employees becausethey use family is broken down by whether or not the business is family owned.

Table 8.1 Business has no employees because use family, zero-employeebusinesses

UrbanRural,town

Rural,village

Rural,dispersed Unweighted n

% % % %

Family business 20 9 25 23 672

Not family business 4 4 8 0 260

Total 15 8 21 19 932

Unweighted n 641 92 121 78 1864


Not surprisingly, family-owned businesses are much more likely to give using

family as a reason for having no employees, but there is still an appreciableproportion of non family-owned businesses that use family instead of employees.This proportion is highest in rural villages.


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9. Summary/ Conclusions

This analysis of the ASBS 2004 has investigated the differences between Englishbusinesses in urban and different types of rural area and districts which are

underperforming in productivity. The results do not show an overall pattern, andfor some topics the location of a business does not appear to have any effect onresponses. However, in many cases there is a clear split between SMEs in ruraland urban areas and, in some instances, a clear sequence in settlement size.

There is also a variety of responses across different types of district, with PSA4and non-PSA4 districts sometimes different and sometimes similar. Businesses inthe urban parts of PSA4 districts may also be different from those in rural parts.

9.1 Differences between rural and urban businesses

The main differences found between SMEs in urban and rural areas are in size and

form. Of the businesses interviewed, 70% (74% of the employers) were locatedin urban areas, a good reflection of the actual registered businesses population(99.5% of which are SMEs). Comparing this percentage with population figuresshows that there are more businesses per head in rural areas than in urban areas.

Businesses in rural areas tend to be smaller. The proportion of businesses withno employees is higher in rural than urban areas, and in rural towns and villagesthere is a higher proportion of SMEs with turnovers less than 250,000. In urban

areas and rural towns there is a higher proportion of businesses with 10-250employees than in rural villages and areas with dispersed dwellings.

Urban areas are home to a higher proportion of companies than rural areas, whichmay in part reflect the higher proportion of employers. However, rural areas have

a higher proportion of partnerships, which increases with decreasing settlementsize and is highest in dispersed dwellings.

As would be expected, the

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