The UK may be home to more contractors than had previously been thought, according to official figures.

Tuesday 26 March 2013

There may be far more contractors working as limited companies than anyone in the UK had previously thought, according to new figures from the Department for Business, Innovation and Skills (BIS).

The latest Small Business Survey has been released this week, showing that more than 800,000 limited companies consist of just one person and no employees.

Companies with no employees reached 3.557 million in 2012, accounting for 17 per cent of all employment in the private sector and three-quarters of all businesses in the UK.

Of these, 23 per cent said they were working as limited companies, leaving a total of 818,000.

Two of the most popular industries for businesses with no employees were the building trade and professional or scientific occupations, but retailing, food and accommodation were much more likely to be the province of small businesses who could call upon a workforce.

While workers in construction and manufacturing may not be engaging in contractor work, it is still likely that earlier calculations have hugely underestimated Britain’s contractor population.

Younger businesses were the most ambitious, at least in terms of growth, with one-person companies becoming less likely to plan growth as they aged. Under three years old, almost 90 per cent were looking to grow, but by the time businesses had been trading ten years or more that figure was cut in half.

Previous studies have often shown that more men opt for self-employment than women, perhaps because women are still underrepresented in major industries such as construction and engineering. These figures are no different - far more men than women were running companies without staff.

For many of these limited companies without employees, however, a difficult business environment has stopped them from achieving their goals. Three-quarters said that the UK’s current economic woes were holding them back. More than half also cited competition as a natural obstacle, while more than four out of ten listed cash flow, regulations and taxation among their biggest challenges.

Three in ten said that their success was hindered by a lack of access to finance, but nearly a fifth said that a shortage of skills was standing in their way - a call which is becoming increasingly common in business, but which also provides contractors with excellent opportunities to develop, share ideas and give their own businesses a boost.

Around an eighth of businesses that did not hire employees had applied for finance at some point in the previous year, 58 per cent of which had been to ease cash flow problems or acquire working capital. However, half had faced problems in gaining finance from the first source they approached, and two-fifths had not been able to find any cash whatsoever. These figures were consistently slightly higher than for smaller companies with employees.

However, when it came to making the most of the money available to them, contractors appeared to be missing out on crucial support compared to small businesses that took on staff. Just a third of businesses without employees had sought external information of advice in the last year, compared to 45 per cent of their staffed counterparts.

One in twenty had benefited from the advice of a business mentor and trade associations had given a boost to one in ten, but the single most popular source of assistance was an accountant. Four out of ten businesses with no employees had consulted a professional for assistance with their financial affairs.

By Victoria McDonnell

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