The number of small businesses in the UK has grown 17% since 2010.
In London, that growth has been more extreme, with the number increasing by 27% in the same period. Given its significant contribution to employment growth since the recession, it is no surprise then that the SME sector, defined as companies with less than 50 employees, has attracted increasing levels of attention in recent years. It is worth noting though, that a look further back at UK-wide data reveals that the small business sector has been growing steadily since 2000, throughout economic cycles.
In order to best support this community in London, it is important to understand who these companies are and where they sit in the wider economy. There has been a misconception in the past that London’s small, fast-growing businesses are dominated by technology firms, and there are some concerns that this sector is reaching maturity. ‘Tech’ has become a buzzword for any innovative, entrepreneurial business, and is being adopted as a catch-all term for the huge numbers of businesses from all sectors that are using technology in their operations, whether an online retailer or disruptive e-finance company. In fact, an analysis of the companies based in 12 of our largest London business centres found they are operating across a hugely diverse spread of sectors, with pure-play technology companies accounting for less than 1% of the rent roll from these buildings.
The importance of small businesses to wider economic growth, alongside increased media reports of disruptive new and growing companies, has resulted in a wave of policy initiatives designed to support them.
In particular, measures announced in the recent Budget pointed to recognition among policymakers of the value of promoting small businesses. These included raising the annual threshold for SME tax relief, exempting thousands of firms and encouraging entrepreneurship. The proposals to increase the small business rate relief threshold from £6,000 to £15,000 rateable value are particularly welcomed as they will reduce costs, enabling businesses to commit more resources to growth.
As the policymakers are introducing new initiatives, so the real estate industry must adapt if it wants to cater for the needs of the growing small business community in London. More landlords are offering flexible lease terms, in itself not new, and we have seen a rise in the provision of co-working space alongside more traditional office space to facilitate networking and attract smaller businesses.
By far the most significant requirement for these discerning companies, however, is access to business-class connected services, intelligent wifi and a secure, super-fast and resilient network. Workspace is investing heavily in technology for our customers, and it is this blend of facilities as well as a cutting-edge technology offer that is helping to drive continued demand for our space.
With the number of small businesses in the UK continuing to increase, the challenge for real estate is how to react. If property companies want access to these fast-growing businesses and their unyielding demand for space, perhaps the industry needs to evolve too, to be as innovative as the customers it is trying to recruit.
Jamie Hopkins is chief executive of Workspace