Small Businesses in Rural Areas-UK-2005

Small Businesses in Rural Areas
An analysis of the Annual Small Business Survey 2004
Rosie Telford
Small Business Service Analytical Unit
October 2006 URN 06/2078
1
Table of Contents
1. Introduction.............................................................................. 4
1.1 Summary of main findings .................................................... 4
1.2 Background ........................................................................ 6
1.3 The Annual Small Business Survey......................................... 7
1.4 Definitions used in report...................................................... 7
1.4 Structure of Report .............................................................. 8
2. The Business Population ........................................................... 9

2.1 Locations of English businesses ........................................... 10
2.2 Legal status ...................................................................... 11
2.3 Size of business ................................................................ 14
2.4 Turnover .......................................................................... 15
2.5 Age of business ................................................................. 17
2.6 Sectoral patterns............................................................... 19
3. Business Dynamics ................................................................. 21

3.1 Growth ............................................................................ 22
3.2 Innovation........................................................................ 23
3.3 Obstacles to success .......................................................... 23
3.4 Government support .......................................................... 25
4. ICT ....................................................................................... 26
4.1 Uses of ICT....................................................................... 27
4.2 Access to broadband .......................................................... 29
5. Transport Issues ..................................................................... 30

5.1 Satisfaction with public transport ......................................... 31
5.2 Public transport and recruitment.......................................... 32
5.3 Transport issues as an obstacle to success ............................ 32
6. The Environment ..................................................................... 33

6.1 Action taken ..................................................................... 34
6.2 Government help with environmental performance................. 35
6.3 Social and environmental goals ........................................... 35
6.4 Promoting business as environmentally friendly ..................... 37
7. Qualifications and skills .......................................................... 38

7.1 Qualification of owner ........................................................ 39
7.2 Skills shortages as an obstacle to success ............................. 40
7.3 Satisfaction with marketing skills available ............................ 40
7.4 Training of managers ......................................................... 41
8. Family businesses and businesses with no employees............ 43

8.1 Family businesses by sector ................................................ 44
8.2 Family businesses by size ................................................... 45
8.3 Reasons for having no employees ........................................ 46
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9. Summary/Conclusions ............................................................ 48
9.1 Differences between rural and urban businesses .................... 48
9.2 The effects of remoteness................................................... 49
9.3 Dispersed areas and PSA4 districts ...................................... 49
9.4 Dynamic potential ............................................................. 50
Annex 1 Methodology ................................................................... 51

A1.1 Rural and Urban Definitions ................................................ 51
A1.2 PSA4 Productivity Indicator Districts..................................... 51
A1.3 Adding rural and urban flags ............................................... 52
A1.4 Data limitations and significance testing ............................... 52
Annex 2 Additional Tables ............................................................ 55
3
1. Introduction
A thriving small business sector is central to the vision of economic and social
regeneration of rural areas presented in Defra’s Rural Strategy 2004 1 . Away from
urban centres, small and medium enterprises (SMEs) provide local jobs, services
and places to trade, as well as the potential to protect and sustain the countryside
environment.
The Small Business Service aims to make the UK the best place in the world to
start and grow a business, with special attention paid to groups under-
represented in self-employment, socially excluded groups and economically
underperforming areas. It is therefore useful to compare SMEs in rural areas with
those in urban areas in terms of their contribution to the economy and their
perceptions of and attitudes to the obstacles they encounter in doing business.
These measures are particularly pertinent in a minority of “lagging” rural areas
with high social deprivation, most of which are either geographically peripheral or
characterised by industries that experienced rapid declines in the recent past, e.g.
coalmining, agriculture and fishing.
This report, produced by the Small Business Service (SBS) in collaboration with
the Department for the Environment, Food and Rural Affairs (Defra), presents an
analysis of the SBS Annual Small Business Survey (ASBS) 2004. The behaviours
and opinions of small and medium-sized business owners on matters relating to
the Rural Strategy are broken down by the type of area the business is located in
to give a picture of the issues that are important to rural businesses. The report
notes differences between businesses in urban areas and rural towns, villages and
areas with dispersed dwellings and investigates how businesses in districts with a
poor socio-economic performance are different from those in more prosperous
areas. The analysis presented covers England only, as this is where the
Rural/Urban Definition that is used applies.
1.1 Summary of main findings

The results presented do not show an overall pattern, and for some topics the
location of a business does not appear to have any effect on responses. This is
true of: the highest qualification of the business owner; the likelihood that the
business introduced innovations in the previous year; and the perception that
skills shortages represent an obstacle to the success of the business.
However, in many cases there is a clear split between SMEs in rural and urban
areas and, in some instances, a clear sequence in settlement size. Businesses in
rural areas:
• tend to be smaller than in urban areas, and a higher proportion have no

employees;
1
Links to the Rural White Paper and Rural Strategy 2004 can be found on Defra’s website
at: http://www.defra.gov.uk/rural/default.htm
4
• are less likely to be companies and more likely to be partnerships than
those in urban areas;
• are more likely to be in the primary sector;
• are more likely to be family businesses; and
• are less likely to find public transport satisfactory in helping their

workforce to get to work.
Defra’s 2005-2008 PSA target 4 (productivity) is to “reduce the gap in

productivity between the least well performing quartile of rural areas and the
English median”. PSA4 “indicator” districts are typically remote, with
underperformance stemming from a decline in traditional industries. It was found
that businesses in PSA4 districts are similar to businesses in dispersed rural areas
in that:
• a higher proportion are sole proprietorships or partnerships;
• they are less likely to have employees; and
• they are less likely to use their profits to further social or environmental
goals.
Business owners in PSA4 districts are also more likely to have no qualifications.
5
1.2 Background
In 2000 the Government laid out in a White Paper its vision for the future of rural
England, focusing rural policy around the concept of sustainable development 2 .
This included providing “high quality public services”, building “a prosperous and
diverse economy, giving high and stable levels of employment”, protection of the
environment and increased self-determination for rural communities. The
Government promised, among other things, to improve public transport
connections, rejuvenate market towns through Regional Development Agencies
(RDAs) and European funds, improve business support through the Small
Business Service (SBS), widen broadband coverage and improve skills training.
The Department for the Environment, Food and Rural Affairs (Defra) was formed
in 2001. Following Lord Haskins’ Rural Delivery Review in 2003 and a review of
the Rural White Paper, in 2004 Defra laid out its Rural Strategy 2 , highlighting the
lessons learnt and the many differences between rural areas. The Government’s
three priorities as laid out in this strategy were:
1. Economic and social regeneration;
2. Social justice for all;
3. Enhancing the value of our countryside.
The first of these includes enhancing skills training (in partnership with the SBS
and other organisations), improving accessibility of business support through the
SBS, RDAs and Business Links (Defra put £2m into the Business Link network),
widening the availability and use of broadband and tackling areas with economic
and social disadvantage. The Strategy emphasized the importance of market
towns as hubs for rural business.
Lord Haskins’ review identified lack of evidence to inform rural policy. Therefore,
alongside the Strategy, the Rural and Urban Area Definition 2004 was launched as
a tool for enabling broad statistical analysis of different types of area 3 . This
definition is based on settlement patterns and is discussed further in the Annex 1.
Following from the Rural Strategy, Public Service Agreement (PSA) targets were
introduced to measure progress against the Government’s aims. Defra’s 2005-
2008 PSA target 4 (productivity) is to “reduce the gap in productivity between the
least well performing quartile of rural areas and the English median by 2008,
demonstrating progress by 2006”. PSA4 “indicator” districts are classified at the
Local Authority District (LAD) level and are typically remote, with
underperformance stemming from a decline in traditional industries. They are
characterised by low earnings, poor job opportunities, low workforce skills, health
inequalities and poor housing. In terms of rural business, Defra’s PSA4 target ties
2
Ibid., p. 2.
3
http://statistics.defra.gov.uk/esg/rural_resd/rural_definition.asp
6
in with the SBS’ PSA target 5, to “encourage more enterprise in disadvantaged
communities and under-represented groups” 4 .
It should be noted that the majority of rural areas are relatively prosperous. 55%
of households in rural areas have an income that is above the median average
household income, with 28% of these in the top quartile. In these areas, the
growth and dynamics rather than survival of local businesses is a matter of
interest. This is addressed in Section 3.
This study examines the differences between businesses in urban and different
types of rural area, as well as looking at the difference between businesses in
PSA4 and other rural districts. It makes use of the 2004 ASBS, and therefore
describes rural areas at the time of the publication of Defra’s Rural Strategy and
at the end of the baseline period of the PSA4 target.
1.3 The Annual Small Business Survey

The Annual Small Business Survey (ASBS) is conducted by the Small Business
Service to provide information about small and medium enterprises (SMEs),
businesses with up to 250 employees. The survey began in 2003 and replaced
the Omnibus Survey, bringing greater consistency in sampling and subject areas
from year to year and being organised more explicitly around the themes of the
Government Action Plan for Small Businesses 5 . Telephone interviewing of around
8000 owner-managers of SMEs around the UK is used to obtain basic information
on business size, turnover, location and sector as well as business growth,
perceived obstacles to success, regulation, access to finance and a range of other
topics. The analysis presented in this paper uses data from the 2004 ASBS. The
fieldwork was carried out in the last quarter of 2004, running into early 2005, and
7505 business owners were interviewed, of which 6145 employed staff.
The ASBS 2004 report, presenting the main analysis and results of the survey, is
available from the SBS website 6 . In this paper a secondary analysis of the data is
produced, as described in Annex 1.
1.4 Definitions used in report

In this analysis, business locations are classified by the four settlement types of
the Rural Urban Definition: urban; rural – town and fringe; rural – village; and
rural – dispersed dwelling (see Annex 1 for more detail). These three rural
classes are grouped to form the “rural” class used in the ASBS 2004 main report.
Analysis by whether the business is located in a PSA4 Productivity Indicator

