The socio-economic impact of businesses in the railway arches
3.
Spaces for small businesses
3.1
One of the largest benefits of The Arch Company’s operations is its contribution to meeting the need that small businesses have in finding suitable lettable space. By creating spaces for these small businesses, The Arch Company’s operations play an important role within local and regional economies , as well as the national economy. This section explains how.
The importance of small businesses as a driver for growth
Small businesses are the backbone of the UK economy. Small and medium-sized enterprises (SMEs), 8 constitute 99.9% of all UK businesses and are responsible for 60% of private sector employment. Small businesses form an important component of local economies. For every £1 spent with a small or medium- sized business (SME), 63p is re-spent in the local area compared to 40p in every £1 spent with a larger business. 9 New and small businesses are vital for a growing economy. Small businesses account for a disproportionately large share of new jobs created in most major economies in the 21 st century. 10 These firms are also disproportionately responsible for developing new services and products within markets and delivering innovation. 11 Put simply, without the freedom for new and small businesses to grow, it would not be possible to deliver the jobs and economic opportunities needed for the growth of the UK ’s economy . This is acknowledged across UK Government in strategy. 12 The Labour party’s Plan for Small Business (2023) states that “ it is no exaggeration to say that without a diverse and thriving ecosystem of small businesses our country would not just be poorer, but the communities we live in would be as well ”. 13 Beyond their role as key suppliers to the UK, small businesses are in part responsible for the future direction of its growth. One of the most significant trends affecting the UK economy is the ‘productivity puzzle’, which is the term used to describe the decline in the growth of output per worker, or productivity. Since 2010, the UK has seen marginal to no growth in the productivity of its workers. Had the productivity of UK workers followed the trend seen in the 00s, output per worker would now be 16% higher than it currently is. 14 This trend is seen internationally but is particularly evident in the UK. Increasing output per worker to German levels would, for example, boost UK GDP by almost £200bn each year. 15 One of the most popular current explanations of why the puzzle is so severe in the UK is referred to as the ‘long - tail’ of productivity for UK businesses. In the UK, the gap between the top performing and bottom performing businesses is significantly larger than that of other countries and is growing. 16 Smaller spaces for start-ups and scale-ups are required to enable new business formation and survival, that can help to tackle the UK economy’s productivity issues.
3.2
3.3
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3.6
Space as a barrier to growth
3.7
New and small businesses need space and facilities to grow. The absence of viable and affordable commercial space is listed as one of the key barriers preventing growth by small businesses. The Small Business Survey (2022) shows 20% of UK small businesses report the availability and cost of finding
8 Less than 250 employees. 9 FSB and the Centre for Local Economic Strategies, 2013. Local Procurement – making the most of small businesses one year on 10 OECD, 2015. Young SMEs, Growth and Job Creation 11 Enterprise Research Centre, 2020. The Role of Innovation in Small Business Performance: A Regional Perspective
12 Department for Education, 2022. Action Plan: Small and Medium Sized Enterprises 13 UK Labour, 2023. The Beating Heart of Our Economy: Plan for Small Business 14 MakeUK, 2022. The UK's Productivity Puzzle - what's the deal 15 PwC, 2019. The Productivity Puzzle Revisited. 16 A. Haldane, 2018. The UK’s Productivity Problem: Hub No Spokes
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