Official Statistics

Longitudinal Small Business Survey: businesses with no employees – UK, 2023

Published 26 September 2024

1. Headline findings

• This edition of the Longitudinal Small Business Survey (LSBS) is the 9th Wave that has been completed since 2015. The report covers a broad range of topics that provide insights on small and medium enterprise (SME) performance and the factors that affect this. This report presents results for businesses with no employees.

• Following the economic shock of the COVID-19 pandemic in 2020 which resulted in some businesses temporarily ceasing or significantly reducing trading, there has been a return to levels of expected growth and aims for growth last seen prior to 2020.

• In terms of obstacles to growth, while high energy and other prices continue to be significant factors, fewer businesses now mention the UK’s exit from the EU in this context, and have returned to citing more traditional challenges, such as competition, taxation and regulation.

• Fewer businesses with no employees highlight uncertainty in price increases as an issue potentially hindering their plans for growth. This too suggests that in 2023 they feel they have been operating within a more settled, stable environment than in 2021 and 2022.

2. Summary of highlights from sections:

2.1 Business Performance

• In 2023, as in the previous two years, 9% of businesses with no employees had previously employed at least one person at the same time last year. There has also been little change in expectations of employment growth for the next 12 months year on year (12% in 2023, one percentage point higher than in the previous three years).
• In 2023, 32% of businesses with no employees reported growth in annual sales (turnover) over the preceding 12 months, which was a three percentage points decrease on 2022, but six percentage points higher than the pre-pandemic (2019) level. A similar proportion of businesses with no employees (31%) reported a fall in turnover during this period (up one percentage point on 2022).
• 28% of businesses with no employees expected turnover to increase in the next 12 months. This was a higher proportion than in 2022 (24%) but remained lower than in 2021 (36%) and 2020 (35%). Half of businesses with no employees (50%) thought turnover would stay roughly the same (54% in 2022), while 19% (as in 2022) thought it would decrease.
• As in 2022, half of businesses with no employees aimed to grow sales over the next three years, and this proportion has changed little since 2018 (50% in 2023 and 2022, 55% in 2021, 56% in 2020, compared with 52% in 2018 and 2019). This compared with 78% of SME employers (74% in 2022).
• 73% of businesses with no employees generated a profit or surplus in their last financial year (75% in 2022, 70% in 2021 and 67% in 2020). The trend reflects that evidenced among SME employers over the last three years (78% in 2023, 79% in 2022, 73% in 2021, 67% in 2020).

2.2 Exporting

• The propensity of businesses with no employees to export goods or services has changed little from year to year. In 2023, 12% of businesses with no employees exported goods or services in the last year, which compared with 11% in 2022 and 12% in 2021. Compared with SME employers, businesses with no employees were less likely to export (18% of SME employers) and those that did export were less likely to plan to increase their level of exports (49%, compared with 55% of SME employers), although plans to increase the level of exports were more prevalent in 2023 (35% in 2022).
• Businesses with no employees were also less likely than SME employers to import (14%, compared with 20% of SME employers), but while SME employers were less likely to import than in 2022 (down three percentage points in 2023), there was no change for businesses with no employees.

2.3 Access to external finance

• 58% of businesses with no employees were using some form of finance (57% in 2022 and 55% in 2021), a lower proportion than among SME employers (75%).
• 8% of businesses with no employees sought external finance in 2023, one percentage point higher than in 2022 and four percentage points higher than in 2021, taking this back up to 2020 levels.
• Businesses with no employees were more likely to report giving customers trade credit in 2023 than in 2022 (37%, compared with 32%), but less likely to have done so than SME employers (47%). Those that offered credit were less likely than SME employers to report late payment as a problem (48%, compared with 59%), but this has increased by six percentage points among businesses with no employees compared with 2022.
• Businesses with no employees were less likely than SME employers to have a formal written business plan in place (23%, compared with 39%), although there has been a small increase among businesses with no employees in this respect since 2022 (up two percentage points).