District or not, with a third category of “not PSA4 district but contains
underperforming areas”, is also included. Throughout this report these districts
4
However, the SBS uses the Index of Multiple Deprivation to identify deprived areas, most
of which are urban.
5
http://www.sbs.gov.uk/sbsgov/action/layer?topicId=7000000084
6
The ASBS 2004 reports and questionnaire can be viewed by following the link on:
www.sbs.gov.uk/evidence
7
are referred to respectively as “PSA4”, “non-PSA4” and “non-PSA4
underperforming”.
It should be noted that PSA4 districts are classified at the Local Authority District
(LAD) level and are therefore larger than the census Output Areas (OAs) on which
the Rural Urban Definition is based. Although predominantly rural, PSA4 districts
contain a mix of rural and urban OAs. In this report the PSA4 analysis is shown
divided into urban and rural OAs.
1.4 Structure of Report

• Section 2 looks at the locations of small businesses and the basic
differences between rural and urban areas in business size, age, legal
status, sector and turnover.
• The dynamics of rural businesses are discussed in Section 3 – their actual

and intended growth, innovation, productivity and sources of funding.
• Section 4 addresses ICT use, a focus of Defra’s Rural Strategy.
• Better public transport was a focus of Defra’s 2000 Rural White Paper and
ties in with social inclusion; this is looked at in Section 5.
• Section 6 concerns the environment, including the measures taken to

reduce the cost of water, electricity and waste.
• Increasing skills is another policy area emphasised in the Rural Strategy;

Section 7 investigates the qualifications of business owners and their
attitudes to the skills available in their organisation.
• In Section 8 the differences in the characteristics of family-owned

businesses are investigated.
• A summary of results is given in Section 9.
8
2. The Business Population
This section gives an overview of the characteristics of the SMEs that were
interviewed in the ASBS and how these vary with location. The legal status, size,
turnover, age and sector of the businesses are presented broken down by urban
and type of rural area and by type of district.
Key findings are:
• 70% of all the businesses and 74% of the employers interviewed for the
survey are located in urban areas. 72% of the actual registered business
population (of which SMEs make up 99.5%) is located in urban areas.
• There are more businesses per head in rural areas than in urban areas.
• Urban areas have a higher proportion of companies than rural areas.

Rural areas have a higher proportion of partnerships and this is highest in
dispersed dwellings.
• Businesses in PSA4 districts have a higher proportion of partnerships and

sole proprietorships than non-PSA4 districts.
• The proportion of businesses with no employees is higher in rural than

urban areas, and higher in PSA4 districts than non-PSA4 districts. Urban
areas and rural towns also have a higher proportion of businesses with 10-
250 employees than other rural areas.
• Rural towns and villages have a higher proportion of businesses with

turnovers of less than £250,000.
• Businesses with no employees tend to be younger in urban areas.
• In PSA4 districts a higher proportion of businesses are three years old or

less than in non-PSA4 districts.
• The proportion of businesses in the primary sectors is much higher in

villages (17%) and areas with dispersed dwellings (25%) than in urban
areas and rural towns (1% and 2% respectively).
• In rural areas, PSA4 and non-PSA4 underperforming districts have a

higher proportion of primary sector businesses than non-PSA4 districts
(18% and 17% compared to 11%) and fewer in the service sector.
9
2.1 Locations of English businesses
Table 2.1 shows the locations of the businesses whose owners took part in the
ASBS, in terms of urban and rural areas and PSA4 Productivity Indicator Districts.
The proportion in each type of area is shown as a percentage with the total
number of respondents before weighting shown alongside. These are presented
alongside working age population figures for each type of location.
Table 2.1 Locations of businesses in survey

Working age
All businesses Employers
population
% Unweighted n % Unweighted n Thousands %
Urban 70 3933 74 3292 24,500 81
Rural, town 10 494 10 402
Rural, village 12 505 10 384 5,700 19
Rural, dispersed dwelling 8 304 6 226
non-PSA4 78 4228 81 3513 25,700 85
PSA4 13 568 11 434 2,400 8
non-PSA4 underperforming 9 440 9 357 2,200 7
Total 100 5236 100 4304 30,200 100
Source: Small Business Service Analytical Unit; Defra: PSA 4 Headline Productivity
Indicator Data http://www.defra.gov.uk/corporate/busplan/psa4headline.xls
Population total may not exactly match the sum of its parts, due to rounding.
Most SMEs in this survey (70%) are located in urban areas. Of those that are not,
around a third (10% of all) are located in rural towns, slightly more (12%) in
villages and the remainder in dispersed dwellings (8%).
When businesses with no employees are excluded, the proportion of SMEs in

urban areas is higher (74%). SMEs in rural villages and dispersed dwellings make
up 16% of businesses with employees, compared to 20% of all businesses.
Businesses with no employees must therefore make up a higher proportion of
businesses in rural areas.
Table 2.2 shows the locations of businesses on the Office for National Statistics
(ONS) Inter-Departmental Business Register (IDBR) 7 . The IDBR holds details of
all businesses that are registered for VAT, PAYE or as limited companies. Only the
smallest zero-employee businesses will not be included on the register, and
99.5% of English businesses on the IDBR are SMEs.
7
This data was obtained by the SBS as part of its annual Service Level Agreement with
ONS in June 2006. It gives a snapshot of the IDBR taken during March 2006.
10
Table 2.2 Locations of English businesses
Proportion of
businesses
%
Urban 72
Rural, town 9
Rural, village 11
Rural, dispersed dwelling 8
Source: Office for National Statistics Inter Departmental Business Register, March 2006
According to the IDBR figures, the actual proportion of businesses based in urban
locations lies between the ASBS figure for all businesses and that for employers
only. Since not all zero-employee businesses are included on the register, this
shows that the ASBS sample is a fairly good reflection of the actual distribution of
businesses in terms of urban and rural. This is also true of rural villages, although
rural towns are slightly over-represented in the survey and rural areas with
dispersed dwellings slightly under-represented.
As 81% of the total population in England is based in urban areas but only 72% of
the businesses, it is clear that there are more businesses per head in rural areas.
This may be because rural businesses tend to be smaller.
SMEs with employees are slightly less likely to be located in PSA4 indicator
districts (11%) than the business population as a whole (13%). An additional 9%
are located in districts which are not PSA4 indicator districts but contain
underperforming areas. Again, the population figures hint that there are more
businesses per head in PSA4 districts than non-PSA4 districts.
2.2 Legal status

Tables 2.3 and 2.4 show the legal statuses of businesses in different types of area
and district.
Table 2.3 Legal status - all businesses by type of area

Rural, Rural, Rural,
Urban town village dispersed Total
% % % % %
Company 42 40 36 33 41
Partnership 15 15 19 27 16
Sole proprietor 43 45 45 40 43
Unweighted n 3933 494 505 304 5236

Source: Small Business Service Analytical Unit
11
Table 2.4 Legal status - all businesses by type of district
Urban Rural All
non- PSA4 non-PSA4 non- PSA4 non-PSA4 non- PSA4 non-PSA4
PSA4 under- PSA4 under- PSA4 under-
performing performing performing
% % % % % % % % %
Company 45 22 29 42 26 35 44 24 32
Partnership 14 26 13 16 27 22 15 27 17
Sole 41 52 59 42 47 43 41 49 51
proprietor
Unweighted n 3460 238 235 768 330 205 4,228 568 440
SMEs in urban areas are most likely to have the status of limited companies
(42%). In rural areas the proportion of SMEs that are companies decreases with
degree of rurality, from 40% in towns to 33% in areas with dispersed dwellings.
As legal status and size are linked, this may be largely due to businesses in urban
areas tending to be bigger (see Section 2.3). The decrease in the proportion of
companies with decreasing settlement size corresponds to an increase in the
proportion of partnerships, with the highest proportion in the most rural areas
(27%).
In both urban and rural areas businesses in PSA4 districts are less likely to be
companies than in non-PSA4 districts, with non-PSA4 underperforming districts in
between. Partnerships are more common in PSA4 districts than in other districts.
Tables 2.5 and 2.6 show the legal statuses of businesses with employees in
different types of area and district.
Table 2.5 Legal status – employers only by type of area

% % % % %
Company 66 51 55 58 63
Partnership 17 24 24 27 19
Sole proprietor 16 25 22 14 18
Unweighted n 3,292 402 384 226 4,304

12
Table 2.6 Legal status – employers only by type of district
Urban Rural All
non-PSA4 PSA4 non-PSA4 non- PSA4 non-PSA4 non-PSA4 PSA4 non-PSA4
under- PSA4 under- under-
% % % % % % % % %
Company 69 40 55 61 42 47 67 41 51
Partnership 16 33 21 22 29 26 17 30 24
Sole proprietor 15 27 23 17 29 26 16 28 25
Unweighted n 2915 185 192 598 249 165 3,513 434 357
Similar patterns are repeated when businesses with no employees are excluded,
the main difference being a higher proportion of companies overall. Urban
businesses are most likely to be companies (66%), although in rural areas the
proportion of companies increases with decreasing population settlement size.
Partnerships are still most common in the most rural areas (27% of businesses).
As in the case of all businesses, employers in PSA4 districts are more likely to be
partnerships and sole proprietorships and less likely to be companies than those
in non-PSA4 districts, with non-PSA4 underperforming districts in between.
13
2.3 Size of business
The sizes of businesses in the survey are shown in Tables 2.7 and 2.8.
Table 2.7 Size of businesses (number of employees) in different types of area

