Did you know that there are 5.4 million small and medium-sized firms (those employing less than 250 people) in the country as a whole, employing some 23 million people?
They are the heart of the economy and of any future viable economy. But it is very difficult to find information about them. Search GMCA’s website or that of its economic think tank, New Economy and you will find little hard information about our SME’s1 – go on, try it.
Yet of these firms, perhaps only 10 per cent are doing well, while another 30 percent are in real difficulties. That leaves some 60 per cent surviving. Of new start ups, some 70% last less than five years. The failure rate is particularly high in Greater Manchester (along with Leeds City Region, Greater London and Greater Birmingham/Solihull). Think of the personal costs that entails: bankruptcy, loss of savings, loss of income, and sometimes the loss of the family home and even the family itself. Think of the stress and its effects on health and well-being…..
Small and medium enterprises (SME’s) have a positive role to play in a future Viable Economy. In general (and yes there are exceptions), they make a greater contribution to the local economy and our community than big firms with shareholders beyond the city region. They tend to be place based, rely on local trade, employ local people and contract with other local companies. They tend not to make excessive profits and what money they do make tends to stay local, rather than exported to tax havens. Indeed, many SME’s do not aspire to grow, being content with making a living, living off a fairly constant throughput of money and localised resources rather than having to grow and grow off the back of resources imported from miles away. For others, growth would be a good thing, helping build the replacement economy we need to deliver environmentally safe, resilient prosperity for all. They are therefore more likely to be part of the solution than part of the problem for the ecological crisis.
However, official policy in Greater Manchester has not consistently been to favour SME’s. Policy was influenced by the Manchester Independent Economic Review of 2009 which, following a narrow growth and productivity agenda, advised that “policy support should not be geared disproportionately … towards SME’s”. That seemed to be based on the view that “growth through indigenous SMEs … is slower and more organic” than that from large scale inward investment into big firms. However, there are some promising examples of initiatives2 to support SME’s, for example the Tameside Business Family which provides a variety of support and networking for local businesses, Manchester’s Sustainable Procurement Policy that tends to favour SME’s with its local emphasis, Greater Manchester Chamber of Commerce’s Skills Gateway (aimed at SME’s), and the GMCA’s Greater Manchester Loan Fund that specifically makes loans available to SME’s. The former Regional Development Agency also prioritised financial assistance for SME’s.
Moreover, since the big banks pretty much abandoned this sector, SME’s have struggled to obtain credit for investments they need to make.
We take the view that small, resilient, labour-intensive, local and stable firms are more compatible with the Viable Economy, than those larger, outward-facing firms attractive to well-resourced and footloose foreign investors. This is to generalise, but we are looking for a greater relative emphasis on those place and people orientated companies that appear3 to account for more than half of the Greater Manchester workforce.
In Greater Manchester, 86,100 firms employ fewer than 10 people: that’s out of a total of 105,000 businesses. This excludes self-employed people. How good a deal are they getting here in Greater Manchester? And what could be done to improve matters?
We think that the following should be priorities, both for leaders in the City Region but for those of us in all sectors, as citizens, consumers and activists:
Support SME’s that embody the principles of the Viable Economy in their products and practices.
Foster win-win collaborations among SME’s, and between SME’s and other organisations, public, private and community (as in this West Midlands example).
Develop IT, finance and marketing frameworks that support existing SME’s4 helping them to improve their performance and thereby survive, while stepping up to the challenges of establishing a Viable Economy in the region.
Identify with SME’s the barriers and constraints they face and help publicise these in policy arenas.
Use the philosophy of plugging the leaks to increase opportunities for money and resources to circulate around the sector rather than leaching out of the region.
Find ways to help them overcome the scarcity of financing, for the payback to the local economy can be much greater than from the large incoming-investment corporate schemes which tend to dominate political thinking. Recent discussions on public, community and municipal banking are relevant here, and Greater Manchester leaders should be actively promoting alternatives to Britain’s dysfunctional banking system.
Thanks to Allan Wort for drawing some of the above points to our attention.
Minor amendments: 16/3/2016
The Steady State Manchester team.
1Nor will you find much anywhere else: but do let us know if we’ve missed anything.
2Although typically underpinned by a narrative of “growth”.
3These data are not publicly available, although might be accessible on the NOMIS government website on paying a fee. We have conservatively estimated the average number of employees in each of the classes of enterprise using the figures given in the following paragraph to arrive at our estimate of 65%.
4In contrast to the Business Growth Hub, part of GMCA’s Manchester Growth Company, efforts which seem to target support at trendy new startups rather than towards existing more run-of-the-mill SMEs