2.4 Innovation activity

• In 2023, 26% of businesses with no employees had introduced new or significantly improved goods or services in the last three years, which was an increase of three percentage points on 2022, although still below the level seen in 2021 (28%). This compared with 33% of SME employers in 2023. Since 2022, there was an increase in innovating businesses with no employees that had introduced goods or services that were new to the market (30%, compared to 24%).

2.5 Major Obstacles to the success of the business

• As in 2022, the level of energy prices was the most frequently cited obstacle to business success among businesses with no employees, although fewer businesses mentioned this in 2023 (48%, compared to 52% in 2022). This echoed the responses of SME employers (56% in 2023; 60% in 2022).
• Among the 60% of businesses with no employees with plans to undertake growth-related activities, 55% reported that plans had been affected by rising costs, which was seven percentage points higher than in 2022. The most significant issue for both businesses with no employees and SME employers was cost increases other than increased energy costs (79% and 76% respectively of those affected).

2.6 Business Support

• Businesses with no employees in primary sectors were the most likely to have sought information and advice (40%), whilst those least likely to do so were in the retail and wholesale, and transport and storage sectors (both 8%).

2.7 Future plans

• As in 2022, 50% of businesses with no employees aimed to grow sales over the next three years.
• Registered businesses were more likely than unregistered businesses to report an intention to grow sales (58% and 44% respectively).

2.8 Women-led businesses

• In 2023, 18% of businesses with no employees were majority-led by women, fewer than in 2022 and 2021 (20%). The proportion was higher among unregistered businesses (24%) than registered businesses (11%).

2.9 Minority Ethnic Group-led businesses

• About 6% of businesses with no employees were MEG-led (defined as having a person from an ethnic minority in sole control of the business or having a management team with at least half of its members from an ethnic minority. This was two percentage points higher than in 2022, and one percentage point lower than amongst SME employers in 2023.

3. What you need to know about these statistics:

The Longitudinal Small Business Survey (LSBS) is a telephone survey of UK businesses in the private sector with fewer than 250 employees. (This definition treats full-time and part-time employees equally.) This report summarises key findings from the 2023 survey (Year 9). It focuses on those businesses with no employees (‘non-employers’), with a separate report on SME employers.

Separate reports are published because we use two separate sampling frames and because the estimates for businesses with no employees include a large proportion of businesses which are not registered for VAT or PAYE. For the SME employers we use the Interdepartmental Business Register from the Office for National Statistics, which has complete coverage of the population from VAT and PAYE records, whereas for the sample of business with no employees we use both the IDBR and a commercial database provider to include businesses not registered for VAT or PAYE. 

The coverage of the unregistered business population is less well understood and small business who rely on word of mouth or platforms such as Facebook or Instagram are unlikely to be included in either of the sampling frames and therefore this should be considered when making comparison between the two reports. There is some guidance at the back of the report on the uncertainty that arises because we are using a sample of the UK SME population rather than collecting data from all of them.

We refer to registered businesses, who are those that appear in the IDBR (they are registered for VAT, but not PAYE) and unregistered businesses, who are those that are not registered for VAT, both with no employees (at the time of interview). 

In this report when we refer to business size this is defined entirely in terms of number of employees. Levels of turnover (sales) or assets are not part of our definition, though there are other definitions of business size which include these.

‘SMEs’ stands for ‘small and medium enterprises’ – but this is always taken to include microbusinesses and non-employers too. The LSBS covers all SMEs, not just small businesses, though this report only covers non-employers.

This is a longitudinal survey as we try to re-interview businesses (SME employers and businesses with no employees) each year – 460 businesses have taken part in all nine years of the survey so far (‘panellists’), and another 6,177 businesses in 2023 had taken part in at least one previous survey. In addition, there were 3,504 businesses new to the survey (‘top-ups’). The overall LSBS sample in 2023 was 9,681, including 1,861 businesses with no employees on which this report is based.

Throughout the report, where figures sum to less than 100% when you think they should sum to 100% (because they cover all possibilities) the shortfall will be due to businesses saying they did not know the answer or refusing to answer or might be due to rounding of estimates to the nearest whole percentage.

Our respondents were each randomly assigned to one of three cohorts and some questions were only asked of one cohort (though most questions went to all three cohorts). The underlying data tables that accompany this report group cohort questions separately, so the report and charts make clear when they are covering cohort questions, to allow you to find the corresponding data table if required.