% % % % %
None 70 70 76 79 71
Micros (1-9 employees) 25 26 21 18 25
Small (10-49 employees) 4 4 3 3 4
Medium (50-250 employees) 1 0 0 0 1
Unweighted n 3933 494 505 304 5,236
Table 2.8 Size of businesses (number of employees) in different types of

district
Urban Rural All
non-PSA4 PSA4 non-PSA4 non- PSA4 non-PSA4 non- PSA4 non-PSA4
under- PSA4 under- PSA4 under-
% % % % % % % % %
None 69 78 73 75 77 71 71 77 72
Micros (1-9
employees) 25 18 23 22 20 25 25 19 24
Small (10-49
employees) 5 3 4 3 3 3 4 3 4
Medium (50-
250 employees) 1 1 1 0 0 0 1 0 0
Unweighted n 3460 238 235 768 330 205 4,228 568 440
The difference in legal status of businesses in different types of area can in part
be explained by differences in the sizes of the businesses. Businesses with
employees are more likely to incorporate and so areas with a higher proportion of
no-employee businesses will also have a lower proportion of companies.
This difference is evident in the size distributions in different areas. In urban

areas 70% of businesses have no employees. In rural areas, the proportion of
zero-employee businesses increases with decreasing settlement size to 79% in
areas with dispersed dwellings. Conversely, the proportion of small and medium
businesses decreases in more rural areas.
PSA4 indicator districts appear to have a higher proportion of zero-employee

businesses and lower proportion of smalls and mediums than non-PSA4 districts,
but these differences are not significant.
When zero-employee businesses are excluded, the differences between areas are
smaller. There is little difference between the proportion of micros in rural towns,
villages, and areas with dispersed dwellings (86%, 88% and 85% respectively),
14
although the proportion is smaller in urban areas (83%). As the differences are
small, detailed results have not been shown but can be found in Tables A2.1 and
A2.2 in Annex 2.
2.4 Turnover
Respondents were asked for the approximate turnover of their business in the
previous 12 months. The answers are shown in Tables 2.9 by type of area and
2.10 by type of district.
Table 2.9 Turnover in different types of area, all businesses

% % % % %
£99,999 or less 38 43 42 35 39
£100,000 -
13 16 17 15 14
£249,000
£250,000 -
5 5 6 4 5
£499,999
£500,000 -
5 4 4 3 4
£999,999
£1m or more 6 4 3 7 6
Don’t know 11 9 10 8 11
Refused 22 19 18 28 21
Unweighted n 3,933 494 505 304 5,236

Table 2.10 Turnover in different types of district, all businesses
Urban Rural All

non-PSA4 PSA4 non-PSA4 non-PSA4 PSA4 non-PSA4 non-PSA4 PSA4 non-PSA4
under- under- under-
performin performin performin
g g g
% % % % % % % % %
£99,999 or less 37 42 43 41 39 42 38 40 43
£100,000 -
13 15 11 17 16 14 14 16 13
£249,000
£250,000 -
6 4 5 6 4 6 6 4 6
£499,999
£500,000 -
5 1 2 4 3 4 5 2 3
£999,999
£1m or more 7 4 4 5 2 5 6 3 4
Don’t know 11 12 11 9 9 9 11 10 10
Refused 21 22 23 18 27 20 21 25 21
Unweighted n 3,460 238 235 768 330 205 4,228 568 440
Given the high proportion of respondents that said they didn’t know their turnover
or refused to answer, these figures are highly uncertain.
15
It appears that a higher proportion of businesses in urban and dispersed rural
areas have turnovers of over £1 million and a lower proportion have turnovers of
less than a quarter of a million compared to businesses in rural towns and
villages. In urban areas this is probably because businesses tend to have more
employees, whereas in dispersed areas it is more likely to be due to the higher
proportion of capital-intensive primary industries (see Section 2.6).
Urban businesses in non-PSA4 districts tend to have higher turnovers than those
in PSA4 districts, but there is no significant difference in rural areas.
Tables 2.11 and 2.12 show the turnovers of businesses in different types of area
and district when businesses with no employees are excluded.
Table 2.11 Turnover in different types of area, employers only

% % % % %
£99,999 or less 11 14 17 12 12
£100,000 -
14 18 16 12 15
£249,000
£250,000 -
14 16 13 15 14
£499,999
£500,000 -
12 8 12 11 12
£999,999
£1m or more 18 12 11 18 16
Don’t know 12 14 14 10 12
Refused 19 18 18 23 19
Unweighted n 3,292 402 384 226 4,304

Table 2.12 Turnover in different types of district, employers only
Urban Rural All

performin performin performin
g g g
£99,999 or less 11 16 16 13 14 22 11 15 19
£100,000 -
14 20 17 14 20 18 14 20 18
£249,000
£250,000 -
14 11 12 15 11 16 14 11 14
£499,999
£500,000 -
13 5 7 12 9 8 13 7 8
£999,999
£1m or more 18 13 14 15 10 11 18 11 12
Don’t know 11 15 17 13 13 13 12 14 15
Refused 19 20 17 19 23 12 19 22 15
Unweighted n 2,915 185 192 598 249 165 3,513 434 357
16
When zero-employee businesses are excluded, the pattern of turnover is even
clearer. Again, urban and dispersed rural areas appear to have a higher
proportion of businesses with turnovers of £1 million or more, and rural towns and
villages have a higher proportion with turnovers of less than £250,000.
Businesses in PSA4 districts tend to have lower turnovers than those in non-PSA4
districts for both urban and rural areas. The proportion of businesses with
turnovers of over £1 million is around 5 percentage points lower in PSA4 districts
in each case.
2.5 Age of business

Tables 2.13 and 2.14 show the age distribution of businesses in different types of
area and different types of district.
Table 2.13 Age of business in different types of area, all businesses

% % % % %
Three years or less 20 18 14 18 19
4-10 years 29 35 27 21 28
More than 10 years 51 48 59 61 53
Unweighted n 3933 494 505 304 5236

Table 2.14 Age of business in different types of district, all businesses

Urban Rural All
% % % % % % % % %
Three years or less 19 34 15 17 16 13 19 23 14
4-10 years 30 12 33 32 21 23 30 18 28
More than 10 years 51 54 52 51 62 65 51 59 58
Unweighted n 3460 238 235 768 330 205 4,228 568 440
The proportion of new businesses is highest in urban areas, with a fifth less than
four years old 8 . In urban areas and rural towns around half of businesses are
more than ten years old, compared to around 60% in other rural areas.
In urban PSA4 indicator districts businesses are much more likely to be new than
in non-PSA4 districts (34% compared to 19%). The pattern is different in rural
areas, where the proportion of new businesses is the same for PSA4 and non-
8
The sampling frame used in the survey is known to under-cover very new businesses. It
is therefore possible that differences in the proportion of businesses aged three years or
less in different types of area are entirely due to differences in how quickly they find their
way into the sampling frame.
17
PSA4 districts. In these areas the proportion of businesses older than 10 years is
much higher in PSA4 than in non-PSA4 districts (62% compared to 51%). The
main difference here is between urban and rural PSA4 indicator districts, with the
former home to a much higher proportion of new businesses.
Tables 2.15 and 2.16 show the age distribution of businesses in different types of
area and district when businesses with no employees are excluded.
Table 2.15 Age of business in different types of area, employers only

% % % % %
Three years or less 13 18 14 18 14
4-10 years 28 29 35 24 28
More than 10 years 59 53 51 58 58
Unweighted n 3292 402 384 226 4304

Table 2.16 Age of business in different types of area, employers only

Urban Rural All
% % % % % % % % %
Three years or less 13 19 7 15 18 20 14 18 13
4-10 years 28 28 28 32 31 23 28 30 25
More than 10 years 59 53 66 53 52 58 58 52 62
Unweighted n 2915 185 192 598 249 165 3,513 434 357
When the zero-employee businesses are removed, urban areas go from having
the highest proportion of new businesses to having the lowest proportion, with
13% less than four years old. The proportion of businesses older than 10 years
is greatest, at 59%, for urban employers, whereas in rural villages the proportion
drops to 51%.
These differences hint at an underlying difference in business populations. In

urban areas it appears that new businesses start as sole traders and take on new
employees over time. In contrast, rural villages have a large population of long-
term sole traders, with a smaller, separate population of established, but younger,
employers. In rural towns and areas with dispersed dwellings there is little
difference in the ages of businesses with and without employees.
With zero-employee businesses removed, the age distribution in rural PSA4

districts becomes much more similar to that in the non-PSA4 districts, showing
that in PSA4 districts new businesses tend have no employees.
18
2.6 Sectoral patterns
The sample of businesses in the ASBS is not large enough to enable a detailed
sectoral breakdown. However, businesses can be grouped into a broad
classification of primary (SIC codes A and B – agriculture, hunting and fishing),
production (C-E – mining and quarrying, manufacturing and electricity, gas and
water supply), construction (F) and service (G-O – all other) industries. Tables
2.17 and 2.18 show the sectors of businesses in different types of areas and
districts.
Table 2.17 Industry sector by type of area, all businesses

% % % % %
Primary 1 2 17 25 5
Production 12 7 8 10 11
Construction 9 11 11 8 9
Services 78 80 64 57 75
Unweighted n 3933 494 505 304 5236

Table 2.18 Industry sector by type of district, all businesses

Urban Rural All
non- PSA4 PSA4 non-PSA4 non PSA4 PSA4 non-PSA4 non-PSA4 PSA4 non PSA4
% % % % % % % % %
Primary 1 1 2 11 18 17 4 12 9
Production 13 7 8 8 9 8 12 8 8
Construction 9 8 5 10 9 12 9 8 8
Services 77 84 85 70 64 63 75 72 74
Unweighted n 3460 238 235 768 330 205 4,228 568 440
Unsurprisingly, urban areas and rural towns have a very low proportion of primary
industries (1% and 2% respectively), with the proportion much higher in villages
(17%) and areas with dispersed dwellings (25%).
The proportion of businesses in production and construction does not vary much
between types of area, the difference mainly being made up by services, which
make up 78% and 80% in urban and rural areas respectively, compared to 64%
and 57% in rural villages and areas with dispersed dwellings.
Urban PSA4 districts appear to have a lower proportion of production and

construction businesses than non-PSA4 districts, the difference being made up by
a greater proportion of service sector businesses. This is also true of non-PSA4
underperforming districts. In rural areas, PSA4 and underperforming areas have
a higher proportion of primary sector businesses than non-PSA4 districts (18%
compared to 11%) and fewer in the service sector, confirming that these districts
are indeed dominated by traditional industries.
19
Within PSA4 districts, the mix of sectors in rural areas is very different from that
in urban areas, with the former home to a much higher proportion of primary
sector businesses. As PSA4 districts tend to be characterised by a large primary
sector, this may mean that businesses in the urban parts of PSA4 districts are not
typical of those found in PSA4 districts in general.
Table 2.19 shows the sectors by type of area for employers only.
Table 2.19 Industry sector by type of area, employers only

