Jobs to come in home-based business

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Over 40 per cent of home-based businesses in Ayrshire (42%) say they expect to employ full-time staff over the next two years, whilst almost half plan to take on part-time employees.

That was the finding of a new report which found that half of all Scottish businesses are based in the home, sustaining around one in five private sector jobs and turning over £19.7 billion a year.

But business leaders warned that these firms’ ‘biggest bugbears’ - unreliable broadband and a lack of suitable finance - need to be tackled.

Believed to be the first in-depth profile of Scottish home-based businesses, the new Federation of Small Businesses’ (FSB) report, conducted by Professor Colin Mason from Adam Smith Business School at the University of Glasgow and Dr Darja Reuschke of the University of St Andrews, dispels many of the popular myths about these 188,000 firms. For example, the research reveals almost two thirds of home-based businesses employ at least one member of staff.

The report argues that local government, regulators, banks and enterprise support agencies can’t ignore these businesses and should adapt their approach to better meet their needs.

Professor Colin Mason said: “Policymakers have been slow to appreciate the importance of home-based businesses to the Scottish economy. This report shows that Acacia Avenue is as much the home of entrepreneurship as any business park.

“These are serious businesses, accounting for 10 per cent of private sector turnover and 17 per cent of private sector employment. If our economic salvation lies in broadening and strengthening our small business base, we ignore their contribution and their needs at our peril.”

The FSB studied data from 999 business owners, 39 per cent of whom were home-based and a further 19 per cent owned businesses that grew out of the home. The research highlights that these firms operate across every sector and geography.

The biggest concentrations of these enterprises are in catering, leisure, tourism, hotels and entertainment (24%), and providing business services (12%). Smaller clusters were found in creative services (8%) and construction (7%). However, up to six per cent of all enterprises in all other business sectors (including engineering; real estate; and health & social work) are based in the home.

Further, far from being start-ups, more than half of Scotland’s home-based businesses (54%) have been established for ten years or more. Around three quarters (73%) of these enterprises turn over less than £100,000 a year, and 3 per cent generate more than £500,000.

More than two-fifths respondents in Ayrshire (42%) say they expect to employ full-time staff over the next two years, whilst almost half (49%) plan to take on part-time employees. More than half (51%) have seen their turnover increase in the past two years. The survey also finds that around two-thirds (67%) of Ayrshire home-based businesses are located in towns, with one-third (29%) thinking that they will or could move out of the home at some point in the future.

The survey also challenges ideas of home-based businesses being parochial. In fact, they are more likely to have a broader customer base than other businesses – with a larger proportion trading nationally and internationally and utilising e-commerce compared to firms in commercial premises.

Ada Galloway, Chairman of the Federation of Small Businesses’ (FSB) Ayrshire Branch, said: “When it comes to growing our economy, you might think about finding big investors and developers outside Ayrshire, often outside Scotland. But maybe it’s not necessary to look out for them. As this report shows, a significant part of our economy is small home-based businesses, here in Ayrshire.

“This army of businesses is vital to our economy. Despite the recession, many of them have grown over the last two years and plan to employ new staff. Their contribution to Ayrshire’s economy is absolutely immense. We need to focus our efforts to help them grow and prosper.

“As these home-based firms grow, some of them consider moving out of the home, but many find commercial premises too expensive. Why don’t we, then, make those empty units in our high streets cheaper and more attractive for them?

“Now we know how important this sector’s economic contribution is, regulators and local authorities need to make sure that their policies and regulations are right for those based in the home. We also need to tackle these firms’ biggest bugbears: unreliable broadband and a lack of suitable finance products.”