4. Business performance

4.1 Changes in the levels of employment

In the data tables accompanying this publication, table 36 shows how many employees businesses had on their payrolls across all UK sites 12 months before their interview and table 37 shows how the size of the workforce has changed over the last 12 months.

An estimated 9% of businesses with no employees employed at least one person 12 months previously, unchanged since 2021. (If the business had no employees at the time of the interview it is included in this report, even if it had employees 12 months earlier.)

Figure 1: Proportion of businesses with no employees who employed at least one person 12 months previously, by year

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Unregistered businesses were less likely to have had at least one employee a year ago than those that were registered (5% compared with 14%).

By sector, businesses in the accommodation and food service (17%), administrative services (16%) and construction (15%) sectors were most likely to have reduced their employment levels. Those in arts and entertainment (3%) were least likely to have done so.

4.2 Expectations for employment growth

In the data tables accompanying this publication, table 39 shows whether the business expects to have employees in 12 months’ time.

Some 12% of businesses with no employees expected to increase employment in a year’s time (one percentage point higher than in 2020, 2021 and 2022). Some 88% expected no change.

Figure 2: Proportion of businesses with no employees who expected to employ at least one person in 12 months’ time, by year

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Unregistered businesses are less likely than those that are registered to expect to be employing someone in a year’s time (9% and 15% respectively).

By sector, businesses in transport and storage (19%) and construction (17%) were more likely to expect to employ people, while those in financial and real estate (3%) sectors were least likely to expect to do so.

4.3 Changes in levels of turnover

In the data tables accompanying this publication, table 136 shows the change in turnover compared with 12 months ago.

An estimated 32% of businesses with no employees (that had traded for at least one year) reported growth in turnover (value of sales) since the previous year. A similar proportion of businesses reported the same turnover (35%), or a decrease (31%). Compared to 2022, there was a three percentage points decrease in businesses with no employees that reported turnover growth in the last 12 months, but this was six percentage points higher than the pre-pandemic (2019) level.

By nation, businesses with no employees in Wales and Northern Ireland were less likely to report an increase in turnover over the past year (24% and 25% respectively), than those in England (32%) and Scotland (37%). Those in Northern Ireland were also least likely to report a reduction in turnover - 19%, compared with 25% in Scotland, 26% in Wales and 32% in England.

Businesses with no employees in information and communications (43%) were the most likely to report growth in turnover, while those in construction were most likely to report a decrease in turnover (38%).

Figure 3: Current turnover compared to 12 months previously, by year (based on businesses with no employees trading for at least a year)

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4.4 Expectations of turnover in 12 months’ time

In the data tables accompanying this publication, table 140 shows the expected change in turnover in 12 months’ time.

In 2023, 28% of businesses with no employees expected turnover to increase in the next 12 months (a four percentage points increase on 2022, but an eight percentage point decrease on 2021), 19% expected turnover to decrease (as in 2022, but six percentage points up on 2021), and 50% expected turnover to remain at similar levels over the next year (down four percentage points on 2022, up three percentage points on 2021).

Registered businesses with no employees were more likely than unregistered businesses to expect turnover to increase over the next year (33%, compared with 25%), with unregistered businesses more likely than registered businesses to expect a reduction (22%, compared with 15%).

By sector, businesses with no employees in primary sectors were most likely to expect turnover to increase (19%), while those in the professional and scientific (24%) sector were most likely to expect a decrease in turnover in the next 12 months.

Figure 4: Expectations of turnover in 12 months’ time, by year

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4.5 Profit

In the data tables accompanying this publication, table 146 shows whether the business without employees generated a profit or surplus in the last financial year

In 2023, 73% of businesses with no employees generated a profit or surplus in their last financial year (a decrease of two percentage points on 2022). This compares with 78% of SME employers in 2023.

Unregistered businesses were less likely to have generated a profit or surplus than registered businesses (71%, compared with 76%).

By sector, businesses with no employees in financial and real estate (89%), primary, professional and scientific, (both 81%) and construction (80%) were most likely to generate a profit or surplus, whilst those in other services were least likely to have done so (57%).