% % % % %
Primary 0 3 6.5 13 2
Production 14 13 9 15 13
Construction 10 14 9 8 10
Services 75 71 76 64 74
Unweighted n 3292 402 384 226 4304

When zero-employee businesses are excluded, the proportion of rural businesses

in primary sectors drops markedly (13% compared to 25% for all businesses in
dispersed areas), showing that in these industries a high proportion of businesses
have no employees. (The reasons given for a businesses having no employees is
discussed in Section 8). Rural areas with dispersed dwellings still have the
highest proportion of both primary industries and also, in this case, production
industries.
In PSA4 districts the results are similar to those for all businesses. These are not
shown as the smaller sample size results in the differences not being statistically
significant.
20
3. Business Dynamics
A perennial problem of small business policy is in defining what constitutes a

“successful” business. One aspect often considered is business growth, and this
section looks at recent as well as anticipated growth, comparing the expectations
of respondents with the past behaviour of their business. Another aspect is
whether a business innovates and this section gives a summary of the responses
to questions asked on innovation. It also reports on perceived obstacles to
business success and Government support in the form of grants and loans.
Key findings are:
• Businesses in dispersed rural areas have the highest growth aspirations,

but are actually the most likely to have stayed the same size.
• Urban areas and rural villages have the highest proportion of businesses
with recent employment growth.
• There is little difference across types of area in the proportion of

businesses that had introduced innovation in the previous 12 months.
• In rural areas businesses in non-PSA4 districts were almost twice as likely

as those in PSA4 districts to have introduced new products in the previous
12 months (40% compared to 23%).
• For businesses in all types of area the four most commonly perceived
obstacles are competition, regulations, the economy and taxation.
• Businesses in rural areas are more likely than those in urban areas to cite
taxation and regulation as obstacles to success.
• Businesses in dispersed rural areas are twice as likely as those in other

areas to be claiming Government grants and loans.
• Rural businesses in non-PSA4 underperforming districts are more than

twice as likely as those in other districts to be claiming Government grants
and loans.
21
3.1 Growth
Respondents were asked several questions regarding their business growth and
growth aspirations. One of these was simply whether they aimed to grow their
business in the next 2 to 3 years. They were also asked to give the number of
employees 12 months previously and the number expected 12 months in the
future. From this, past and future behaviour could be classified into
“employment growth”, “employment the same” and “employment less”. The
results of this analysis are presented in Table 3.1.
Table 3.1 Growth aspirations, past growth and expected growth by type of
area, employers only
Total
Urban town village dispersed
% % % % %
Aims to grow business in next 2-3 years 67 64 68 73 67
Change in employment Employment growth 28 22 29 25 27
in past year Employment same 57 62 56 64 58
Employment less 15 14 15 10 14
Change in employment Employment growth 27 26 24 28 27
expected next year Employment same 66 68 71 65 67
Employment less 6 4 5 6 6
Unweighted n 3292 402 384 226 4304
Business owners in areas with dispersed dwellings have the highest growth
aspirations, with 73% saying they aim to grow their business. Those in rural
towns have the lowest, with 64% saying they aim to grow. However, these
differences are only significant at the 90% level.
Businesses in areas with dispersed dwellings are, however, most likely to have
stayed the same size in employment in the past year (64%), followed by those in
rural towns (62%). Those in urban areas and rural villages are most likely to
have grown (28% and 29% respectively) and to have shrunk (15% in each case)
in number of employees.
In rural areas businesses in PSA4 districts have lower growth aspirations than
those in non-PSA4 districts, with a significance of 90% 9 .
9
Growth characteristics for different types of district are shown in Annex 2, in Table A2.3,
since very few of the differences in this analysis are statistically significant.
22
3.2 Innovation
As a measure of innovation, respondents were asked in turn whether they had
introduced new products or services or new processes in the past 12 months. If
so, they were then asked whether these were new to the business or completely
new. Tables 3.2 and 3.3 show the proportion of businesses that had introduced
new products or processes.
Table 3.2 Innovation in past 12 months by type of area, employers only

% % % % %
Introduced new products 34 33 35 33 34
Introduced new processes 25 21 23 25 25
Unweighted n 1668 196 191 111 2166

Table 3.3 Innovation in past 12 months by type of district, employers only

Urban Rural Total
non-PSA4 non-PSA4 non-PSA4
non-PSA4 PSA4 performing non-PSA4 PSA4 performing non-PSA4 PSA4 performing
Introduced new
products 35 35 30 40 23 28 36 28 29
Introduced new
processes 25 24 22 23 28 14 25 27 18
Unweighted n 1465 96 107 307 112 79 1772 208 186

There is no significant difference across types of area in the proportion of

businesses that introduced new products or processes. In total 34% introduced
new products or services and 25% introduced new processes.
In rural areas businesses in non-PSA4 districts were almost twice as likely as

those in PSA4 districts to have introduced new products in the previous 12
months (40% compared to 23%). Conversely, businesses in PSA4 districts were
slightly more likely to have introduced new processes than in non-PSA4 districts
(28% compared to 23%).
3.3 Obstacles to success

Respondents were asked, first unprompted, then from a list of possible answers,
which factors presented obstacles to the success of their business. Chart 3.1
shows the most popular answers, where the unprompted and prompted responses
have been added together. Several of these factors are discussed in the sections
that follow.
23
Chart 3.1 Obstacles to the success of the business, employers only
Urban Rural, town Rural, village Percen

Rural, tdispersed dwelling
0 5 10 15 20 25 30 35 40 45
Co mpetitio n
The eco no my
Regulatio ns
Taxatio n
Recruiting staff
Cash flo w
Sho rtage o f skills generally
A vailability o r co st o f suitable
premises
Obtaining finance
Keeping staff
No o pinio n
Keeping up with new

techno lo gy
Transpo rt issues
Crime
Sho rtage o f managerial skills

o r expertise
Lack o f financial
understanding
Lack o f bro adband access
Lack o f custo mer demands
For businesses in all types of area the four most commonly perceived obstacles
are competition, regulations, the economy and taxation, and there are significant
differences between types of area in how commonly each of these are cited. In
urban areas competition is around five percentage points more likely to be cited
than in rural areas, whereas taxation and regulation are much more likely be
considered an obstacle in rural areas than in urban. The economy is most likely
to be perceived as an obstacle in rural villages.
Other significant differences were for transport issues (discussed in Section 6.3)
and access to broadband (Section 5.3), shortage of managerial skills (Section 8.1)
and crime.
24
3.4 Government support
It is relevant to look at the distribution of Government funded financial aid to
businesses. The ASBS does not contain any direct questions about funding from
Government grants, but does ask whether the business owner has had any
contact with Government in the last 12 months. “Yes - claiming grants and loans”
is one of the options for responses, and this is used as a proxy measure. Tables
3.4 and 3.5 show the proportion of businesses which had contact with
Government through claiming grants and loans.
Table 3.4 Contact with Government through claiming grants and loans by type
of area, employers only
% % % % %
6 5 4 11 6
Unweighted n 3,292 402 384 226 4,304

Table 3.5 Contact with Government through claiming grants and loans by
district, employers only
Urban Rural All

not PSA4 not PSA4 not PSA4
not performin not performi not performin
PSA4 PSA4 g PSA4 PSA4 ng PSA4 PSA4 g
% % % % % % % % %
5 6 7 4 6 12 5 6 10
Unweighted n 2915 185 192 598 249 165 3513 434 357
Around one in 20 businesses in urban areas and rural towns and villages have
claimed grants and loans in the last 12 months. In rural areas with dispersed
dwellings this fraction is significantly higher, at just over one in 10. This may
purely be a reflection of the farm subsidy system, with no real difference for other
grants or loans. However, it is interesting that the type of area in which SMEs
have higher turnovers (see Section 2.4) is the same as that where they receive
the highest proportion of grants, which are included in calculations of turnover.
Rural PSA4 districts do not have a much higher proportion of businesses claiming
grants and loans than non-PSA4 districts, but in non-PSA4 underperforming
districts the proportion claiming grants and loans is 12% – more than double that
in PSA4 districts.
25
4. ICT
As identified in the Rural Strategy, the Government aims to “ensure that the full
potential of broadband for delivering public services and increasing the
productivity of businesses is realised in rural areas”. This links in with the SBS
objective of increasing the use of ICT by small businesses. Part of the ASBS
addresses the use of ICT, and this section presents a summary.
Key findings are:
• The most common uses for ICT are record keeping, accounts, word
processing and e-mail, which are all used by more than 70% of
respondents.
• Businesses in dispersed rural areas are significantly more likely than those
in other types of area to use ICT. Those in rural towns are least likely.
• Lack of broadband access is cited as an obstacle to success in around 1 in

20 businesses based in rural villages or areas with dispersed dwellings.
26
4.1 Uses of ICT
Businesses owners were asked for what purposes they used ICT. Chart 4.1 shows
the most popular uses.
Chart 4.1 Most popular uses of ICT by type of area, employers only
Urban Rural, town Rural, village Rural, dispersed

