Micro businesses 'need targeted support', argue MPs

24 Nov 2011

The definition of 'micro businesses' should be changed to enable Britain's smallest firms to benefit from targeted support and legislation, MPs have argued.

A micro business is currently defined as a company employing fewer than 10 people with a turnover of less than 2 million euros.

However, according to the UK's All Party Group for Micro Businesses, the definition needs to be much tighter, as 95% of UK companies qualify as micro businesses.

'The consequence of this lack of definition has been an inability of government to create policy tailored toward this group,' said the MPs' report. 'Such a group is too large in number and share of the economy and too diverse in nature for cohesive policy making.'

Instead, the report suggests that a micro business should be defined as a company employing fewer than five people. It added that this group should also benefit from targeted tax breaks and simplified regulations to help them expand.

The MPs claim that similar initiatives abroad have resulted in increased growth. 'In America, the evidence is that 90% of all new jobs created after their last downturn was exactly in this sector,' said the founder of the group, Anne Marie Morris MP.

However, the Government has rejected calls to alter the definition of a micro business.

'I believe excluding businesses employing between five and nine employees from this definition may have a detrimental effect on a significant number of businesses, as they could miss out on several current exemptions based on size of business, such as the three-year moratorium on new domestic regulation for micro businesses and start-ups,' commented Business and Enterprise Minister Mark Prisk.