Figure 5: Percentage of businesses with no employees that generated a profit or surplus in the last financial year, by sector

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5. Exporting

5.1 Sales of goods or services outside the UK in the last year

In the data tables accompanying this publication, tables 41-45 show whether businesses exported goods or services.

Overall, 12% of businesses with no employees exported goods or services in the last year (an increase of one percentage point on 2022, and the same proportion as in 2021). This compared with 18% of SME employers that had exported goods or services in the preceding 12 months.

Registered businesses were more likely to have exported than unregistered businesses (14% and 10% respectively). However, the gap was narrower than in 2022 (15% of registered and 8% of unregistered businesses in 2022).

Figure 6: Whether sold goods or services or licensed products outside the UK in the last 12 months, 2023

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Businesses with no employees in Northern Ireland were most likely to export (including to the Republic of Ireland, 18%), compared to 14% of businesses with no employees in Scotland, 13% in Wales and 11% in England.

By sector, businesses with no employees that were more likely to export operated in; retail and wholesale (25%), information and communications (22%), manufacturing, and arts and entertainment (both 20%), while those least likely to export were in financial and real estate (1%), construction, accommodation and food services (both 2%), transport and storage (3%) and primary (4%) sectors.

5.2 Destinations of exports

In the data tables accompanying this publication, table 47 shows the destination of exported goods or services.

Of businesses with no employees that exported in the last year, 68% exported to European Union (EU) countries, while 76% exported to destinations outside the EU. After EU countries, the next most frequently cited export destination was the USA (53%), followed by EFTA (The European Free Trade Association) countries and Canada (both 18%), India (8%), China (5%), South Korea (3%) and Turkey (2%). The relative importance of each has not changed since 2022. Among businesses that exported, 47% reported exporting to the ‘rest of the world’.

5.3 Goods or services imports in the last 12 months (Cohort A only)

In the data tables accompanying this publication, table 2 (cohort A) shows whether businesses imported goods or services.

As in 2022, an estimated 14% of businesses with no employees imported goods or services in the previous year. In comparison, 20% of SME employers had imported goods or services in the last year.

Registered businesses were more likely to have imported goods or services in the previous year than non-registered businesses (18% compared with 10%).

Figure 7: Sources of imports for businesses with no employees

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5.4 Plans to increase exports, start exporting and intermittent exporting (Cohort C)

In the data tables accompanying this publication, table 3 (cohort C) shows whether businesses have had overseas sales every year, and tables 6, 7 and 8 (cohort C) show whether businesses planned to start or to increase exporting in the next few years.

In 2023, 49% of current exporters planned to increase their level of exports over the next few years, a significant increase on 2022 (35%). This compared with 55% of SME employer exporters

Of businesses with no employees that did not currently export but who had a product or service suitable for exporting, 25% planned to export (a ten percentage points increase on 2022, but a six percentage points decrease on 2021). As a percentage of all businesses with no employees, 5% did not currently export but planned to in the future, which compared with 4% of SME employers.

Of businesses with no employees that have exported for two years or longer, 62% have had overseas sales every year since they started exporting (an increase of eight percentage points on 2022). Thus, 33% have had some years without overseas sales. Among SME employers who have exported, 79% have made overseas sales every year since they started exporting.

6. Access to external finance

6.1 Types of external finance currently used

In the data tables accompanying this publication, table 79 shows the types of finance that businesses without employees currently use.

Overall, 58% of businesses with no employees were using some form of external finance in 2023, similarly to 2022 (57%). It compares with 73% of SME employers.

Figure 8: Percentage of businesses with no employees currently using forms of external finance

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Reflecting the pattern observed previously, registered businesses (68%) were more likely to use external finance than unregistered businesses (49%).

Businesses in the primary (82%), and accommodation and food (78%) sectors were most likely to report use of one or more forms of external finance.