Percen t
0 10 20 30 40 50 60 70 80 90
Record keeping
Accounts
Word processing
Com m unication by em ail
Research
Business w ebsite
Purchasing via Internet
Sales via Internet
Internet - int with Gov
Designing products
Sales via other e-networks
The most common uses for ICT are record keeping, accounts, word processing
and communication by e-mail. ICT is also used for research or a business website
by more than half of employers.
For almost all purposes businesses in rural areas with dispersed dwellings are
significantly more likely than those in other types of area to use ICT. Out of all
rural businesses, those in rural towns are nearly always least likely to use ICT,
giving a clear sequence towards higher ICT use in more remote areas. The use of
ICT in urban areas tends to fall between the rural extremes. These results may
indicate that in remote areas ICT is used to compensate for lack of direct contact,
27
or that business owners in remote areas are more likely to be running a home-
based enterprise or performing their own administration rather than employing
professionals.
Chart 4.2 show the most popular uses of ICT by type of district. For ease of
comparison between PSA4 and non-PSA4 districts, the rural and urban distinction
has been suppressed.
Chart 4.2 Most popular uses of ICT by type of district, employers only
PSA4 indicator district not PSA4 but underperforming not indicator district
Pe r ce nt
0 10 20 30 40 50 60 70 80
Record keeping
Accounts
Word processing
Com m unication by em ail
Research
Business website
Purchasing via Internet
Sales via Internet
Internet - for int with Gov
Designing products
Sales via other e-networks
Overall, the use of IT for each purpose given is always lower for businesses in
PSA4 districts than in non-indicator districts, with underperforming non-PSA4
districts usually in between the two. It is possible that this reflects lower skill
levels in PSA4 districts, but it could also be due to fewer businesses being able to
afford ICT.
28
4.2 Access to broadband
The proportion of respondents that said lack of broadband access is an obstacle,
either prompted or unprompted, is shown in Chart 3.1 in Section 3.
Businesses in rural villages and areas with dispersed dwellings are far more likely
to cite lack of broadband access as an obstacle (6% in each case) than those in
towns or urban areas (2% and 3%). However, in all cases the proportion that
said this is very small.
29
5. Transport Issues
Acknowledging the lack of public transport in rural areas, in its 2000 White Paper
the Government made a commitment to “better public transport”, promising
increased subsidy for rural buses and increasing its funding of the rural transport
partnership scheme. The ASBS 2004 contained questions on respondents’
experiences of public transport.
Key findings are:
• Despite the Government’s commitment to better public transport in rural

areas, businesses in rural areas find public transport less satisfactory than
those in urban areas in helping their workforce get to work.
• The level of satisfaction may be linked with perceived need. In rural

villages more than one third of respondents say that public transport
affects their ability to recruit staff, with just under a quarter of those in
other rural areas saying this.
• “Transport issues” are more likely to be considered an obstacle to the

success of the business in rural villages and areas with dispersed dwellings
than in urban and rural towns.
30
5.1 Satisfaction with public transport
Chart 5.1 shows the responses of business owners when asked how satisfactory
public transport is in helping them or their workforce get to work.
Chart 5.1 How satisfactory public transport is in helping

workforce/respondent get to work, employers only
Urban Rural, town

7.3% 1.8%
Very satisfactory 9.3%
Quite satisfactory 7.5%

18.0%
35.0%
Neither
42.6% 8.1%
Quite unsatisfactory
Very unsatisfactory 8.2%
Public transport not

used 11.1%
Unwilling to answer 30.0%
19.3%
Rural, village Rural, dispersed

3.4% 1.2%
10.5%
11.4%
5.9%
3.1%
6.8%
41.6% 44.4%
11.6%
30.9%
27.8%
As might be expected, the more rural the area, the less likely the
workforce/respondent is to use public transport to get to work. In all areas a
higher proportion of respondents say that public transport is unsatisfactory than
satisfactory. Business owners in rural areas are more likely than those in urban
areas to say that public transport is either quite or very unsatisfactory (39%, 38%
and 38% respectively for towns, villages and dispersed, compared to 30% for
urban). Respondents in urban areas are more likely to say that public transport is
either quite or very satisfactory (25%), followed by rural towns, where the
proportion is only 15%.
In urban PSA4 districts respondents are less likely to say that public transport is
satisfactory (20%) and more likely to say it is unsatisfactory (40%) than in non-
PSA4 districts (26% and 30% respectively). Those in rural PSA4 districts are
31
even less likely to say public transport is satisfactory (13%), but more likely than
those in rural non-PSA4 districts (12%). In rural PSA4 and non-PSA4
underperforming districts a higher proportion use public transport than in non-
PSA4 districts (40% and 34% compared to 46% do not use).
5.2 Public transport and recruitment

Respondents were also asked whether public transport affects their ability to
recruit staff. The responses given are shown in Table 5.1.
Table 5.1 Whether public transport affects the ability to recruit staff,
employers only
% % % % %
Yes 15 24 34 23 19
No – but other
recruitment problems 5 4 1 4 4
No - no recruitment
problems 77 68 60 66 73
Unweighted n 3292 402 384 226 4304
In urban areas public transport is less likely to affect recruitment, with 15% of
respondents saying that it does. Businesses in rural villages are most likely to
find that public transport affects recruitment, with more than one third (34%)
saying it does.
Results for PSA4 districts are not shown, as in both urban and rural areas
businesses in PSA4 districts public transport is only slightly more likely to affect
recruitment than in non-PSA4 districts.
5.3 Transport issues as an obstacle to success

In Chart 3.1 in Section 3, the proportion of respondents giving “transport issues”
as an obstacle to the success of the business is just over ten percent.
Transport issues are more likely to be considered an obstacle to the success of the
business in urban areas than in rural towns (10% compared to 7%). However, in
rural villages and areas with dispersed dwellings an even higher proportion of
businesses consider transport issues to be an obstacle (14% in each case). The
fact that transport issues are an obstacle in both urban and remote rural areas
highlights the different needs in these areas – while urban businesses face
problems such as congestion and parking, remote rural areas may suffer from a
lack of access.
In both urban and rural areas PSA4 districts are not significantly different from
non-PSA4 districts in the proportion of businesses that considers transport issues
an obstacle to success.
32
6. The Environment
The attitude of a business to environmental issues will be shaped by its location.

Several parts of the ASBS deal with environmental issues or related subjects,
including action taken to reduce the costs of energy, water and waste disposal,
the goals of the business and the effect that promoting the business as
environmentally friendly would have on growth.
Key findings are:
• In all types of area, the majority of businesses have not taken, and are
not planning to take, any action to reduce the cost of energy, water or
waste disposal.
• Nearly three quarters of businesses in urban PSA4 districts have taken no

action. In contrast, over 60% of businesses in rural PSA4 districts have
taken some action.
• Around 30% of businesses say that they would like the Government to do
something to help them improve their environmental performance.
• Businesses in rural villages are most likely to have a social or

environmental goal as their main purpose (42%) and are most likely to
reinvest their profits this way.
• Businesses in rural areas with dispersed dwellings are least likely to have
a social or environmental purpose, and those that say they do are least
likely to reinvest their profits this way.
• Rural businesses in non-PSA4 districts are much more likely to reinvest

their profits to further their social or environmental goals (38%) than
those in either PSA4 (23%) or underperforming (17%) districts.
• In rural villages around a third of respondents say that promoting their

business as environmentally friendly would have a positive effect on its
growth.
33
6.1 Action taken
Respondents were asked whether they had taken or planned to take any action to
reduce the cost of energy, water or waste disposal to their business. The three
most common actions taken were starting or improving recycling, reducing water
or electricity consumption, and improving the energy efficiency of buildings.
Actions taken for different types of area are shown in Chart 6.1.
Chart 6.1 Action taken to reduce cost of energy, water or waste disposal,
employers only
60
55 Urban
50
45 Rural,
tow n
40
Rural,
35
Percen t
village
30
Rural,
25 dispersed
20
15
10
0
None Start or Reduce w ater Energy Reduce Other
improve or elec efficiency of w aste
recycling consumption buildings
In all types of area, the majority of businesses had not taken and were not
planning to take any action at all. This proportion is highest in urban and
dispersed rural areas (57% and 56% respectively) and lowest in rural towns and
villages (52% and 51%). In all areas except rural villages, recycling is more
common than reducing water or electricity consumption. Overall, a similar
proportion of businesses in all types of area (around 16%) had started or were
planning to start or improve recycling.
There are more marked differences in action taken or planned between PSA4 and
non-PSA4 districts. The top three responses in each type of district are shown in
Table A2.4 of Annex 2. In urban PSA4 districts three quarters of businesses had
taken no action to reduce the cost of energy, water or waste disposal, compared
to 56% in non-PSA4 and PSA4 underperforming districts. In rural areas this
difference is reversed, with 39% of businesses in PSA4 districts having taken no
action, compared to 59% in non-indicator districts and 47% in underperforming
districts. Again, in all areas the most popular actions to take are recycling or
reducing energy/water consumption.
34
Across all types of area, improving the energy efficiency of buildings is always the
fourth most popular action.
6.2 Government help with environmental performance

Respondents were asked whether they would like the Government to do
something to help their business’ environmental performance. In general, the
proportion that answered yes to this question was just under 30%, with no
significant differences between different types of area.
This question was followed-up by asking businesses how they would like the
Government to help them. However, due to the variety of answers that were
given and the fact that only a minority of businesses said they would like help, the
counts were far too low to give robust results.
6.3 Social and environmental goals

Respondents were asked whether the main purpose of their organisation was
social or environmental. If it was, they were then asked a multiple choice
question on what they did with any profit or surplus generated by their business,
one option being that “profit is reinvested to further your social, including
environmental, goals” 10 . The proportions answering yes to these questions in
different types of area are shown in Tables 6.1 and 6.2 and in different types of
district in Tables 6.3 and 6.4. Since it is not possible to separate businesses that
have environmental goals from those that have social goals, these figures alone
cannot be used as a measure of environmental behaviour.
Table 6.1 Main purpose of the business is social or environmental, employers

only
Rural, Rural,
Urban Rural, town village dispersed Total
% % % %
34 33 42 31 35
Unweighted n 3,292 402 384 226 4,304

Table 6.2 Percentage of those whose main purpose is social or environmental

whose profit is mainly reinvested to further these goals, employers only
% % % %
26 25 28 19 26
Unweighted n 1,076 131 151 69 1,427

