Small firms 'vital' to economy and employment, says business group

Small businesses are 'vital' in aiding economic recovery and slowing the rate of unemployment in the UK, the Federation of Small Businesses (FSB) has said.

Research tracking data from the start of the 2008 recession found that up to nine in ten (88 per cent) unemployed people find jobs in the private sector; by either setting up a new business or working for a small and medium sized enterprise (SME).

According to the findings, a quarter (24 per cent) of those out of work found employment with a micro business, 27 per cent with a small firm and 17 per cent started their own business.

Figures from the Office for National Statistics (ONS) revealed that 2.56 million people in the UK remained unemployed in the three months to June.

Although this number was down on the previous quarter, eight per cent of the population remain out of work; a figure the FSB said was still 'stubbornly high.'

National chairman for the FSB John Walker, said: "The numbers speak for themselves - small firms are responsible for creating the majority of jobs and are more likely to take on people out of work, including those that have been out of work for some time."

With SMEs accounting for 99 per cent of businesses in the UK, The FSB is now calling for the Government to urgently review measures to help boost small business growth and reduce unemployment.

In particular, it wants to see the National Insurance Contributions holiday extended to allow more firms to take on staff. The scheme currently exempts qualifying new businesses from certain employee contributions.

Elsewhere, it also called for a review of the New Enterprise Allowance Scheme to allow those claiming Jobseeker's Allowance access to business funding from day one of unemployment. Applicants with a viable business plan can currently only apply for the funding after six months on Jobseeker's Allowance.

Walker added: "In the current economic climate, with costs increasing and cash-flow tight, small firms need all the help they can get."

"Giving people the ability to start their own business and small firms the incentive to take on staff through extending the National Insurance Contributions holiday will help to boost economic confidence and growth, which is vital."