Among businesses with no employees the most common forms of external finance used were credit cards (26%), bank overdrafts (25%), loans from a bank, building society or other financial institution related to coronavirus (13%), loans from business partners, directors or owners (12%), and leasing or hire purchase (11%).  Fewer businesses with no employees were using Government or local authority grants or schemes directly relating to coronavirus support in 2023 than in the last 2 years (8%, 12% in 2022 and 19% in 2021), while only 3% had used Government or local authority grants or schemes not directly related to coronavirus.

As in 2022 and 2021, the use of any form of so-called ‘alternative finance’, not originating from banks, the public sector, or people known to the business (alternative finance refers to equity, factoring/invoice discounting, peer-to-peer loans and some forms of other finance ), was reported by 3% of businesses with no employees (7% of SME employers).

6.2 Whether businesses sought external finance in the last 12 months

In the data tables accompanying this publication, table 82 and 83 shows whether businesses without employees sought external finance in the last 12 months.

Some 8% of businesses with no employees had sought external finance in the last year – one percentage point higher than in 2022, and four percentage points higher than 2021. Five percent of businesses with no employees sought external finance once, and 3% more than once. Businesses with no employees were less likely than SMEs to have sought external finance in the last 12 months (13%).

Registered businesses with no employees were more likely to have sought external finance than unregistered businesses (11% and 6% respectively).

By sector, businesses with no employees in transport and storage (25%), primary and construction (both 14%) sectors were the most likely to have applied for finance in the preceding 12 months.

For 33% of businesses with no employees that sought external finance, this was the first time they had done so.

Figure 9: Percentage of businesses with no employees that sought external finance in the last year, by year and registration status

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6.3 Type of external finance sought

In the data tables accompanying this publication, table 84 shows the types of external finance sought in the last 12 months.

In terms of the types of finance sought, 32% of those businesses with no employees that sought external finance applied for loans from banks or other financial institutions, and a similar proportion (30%) applied for a bank overdraft facility. Fewer applied for a loan from family or a friend (21%), a leasing or hire purchase (18%), Government or local authority finance grants or schemes (14%), credit cards (12%), or loans from business partners/directors/owners (10%). The mostly commonly sought types of finance among businesses with no employees reflects those sought by SME employers (38% of SME employers applied for a loan from a bank and 37% of SME employers applied for a bank overdraft facility). Businesses with no employees were more likely than SME employers to have applied for a loan from a family/friend (21%, compared to 13%) and Government or local authority finance grants or schemes (14%, compared to 7%).

6.4 Intentions to apply for external finance in the next three years

In the data tables accompanying this publication, table 149 shows the likelihood of businesses without employees approaching external finance providers in the next 3 years.

In 2023, 10% of businesses with no employees said it was likely that they would approach external finance providers in the next three years (5% very likely, 5% fairly likely). This was one percentage point lower than in 2022 and 2021 and compared with 21% of SME employers in 2023.

As seen previously, and reflecting the pattern observed in the data of businesses that have sought financial assistance in the past 12 months, registered businesses (13%) were more likely than unregistered businesses (8%) to say it was likely that they would approach external finance providers in the next three years.

Businesses with no employees in primary (24%) and transport and storage (18%) sectors were most likely to report it likely to approach external finance providers in the next three years.

6.5 Trade credit and late payment (Cohort A)

In the data tables accompanying this publication, table 9 (cohort A) shows whether businesses without employees give customers trade credit and table 12 (cohort A) shows whether they have experienced problems with late payment.

An estimated 37% of businesses with no employees reported that they give their customers trade credit (a five percentage points increase on 2022, but just one percentage point higher than in 2021). The provision of trade credit by businesses with no employees remains lower than among SME employers (47%).

Registered businesses were more likely than unregistered businesses to give their customers trade credit (45% compared with 28%). Trade credit was most likely to be given by businesses in the manufacturing sector (61%).

Late payment was considered a problem for 48% of businesses with no employees which gave trade credit (18% of all businesses with no employees overall), which was six percentage points higher than in 2022. An estimated 9% considered it a big problem (four percentage points higher than in 2022).

This compared with 59% of SME employers that gave trade credit who considered late payment a problem (28% of all SME employers).

6.6 Formal written business plans

In the data tables accompanying this publication, table 65 shows whether businesses have a formal written business plan.