10
These conditions are used in the definition of social enterprises. However, they are not
in themselves sufficient for identifying a business as a social enterprise.
35
Businesses in rural villages are most likely to say that the main purpose of their
business is social or environmental (42%). They are also most likely to say that
their profit is reinvested to further their social or environmental goals (28% of
those with a mainly social or environmental purpose). Those in areas with
dispersed dwellings are least likely to do either (31% say their purpose is social or
environmental, 19% reinvest their profits to further these goals). This is not
surprising since businesses with social aims tend to need to be located close to
groups of people. Businesses in rural towns and urban areas fall between the
extremes.
Table 6.3 Main purpose of the business is social or environmental, employers

only
Urban Rural All
% % % % % % % % %
34 33 39 36 35 39 34 34 39
Unweighted n 2915 185 192 598 249 165 3513 434 357
Table 6.4 Percentage of those whose main purpose is social or environmental

whose profit is mainly reinvested to further these goals, employers only
Urban Rural All
% % % % % % % % %
27 26 21 23 38 17 26 33 19
Unweighted n 938 66 72 203 89 59 1141 155 131

Businesses in urban PSA4 and non-PSA4 districts are similarly likely to have a
social or environmental purpose (34% and 33% respectively). However, those in
PSA4 underperforming districts are significantly more likely to have a social or
environmental purpose (39%).
In rural areas the difference between districts in the proportion who say their
purpose is social or environmental is not significant. However, businesses in non-
PSA4 districts are much more likely to reinvest their profits to further their social
or environmental goals (38%) than those in either PSA4 (23%) or non-PSA4
underperforming (17%) districts.
36
6.4 Promoting business as environmentally friendly
Business owners were also asked how the growth of their business would be
affected by promoting it as environmentally friendly. Their responses in different
types of area are shown in Table 6.5.
Table 6.5 Effect on growth of promoting business as environmentally friendly,

employers only
Rural, Rural,
% % % % %
Positive effect 28 25 32 27 28
Negative effect 4 7 2 1 4
No effect 68 68 66 72 68
Unweighted n 1,682 191 186 115 2,174

In all types of areas most respondents said that promoting their business as
environmentally friendly would have no effect on its growth. Those in rural towns
were least likely to say that they thought it would have a positive effect on
business growth (25%), while respondents in rural villages were most likely to say
that it would have a positive effect (32%). Businesses in dispersed rural areas
were most likely to say they thought it would have no effect. These differences
are just outside the 95% level of significance.
37
7. Qualifications and skills
Because the sectors that are more common in different types of area require
different skills sets, it might be expected that variables such as the highest
qualification of a business owner and skills available in the organisation, including
management skills, vary a great deal between different types of area.
Respondents were asked to give their highest qualification, in addition to

answering several questions regarding the skills available in their workforce.
Key findings are:
• There is little difference in the highest qualification of business owners in

urban and different types of rural areas.
• Business owners in PSA4 districts are more likely to have no qualifications

than those in non-PSA4 districts.
• In urban and dispersed rural areas the perception of shortage of

managerial skills as an obstacle to success was higher than in rural towns
and villages.
• Marketing skills appear to be more readily available in more highly

populated areas, as the proportion who are very satisfied with the skills
available increases with increasing settlement size.
• There is little difference in the proportion of businesses seeking general

advice across different types of area and district.
• In dispersed rural areas the proportion of businesses using Business Link

for advice on regulations is more than double that in all other areas.
38
7.1 Qualification of owner
Table 7.1 shows the highest qualification of respondents for urban and rural
areas.
Table 7.1 Highest qualification of business owner, employers only

% % % % %
None 32 32 33 35 32
Postgraduate degree or
12 8 8 11 11
equivalent
Degree, higher degree
24 24 22 22 24
or equivalent
A levels or equivalent 10 12 13 12 11
GCSEs or equivalent 14 13 16 13 14
Other 7 11 7 7 7
Unweighted n 3,292 402 384 226 4,304

There is little difference in the highest qualification of business owners in different

types of area, although those in rural towns and villages are slightly less likely
than those in urban or dispersed rural areas to have postgraduate degrees.
Business owners in rural villages are most likely to have only GCSEs and those in
areas with dispersed dwellings most likely to have no qualifications. The
statistical significance of these differences is above 90%.
There is slightly more variation when businesses are grouped into those in PSA4
and non-PSA4 districts. Table 7.2 shows highest qualification by type of district.
Table 7.2 Highest qualification of business owner, employers only
Urban Rural All

non-PSA4 non PSA4 non PSA4
non- performin performin performin
PSA4 PSA4 g non PSA4 PSA4 g non PSA4 PSA4 g
% % % % % % % % %
None 32 37 27 32 34 34 32 35 31
Postgraduate degree
12 9 9 8 9 9 11 9 9
or equivalent
Degree, higher
25 22 19 24 21 22 25 21 21
degree or equivalent
A levels or
10 11 17 12 16 8 10 14 12
equivalent
GCSEs or equivalent 13 17 17 15 13 10 14 14 13
Other 7 3 8 7 7 16 7 6 12
Unweighted n 2,915 185 192 598 249 165 3,513 434 357
39
Business owners in PSA4 districts are more likely to have no qualifications than
those in non-PSA4 districts in both urban and rural areas. They are also less
likely to be qualified to degree level or above. In rural areas, the highest
qualifications of those in not PSA4 but underperforming districts resemble those in
the PSA4 districts.
7.2 Skills shortages as an obstacle to success

Two of the obstacles to success discussed in Section 3 relate to the skills available
in the business. Overall, 8% of respondents said that “shortage of managerial
skills” was an obstacle and 15% cited “shortage of skills generally” (Section 3,
Chart 3.1).
The proportion of respondents citing shortage of managerial skills shortages as an

obstacle is highest in urban and dispersed rural areas (8% and 12%) and lowest
in rural villages (5%).
Although the results follow a similar pattern to those for managerial skills, there is
no significant difference between types of area in the proportion citing general
skills shortages as an obstacle. Despite being reported by a similar proportion of
respondents, the reasons skills shortages are encountered in urban areas and in
dispersed rural areas may be quite different. For example, the sectoral mix in
urban areas may require more specialist skills, whereas in remote rural areas
there may be a more general problem with recruitment.
There are no significant differences between PSA4 and non-PSA4 districts in the
proportion of businesses who cite skills shortages, either managerial or general,
as an obstacle to success.
7.3 Satisfaction with marketing skills available

In another question business owners were asked how satisfied they are with the
marketing skills available in their organisation. The responses are shown in Table
7.3.
Table 7.3 Satisfaction with marketing skills available in organisation,

employers only
% % % %
Very satisfied 32 29 26 24 30
Quite satisfied 44 41 46 49 44
Neither satisfied nor dissatisfied 13 15 16 13 13
Quite dissatisfied 6 6 8 10 6
Very dissatisfied 1 3 1 2 2
Don't know 5 5 3 1 4
Unweighted n 3,292 402 384 226 4,304
The proportion who are very satisfied with the marketing skills available in their
organisation is highest in urban areas (32%) and decreases with settlement size,
40
to 24% for dispersed rural. However the proportion who are either quite or very
satisfied with the skills available varies less, from 76% in urban areas to 71% in
rural towns.
7.4 Training of managers

Respondents were also asked to estimate the proportion of their managers that
have had training to improve their leadership and management skills. Tables 7.4
and 7.5 show the proportion who trained less than 10%, 10-49%. 50-89% and
greater than 90% of their managers.
Table 7.4 Proportion of managers that have had training to improve

leadership and management skills, employers only
Rural, Rural,
% % % %
<10% 75 77 65 77 75
10% - 49% 7 4 7 6 6
50% - 89% 7 6 10 9 7
>=90% 11 13 18 8 12
Unweighted n 1,641 206 195 121 2,163

Responses were similar in urban areas, rural towns and rural areas with dispersed
dwellings, with around three quarters of businesses training fewer than 10% of
their managers, and around one in 10 businesses training more than 90% of their
managers. In rural villages business owners train a higher proportion of their
managers, nearly one in five training 90% or more and two-thirds training less
than 10%.
Table 7.5 Proportion of managers that have had training to improve

leadership and management skills, employers only
Urban Rural All
non-PSA4 non PSA4 non PSA4
non-PSA4 PSA4 performing non PSA4 PSA4 performing non PSA4 PSA4 performing
% % % % % % % % %
less than
10% 76 68 77 71 76 73 75 74 75
10% - 49% 7 4 8 6 6 2 7 6 4
50% - 89% 7 4 6 7 6 14 7 5 10
90% or more 11 24 9 16 11 12 12 15 11
Unweighted n 1,456 85 100 305 132 85 1,761 217 185

In urban PSA4 districts nearly a quarter (24%) of businesses provided training for
more than 90% of their managers, compared to only 10% in non-PSA4 districts.
In rural areas this is reversed, with 11% of PSA4 district businesses training more
than 90% of their managers compared to 16% in non-PSA4 districts.
41
7.5 Seeking advice
Respondents were asked whether they had sought general advice and information
for running the business in the last twelve months. Overall, 29% of businesses
had sought general advice, a proportion that does not vary significantly between
types of area and district.
Businesses were also asked from which sources they had sought advice on
regulations. The proportion who had sought advice from each source is always
small (less than about 10%), except in the case of accountants, which are used
by around 30% of employers. There is little difference between types of area in
the sources of advice used, with the exception of Business Link. More than double
the proportion of businesses in dispersed rural areas had used Business Link for
advice about regulations than in all other types of area (10% compared to 3% to
5% in the other areas).
42
8. Family businesses and businesses with no
employees
In the preceding sections the analyses performed have been for businesses with
employees. This section focuses mainly on the smallest of businesses – those
with no employees – and the reasons for this. A common reason given for a
business having no employees is that the owner uses family instead. Therefore
this section begins with an analysis of the locations and sectors where family-
owned businesses are most likely to be found.
Key findings are:
• There is not a large variation between sectors in the proportion of

businesses that are family owned. However, in rural towns and villages
businesses in primary industries are more likely to be family owned than
those in other sectors.
• Businesses in urban areas are always less likely to be family owned than
rural businesses.
• For businesses with no employees, the proportion that are family owned
increases with increasing rurality, to 82% in dispersed dwellings.
• The main reasons for a business having no employees are that there is not
enough work to require them or that the owner prefers to work on their
own.
• In rural villages and areas with dispersed dwellings another main reason
for having no employees is that family area used instead. In dispersed
dwellings it may also be too expensive to employ anyone.
43
8.1 Family businesses by sector
Chart 8.1 shows the proportion of businesses that are family owned, comparing
businesses across different locations and sectors.
Chart 8.1 Business is family owned, all businesses
Urban Rural, town Rural, village Rural, dispersed dwelling