In 2023, 23% of businesses with no employees had a formal written business plan. This was two percentage points higher than in 2022. This compared with 39% of SME employers in 2023. Among businesses with no employees, most (66% of those with a business plan) reported keeping plans up to date while the remainder (34%) did not.

Registered businesses with no employees were more likely than unregistered businesses to have had a formal written business plan (25% compared with 20%). However, there was little difference between registered and unregistered businesses in terms of having plans that are kept up to date (16% and 14% respectively).  

By sector, businesses with no employees in information and communications (39%), finance and real estate (33%), and education (27%) sectors were most likely to have a business plan. Within the latter two sectors, 22% of businesses with no employees reported having business plans that are kept up to date. Businesses in transport and storage (16%) and other services (18%) sectors were least likely to have a business plan.

Figure 10: Percentage of businesses with no employees which have formal written business plans

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7. Innovation activity

7.1 New or significantly improved processes in the last three years (Cohort C)

In the data tables accompanying this publication, table 19 (cohort C) shows whether the business has introduced any new or significantly improved processes in the last three years.

It is estimated that 15% of businesses with no employees had innovated processes for producing or supplying goods or services in the last three years – one percentage point higher than in 2022, and three percentage points higher than 2021. In comparison, 21% of SME employers in 2023 (as in 2022) innovated processes.

Registered businesses with no employees were more likely to have introduced process improvements than unregistered businesses (17% compared to 13%). This compared with 14% and 13% respectively in 2022.

7.2 New or significantly improved goods or services in the last three years

In the data tables accompanying this publication, tables 101, 102 and 103 show whether the business has introduced any new or significantly improved goods or services in the last three years.

It is estimated that 26% of all businesses with no employees had introduced new or significantly improved goods or services in the last three years, three percentage points higher than in 2022, and two percentage points lower than 2021. This compared to 33% of SME employers in 2023. There was no difference between registered and unregistered businesses with no employees in this respect (both 26%).

By sector, those most likely to have innovated goods or services were in information and communications (45%), arts and entertainment (39%), and education (35%) sectors, whilst those least likely to have done so were in primary (13%) and financial and real estate (11%) sectors.

Figure 11: Percentage of businesses with no employees which have introduced new or significantly improved goods or services, by registration status, 2023

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7.3 Innovations which were new to market or industry

In the data tables accompanying this publication, table 104 in the main data tables, and table 20 in the cohort C data tables show whether the new goods, services or process innovations were new to the industry or business.

Of all businesses with no employees that have introduced new or significantly improved goods and services in the last three years, 30% had introduced goods or services that were new to the market (up six percentage points on 2022). Of those that had introduced new or significantly improved processes, 31% had introduced processes that were new to their industry (up one percentage point on 2022, nine percentage points up on 2021 and up eleven percentage points on 2020).

Businesses with no employees within the manufacturing sector that introduced new or significantly improved goods or services were most likely to have introduced those new to the market (46%).

Registered businesses were more likely to have innovated in the market (33%) compared to unregistered businesses (28%).

8. Major obstacles to the success of the business (Cohort B)

In the data tables accompanying this publication, table 1 (cohort B) shows what businesses without employees consider to be the major obstacles to business success.

Figure 12: Percentage of businesses with no employees citing each major obstacle to the success of the business, by year

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As in 2022, the most frequently mentioned major obstacle to business success was the level of energy prices (48%, down from 52% in 2022, when this option was added). This echoed the responses of SME employers who also cited this most frequently (56%).

Competition in the market was the next most frequently cited obstacle (37%; 32% in 2022; 48% of SME employers in 2023), followed by other cost issues (33%; 25% in 2022; 30% of SME employers) and regulations and red tape (32%; 33% in 2022; 41% of SME employers).

Other obstacles mentioned by around one in four businesses with no employees, included: late payment (26%; 24% in 2022; 32% of SME employers in 2023), and the UK’s exit from the EU (25%; 23% in 2022; 30% of SME employers).

8.1 Whether experienced difficulties as a result of the UK’s exit from the EU (Cohort B)

In the data tables accompanying this publication, tables 2-7 (cohort B) shows which difficulties businesses without employees have experienced as a result of the UK’s exit from the EU.

For businesses with no employees citing the UK’s exit from the EU as an obstacle to business success, financial impacts were more frequent concerns than the impact on labour availability. Some 61% had already experienced an increase in the cost of imports from the EU (up nine percentage points on 2022), while 25% had experienced an increase in costs of exports to the EU (down nine percentage points on 2022 - whether or not directly experiencing them or having them passed on to them in supplier costs), and 17% experienced a decrease in investment or difficulty in raising capital (up two percentage points on 2022).

In comparison, 12% experienced difficulty in recruiting or retaining skilled EU labour (down four percentage points on 2022), whilst 10% experienced difficulty in recruiting or retaining unskilled EU labour (down five percentage points on 2022).

Figure 13: Major obstacles relating to UK exit from EU, experienced among businesses with no employees that cited EU exit as an obstacle

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9. Business support

9.1 Use of external information or advice in the last year

In the data tables accompanying this publication, table 106 shows whether businesses with no employees have used external information or advice in the last 12 months.

Each year from 2019 to 2023, 16% of businesses with no employees have reported seeking external information or advice (i.e. more than just a casual conversation) in the preceding 12 months. This compared with 26% of SME employers in 2023, among whom there has also been little change across the period.

As seen previously, registered businesses (19%) were more likely to have sought information or advice than unregistered businesses (13%). Compared with 2022, there was a four percentage points decrease among registered businesses and a two percentage points increase among unregistered businesses.

Businesses with no employees in primary sectors were the most likely to have sought information and advice (40%), whilst those least likely to do so were in the retail and wholesale, and transport and storage sectors (both 8%).

9.2 Purpose of information and strategic advice sought

In the data tables accompanying this publication, table 108 details reasons why businesses with no employees sought information or strategic advice in the preceding 12 months.

In 2023, businesses without employees were most likely to have sought information or advice on:

• Financial advice for accounting and general running of the business (23% - up four percentage points on 2022; 24% of SME employers in 2023)
• Business growth (21% - up five percentage points; 25% of SME employers)
• Marketing (15% - up three percentage points; 10% of SME employers)
• Improving business efficiency/productivity (15% - up six percentage points; 13% of SME employers)
• Legal issues (12% - up three percentage points; 15% of SME employers)
• Tax/national insurance law and payments (11% - down two percentage points; 14% of SME employers)
• Financial advice e.g. how and where to get finance (10% - up five percentage points; 8% of SME employers)

9.3 Sources of external information and strategic advice

In the data tables accompanying this publication, table 110 shows the sources of external information or advice.

Sources of external information and strategic advice cited by businesses with no employees included:

• Accountants (31%, a decrease of six percentage points on 2022; 35% of SME employers in 2023)
• Consultants/general business advisers (26%, as in 2022; 36% of SME employers)
• Business networks/trade associations (22%, one percentage point down on 2022; 19% of SME employers)
• Internet search/google/other websites (12%, one percentage point down on 2022; 7% of SME employers).

9.4 How information or strategic advice was delivered

In the data tables accompanying this publication, table 112 shows how external information or advice was delivered.

Of those businesses with no employees that received information or advice, 41% reported that it had been mainly delivered face-to-face (up from 30% in 2022).

There was also an increase in the use of email to deliver advice. Of the businesses with no employees that had received information or advice, 24% received it by email. This is an increase of five percentage points on 2022. Fewer reported receiving advice over the phone than in the last two years (18% in 2023, 20% in 2022 and 24% in 2021).

While registered businesses were more likely than unregistered businesses to have received information and advice by phone (23% and 11% respectively), the difference was not statistically significant.

Receiving information and advice through a website remains significantly lower than in 2021, following a 12 percentage points decrease from 2021 to 2022. At 10% in 2023, it was one percentage point lower than in 2022. Registered businesses were less likely than unregistered businesses to access information through a website (6% and 14% respectively)

9.5 Paying for strategic advice (England, Wales and Northern Ireland)

In the data tables accompanying this publication, table 120 shows whether or not businesses with no employees that received advice paid for it and table 121 shows how much they paid for it.