Percen t
0 10 20 30 40 50 60 70 80 90 100
Prim ary
Production
Construction
Services
Across all sectors more than half (and in most cases more than two thirds) of
SMEs are family owned. In general, there is not a large variation between sectors
in the proportion that are family owned. In rural towns and villages businesses in
primary sectors are more likely to be family owned than those in other sectors.
However, in urban and dispersed rural areas there is no significant difference
between sectors.
The location of the business appears to be a more important factor in whether it is

family owned. In urban areas 67% of businesses are family owned, compared to
82% in rural areas with dispersed dwellings. The difference is most apparent in
primary industries, where businesses are around 30 percentage points more likely
to be family owned in rural areas than urban areas. In all industries except
primary, businesses in dispersed rural areas are most likely to be family owned.
44
8.2 Family businesses by size
Chart 8.2 shows the proportion of businesses of different sizes and in different
locations that are family owned.
Chart 8.2 Business is family owned, all businesses

Percen t
0 10 20 30 40 50 60 70 80 90 100
None
Micro (1-9
em ployees)
Sm all (10-49
em ployees)
Medium (50-249
em ployees)
As may be expected, the larger a business is the less likely it is to be family

owned. In all size bands, businesses in rural areas are more likely to be family
owned, with the proportion clearly increasing with increasing rurality.
It can be seen that businesses with no employees are more likely to be family
owned than businesses with employees. In dispersed rural areas 82% of
businesses with no employees are family-owned. This figure is 78%, 74% and
70% for rural villages, towns and urban areas respectively.
45
8.3 Reasons for having no employees
Owners of businesses with no employees were asked why this was. The main
reasons given are shown in Chart 8.3, broken down by type of area.
Chart 8.3 Why business does not have any employees, zero-employee
businesses

Percen t
0 5 10 15 20 25 30 35 40
Not enough work to

require em ployees
Prefer to work on
own
Use fam ily
Too expensive
Use casual staff

when needed
Em ploym ent
regulations
In general the main reason for a business having no employees is that there is
not enough work to require them, with the proprietor’s preference for working on
their own the second most popular reason (except in rural towns). In rural
villages and areas with dispersed dwellings businesses are more likely than in
towns or urban areas to have no employees because the proprietor uses family
instead (21% and 22% compared to 15% and 8%). In areas with dispersed
dwellings another main reason is that it is too expensive.
It appears that in populated areas the reason for having no employees is mostly
preference, whereas in remote rural areas having no employees is equally likely to
be due to financial constraints.
In PSA4 districts owners are less likely to say they prefer to work on their own
(20% compared to 26% for non-PSA4 districts and 33% for non-PSA4
underperforming). Businesses in PSA4 and non-PSA4 underperforming districts
are slightly more likely to use family. There are no marked differences in other
reasons.
46
In Table 8.1 the proportion of businesses saying they have no employees because
they use family is broken down by whether or not the business is family owned.
Table 8.1 Business has no employees because use family, zero-employee

businesses
Urban town village dispersed Unweighted n
% % % %
Family business 20 9 25 23 672
Not family business 4 4 8 0 260
Total 15 8 21 19 932
Unweighted n 641 92 121 78 1864

Not surprisingly, family-owned businesses are much more likely to give using
family as a reason for having no employees, but there is still an appreciable
proportion of non family-owned businesses that use family instead of employees.
This proportion is highest in rural villages.
47
9. Summary/Conclusions
This analysis of the ASBS 2004 has investigated the differences between English
businesses in urban and different types of rural area and districts which are
underperforming in productivity. The results do not show an overall pattern, and
for some topics the location of a business does not appear to have any effect on
responses. However, in many cases there is a clear split between SMEs in rural
and urban areas and, in some instances, a clear sequence in settlement size.
There is also a variety of responses across different types of district, with PSA4
and non-PSA4 districts sometimes different and sometimes similar. Businesses in
the urban parts of PSA4 districts may also be different from those in rural parts.
9.1 Differences between rural and urban businesses

The main differences found between SMEs in urban and rural areas are in size and
form. Of the businesses interviewed, 70% (74% of the employers) were located
in urban areas, a good reflection of the actual registered businesses population
(99.5% of which are SMEs). Comparing this percentage with population figures
shows that there are more businesses per head in rural areas than in urban areas.
Businesses in rural areas tend to be smaller. The proportion of businesses with

no employees is higher in rural than urban areas, and in rural towns and villages
there is a higher proportion of SMEs with turnovers less than £250,000. In urban
areas and rural towns there is a higher proportion of businesses with 10-250
employees than in rural villages and areas with dispersed dwellings.
Urban areas are home to a higher proportion of companies than rural areas, which
may in part reflect the higher proportion of employers. However, rural areas have
a higher proportion of partnerships, which increases with decreasing settlement
size and is highest in dispersed dwellings.
As would be expected, the proportion of primary sector businesses is much higher

in villages and areas with dispersed dwellings than in urban areas and rural
towns, making up a quarter of all SMEs in rural areas with dispersed dwellings.
Businesses with no employees tend to be younger in urban areas than in rural

areas, suggesting that urban businesses start small and grow. Indeed, urban
areas and rural towns have the highest proportion of businesses that grew in
employment in the past 12 months.
The main reasons business owners give for having no employees are that there is
not enough work to require them or that the owner prefers to work on their own.
In rural villages and dispersed dwellings using family is another main reason for
having no employees. Businesses in dispersed dwellings also cite cost as a
reason.
There is a clear difference between types of area in the proportion of businesses

that are family owned, with rural businesses more likely than urban to be family
48
owned and the proportion increasing with decreasing settlement size. However,
there is not a large variation between sectors.
Businesses in rural areas are more likely than those in urban areas to cite taxation
and regulation as obstacles to success.
9.2 The effects of remoteness

Several subjects covered in the ASBS relate to how well remote areas are
connected to the infrastructure. This is perhaps most visible in the delivery of
public transport. Businesses in rural areas find public transport less satisfactory
than those in urban areas in helping their workforce get to work. In addition, in
rural villages more than one third of respondents say that public transport affects
their ability to recruit staff. Again, “transport issues” are more likely to be
considered an obstacle to the success of the business in rural villages and
dispersed dwellings than in urban and rural towns.
Rural villages and dispersed dwellings may also suffer from a lack of technological
connections, although this problem is only one third as likely to be mentioned as
transport; around 1 in 20 businesses in these areas cite lack of broadband access
as an obstacle to success. However, there is also evidence of ICT being used to
overcome the obstacle of remoteness, with a clear increase in ICT use with
decreasing settlement size. In dispersed dwellings businesses are more likely
than in all other types of area to use ICT.
Recruiting staff may also be difficult in more remote areas. The proportion of
respondents that are very satisfied with the skills available in their organisation
decreases with decreasing settlement size.
In contrast, businesses in rural villages are marked out by the strength of their
social and environmental credentials. These businesses are most likely to have a
social or environmental goal as their main purpose and are most likely to reinvest
their profits this way. In rural villages around a third of respondents say that
promoting their business as environmentally friendly would have a positive effect
on its growth.
9.3 Dispersed areas and PSA4 districts

Several patterns in the survey responses reflect an overlap between businesses in
dispersed areas and those in PSA4 districts. This makes sense, as PSA4 districts
are characteristically those in more remote areas.
Businesses in dispersed rural areas have the highest growth aspirations, but are
actually the most likely to have stayed the same size. This may reflect a lack of
resources to enable growth. Indeed, businesses in dispersed rural areas are more
likely to have some reliance on Government support, being twice as likely as
those in other areas to be claiming Government grants and loans. However,
these areas tend to buck the trend of lower turnover in rural areas, with a similar
proportion of high turnover businesses to urban areas, possibly due to the higher
proportion of subsidized and capital-intensive primary sectors.
49
Businesses in PSA4 districts tend to be similar to the more dispersed rural areas
in having a higher proportion of partnerships and sole proprietorships than non-
PSA4 districts, a higher proportion of businesses with no employees and a higher
proportion of primary sector businesses. They also reflect dispersed areas in that
they are less likely to reinvest their profits to further social or environmental
goals. However, the ages of businesses resemble those in urban areas, with a
higher proportion that are three years or younger than in non-PSA4 districts.
The underlying deprivation in PSA4 districts is reflected in the fact that business
owners in these districts are more likely to have no qualifications than those in
non-PSA4 districts. It may also be evident in the fact that cost saving actions are
more common; over 60% of businesses in rural PSA4 districts have taken or plan
to take action to reduce the cost of energy, water or waste disposal. This is in
contrast with all types of rural and urban area, where the majority of businesses
have taken no action. The propensity to innovate also appears to be linked with
economic performance; in rural areas businesses in PSA4 districts were only half
as likely as those in non-PSA4 districts to have introduced new products in the
previous 12 months (23% compared to 40%).
9.4 Dynamic potential

Perhaps surprisingly, there are few differences across types of area in terms of
the potential for dynamic businesses. There is little difference in the highest
qualification of business owners in urban and different types of rural areas. There
is little difference across different types of rural and urban area in the proportion
of businesses that introduced innovations in the previous 12 months. In all types
of area the vast majority of businesses use ICT, more than 70% overall, and the
types of use showed little variation, the most common being for record keeping,
accounts, word processing and e-mail.
50
Annex 1 Methodology
A1.1 Rural and Urban Definitions

The Rural and Urban Definition 11 was launched in 2004 alongside the Rural
Strategy. It aimed to give a more sophisticated definition of “rural” areas than
those previously available and to enable analysis of the social and economic
characteristics of rural areas at a more local scale than has ever been possible.
The 2004 definition is based solely on settlement patterns in hectare grid squares
and surrounding areas. Each grid square is associated with a particular
settlement type: dispersed dwelling, hamlet, village, small town, urban fringe and
urban (urban areas being defined as settlements with a population greater than
10,000). These are then grouped into four categories: urban; rural, town and
fringe; rural, village or hamlet; and rural, dispersed.
Each grid square can then be given a sparsity score based on the number of
households in surrounding squares up to a distance of 30km, which are then
classified into “sparse” and “less sparse”.
This process leads to an eightfold definition of urban/rural areas, where each of

the four settlement types can be further divided by sparsity, as shown in Figure
A1.1 Classification at the level of 2001 Census Output Areas, Wards and Super
Output Areas can be assigned by aggregating the underlying hectare grid squares
classification.
Figure A1.1 Schematic diagram of the Rural Urban Definition 2004
A1.2 PSA4 Productivity Indicator Districts

In addition to classifying Census Output Areas (OAs), Defra has applied a
Rural/Urban classification to all Local Authority Districts (LADs) in England 12 .
The classification is built upon the assignment of each Output Area making up the
11
Documents describing the Rural and Urban Definition 2004 can be found on Defra’s
website at: http://statistics.defra.gov.uk/esg/rural_resd/rural_definition.asp
12
A description of the Local Authority Classification can be found alongside the Rural
Urban Definition documents on Defra’s website at:
http://statistics.defra.gov.uk/esg/rural_resd/rural_definition.asp
51
LAD to one of the four settlement types of the new rural definition. Recognising
the importance of market towns as drivers of rural productivity, for the purposes
of the LAD classification “larger market towns” 13 are added to the three rural
settlement types.
The PSA4 Productivity Indicator Districts are those LADs used to measure Defra's
PSA4 Productivity target (as discussed in Section 1.2). These indicator districts
are selected from LADs with a predominately rural population and perform poorly
against a basket of socioeconomic indictors 14 . For locations of these districts see
Map 1 (at end of Annex). In this report businesses based in PSA4 Productivity
Indicator Districts have been separated by whether their OAs are urban or rural.
This is to prevent urban businesses from influencing the comparison between
prosperous and poorly performing rural areas.
A1.3 Adding rural and urban flags

The postcode of each business in the ASBS database was used to assign it a flag
indicating the eightfold rural/urban classification. A second flag was added
indicating whether the business was located in a PSA4 Productivity Indicator
District or not, with a third category of “not PSA4 District but contains
underperforming areas” included. Throughout this report these are referred to as
“PSA4”, “non-PSA4” and “non-PSA4 underperforming” districts.
In order to keep counts high in each band, the full rural/urban classification has
not been used for this analysis. Instead, “sparse” and “less sparse” have been
combined and analysis has been performed by the four settlement types of urban,
rural town and fringe, rural village and rural dispersed dwelling.
Analysis has also been performed by PSA4, non-PSA4 and non-PSA4

underperforming districts, presented by urban, rural and all locations.
A1.4 Data limitations and significance testing

At the start of 2004 there were 4.3 million businesses in the UK but only 1.2
million of these had employees – zero employee businesses therefore make up
the majority of the small business population. Only one sixth of the ASBS sample
is of businesses with no employees, meaning that in analysis the weight given to
each of these businesses is very large. Because of this, and since it is difficult to
say how representative these businesses are of the zero employee population as a
whole, the analysis presented focuses mainly on businesses with employees.
The statistical package SPSS was used to produce the analysis presented here
and also to estimate the statistical significance of results. For each table
presented chi-square estimates have been obtained, the level of statistical
13
Larger market towns are identified as a certain set of urban areas having a set of
functional attributes that serve a wider rural hinterland. LADs with a population greater
than 37,000, or more than 26 percent of their population, in rural settlements and larger
market towns are classed as rural.
14
For further details see Defra’s PSA Technical note and Addendum to PSA4
(Productivity): http://www.defra.gov.uk/corporate/busplan/busplan.htm
52
significance representing the probability that the differences between columns is
real and not the result of sampling variability. Before running this test the weight
of each record was multiplied by a constant factor to make the total count of the
group being tested equal to the total unweighted count for that group. This is
necessary when assessing the significance of weighted data.
Results presented are significant at the 95% level, unless otherwise stated.
It should be noted that many characteristics of businesses are inter-related and

that a relationship between two variables does not necessarily mean that one is
the cause of the other. There may be a common cause for both, for example,
differences in the underlying distribution of business size.
53
54
Annex 2 Additional Tables
Table A2.1 Size of businesses (number of employees) in different types of area,

employers only
% % % % %
Micros (1-9 employees) 83 86 88 85 84
Small (10-49 employees) 15 12 10 13 14
Medium (50-250 employees) 2 1 2 2 2
Unweighted n 3292 402 384 226 4304
Table A2.2 Size of businesses (number of employees) in different types of

Urban Rural All
% % % % % % % % %
Micros (1-9
employees) 83 83 83 87 86 87 84 85 85
Small (10-49
employees) 15 14 15 11 12 12 14 13 14
Medium (50-
250 employees) 2 3 2 2 1 1.5 2 2 2
Unweighted n 2915 185 192 598 249 165 3,513 434 357
Table A2.3 Growth aspirations, past growth and expected growth by type of
Urban Rural All
non-PSA4
under- non-PSA4 non-PSA4
performin under- under-
non-PSA4 PSA4 g non-PSA4PSA4 performing non-PSA4PSA4 performing
% % % % % % % % %
Aims to grow business
67 61 69 70 62 68 68 62 68
in next 2-3 years
Change in Employment
28 26 24 24 25 30 27 26 27
employment growth
Employment
in past year same 57 61 56 61 59 61 58 59 59
Employment
less
15 12 20 14 16 9 14 14 15
Change in Employment
28 23 28 26 21 31 27 22 30
growth
employment
Employment
expected same
66 71 70 70 71 61 67 71 65
next year Employment
less 6 6 2 4 6 6 6 6 4
Unweighted n 2915 185 192 598 249 165 3513 434 357
55
Table A2.4 Top three actions taken or planned to reduce cost of water, energy
or waste disposal by type of district, employers only
Unweighted
1 % 2 % 3 % n
Urban non-PSA4 Start or Reduce water
none 56 improve 16 or elec 11 1494
recycling consumption
PSA4 Start or Reduce water
non-PSA4 Reduce water Start or
underperforming none 56 or elec 15 improve 12 93
consumption recycling
Rural non-PSA4 Reduce water Start or
none 59 or elec 15 improve 13 302
consumption recycling
PSA4 Start or Reduce water
non-PSA4 Start or Reduce water
underperforming none 47 improve 18 or elec 15 73
56

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Small Businesses in Rural Areas-UK-2005

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Small Businesses in Rural Areas

An analysis of the Annual Small Business Survey 2004

Small Business Service Analytical Unit

October 2006 URN 06/2078

2. The Business Population ........................................................... 9

3. Business Dynamics ................................................................. 21

5. Transport Issues ..................................................................... 30

6. The Environment ..................................................................... 33

7. Qualifications and skills .......................................................... 38

8. Family businesses and businesses with no employees............ 43

Annex 1 Methodology ................................................................... 51

Annex 2 Additional Tables ............................................................ 55

1.1 Summary of main findings

• tend to be smaller than in urban areas, and a higher proportion have no

• are more likely to be in the primary sector;

• are more likely to be family businesses; and

• are less likely to find public transport satisfactory in helping their

Defra’s 2005-2008 PSA target 4 (productivity) is to “reduce the gap in

• a higher proportion are sole proprietorships or partnerships;

• they are less likely to have employees; and

1. Economic and social regeneration;

2. Social justice for all;

3. Enhancing the value of our countryside.

1.3 The Annual Small Business Survey

1.4 Definitions used in report

Analysis by whether the business is located in a PSA4 Productivity Indicator

1.4 Structure of Report

• The dynamics of rural businesses are discussed in Section 3 – their actual

• Section 4 addresses ICT use, a focus of Defra’s Rural Strategy.

• Section 6 concerns the environment, including the measures taken to

• Increasing skills is another policy area emphasised in the Rural Strategy;

• In Section 8 the differences in the characteristics of family-owned

• A summary of results is given in Section 9.

Key findings are:

• Urban areas have a higher proportion of companies than rural areas.

• Businesses in PSA4 districts have a higher proportion of partnerships and

• The proportion of businesses with no employees is higher in rural than

• Rural towns and villages have a higher proportion of businesses with

• Businesses with no employees tend to be younger in urban areas.

• In PSA4 districts a higher proportion of businesses are three years old or

• The proportion of businesses in the primary sectors is much higher in

• In rural areas, PSA4 and non-PSA4 underperforming districts have a

Table 2.1 Locations of businesses in survey

When businesses with no employees are excluded, the proportion of SMEs in

2.2 Legal status

Table 2.3 Legal status - all businesses by type of area

Unweighted n 3933 494 505 304 5236

Table 2.5 Legal status – employers only by type of area

Unweighted n 3,292 402 384 226 4,304

Table 2.7 Size of businesses (number of employees) in different types of area

Unweighted n 3933 494 505 304 5,236

Source: Small Business Service Analytical Unit

Table 2.8 Size of businesses (number of employees) in different types of

This difference is evident in the size distributions in different areas. In urban

PSA4 indicator districts appear to have a higher proportion of zero-employee

Table 2.9 Turnover in different types of area, all businesses

Rural, Rural, Rural,

Unweighted n 3,933 494 505 304 5,236

Table 2.10 Turnover in different types of district, all businesses

Urban Rural All

Table 2.11 Turnover in different types of area, employers only

Unweighted n 3,292 402 384 226 4,304

Table 2.12 Turnover in different types of district, employers only

Urban Rural All