Of businesses with no employees in England, Wales and Northern Ireland that received strategic advice in the last 12 months, 50% paid for it (a decrease of seven percentage points on 2022). This is compared with 65% of SME employers.

Among businesses with no employees that paid for advice, 21% paid less than £500 (down 12 percentage points on 2022), a further 11% paid between £500 and £999, 24% paid between £1,000 and £2,499, and 42% paid £2,500 or more (up 14 percentage points on 2022).

Business with no employees who paid for advice paid £8,000 on average (mean). Means are affected by high values and can be misleading as a measure. This figure has been calculated only using responses with the exact amount paid for advice stated, so it excludes the respondents who gave an estimated figure within a range. The amount spent by a typical business with no employees is better reflected by using the median. The median amount paid was £1,800 (£1,000 in 2022).

10. Future plans

10.1 Growth ambitions

In the data tables accompanying this publication, table 147 shows whether or not businesses with no employees aimed to grow sales over the next three years.

As in 2022, 50% of businesses with no employees aimed to grow sales over the next three years. The equivalent figure for SME employers in 2023 was 78% (74% in 2022).

Figure 14: Percentage of businesses with no employees that aim to grow sales over the next three years

Download this chart’s data

Registered businesses were more likely than unregistered businesses to report an intention to grow sales (58% and 44% respectively).

By sector, businesses with no employees in manufacturing (63%) were most likely to be aiming to grow sales, while those in professional and scientific (41%) and health (37%) sectors were least likely to be aiming to grow sales.  

Figure 15: Percentage of businesses with no employees that aim to grow sales of the business over the next three years, by sector and year

Download this chart’s data

10.2 Plans to undertake growth-related activities (Cohort B)

In the data tables accompanying this publication, table 8 (cohort B) shows what plans businesses with no employees have in respect of business growth over the next three years.

Over the next three years, businesses with no employees reported having the following plans:

• 33% of businesses with no employees reported planning to work towards a target to reduce carbon/greenhouse gas/other emissions (28% in 2022, when this was first asked; 44% of SME employers in 2023)
• 28% planned to develop and launch new products or services (25% in 2022; 40% of SME employers)
• 23% planned to introduce new working practices (22% in 2022; 40% of SME employers)
• 19% planned to recruit new staff in the UK (19% in 2022, 2021 and 2020; 56% of SME employers)
• 18% planned capital investment in the UK (19% in 2022; 33% of SME employers)
• 14% planned to invest in R&D (12% in 2022; 25% of SME employers), and
• 12% planned to increase export sales or begin selling to new overseas markets (10% in 2022; 17% of SME employers).

Some 40% of businesses with no employees did not plan to undertake any of the activities listed above (14% of SME employers).

10.3 Whether plans for growth-related activities have been affected by rising costs (cohort B)

In the data tables accompanying this publication, tables 25-27 (cohort B) shows whether plans have been affected by rising costs

Of businesses with no employees planning to undertake growth-related activities, 55% reported plans had been affected by issues relating to rising costs. This was seven percentage points higher than in 2022 and was the same as that reported among SME employers in 2023.

When asked about the specific issues relating to rising costs that had affected plans, 44% of businesses with no employees pointed to increased energy costs (down from 57% in 2022; 47% of SME employers in 2023). Issues other than increased energy costs were reported by 79% of businesses with no employees (up from 68% in 2022; 76% of SME employers).

Of those businesses with no employees with plans affected by rising cost issues, 19% cited expectations of cost increases and 17% considered uncertainty relating to cost increases. There was a significant decrease in both expectations of further cost increases and uncertainty compared with 2022 (32% and 38% respectively in 2022), suggesting greater stability in 2023/24. A similar pattern is observed among SME employers (21% and 18% respectively in 2023, compared with 31% and 37% respectively in 2022).

11. Profiles of businesses with no employees

11.1 Number of sites

In the data tables accompanying this publication, table 6 shows the number of sites operated by businesses with no employees.

As in 2022, 94% of businesses with no employees operated from a single site in 2023. This was a one percentage point increase on 2021. This is compared with 88% of SME employers.

Unregistered and registered businesses with no employees were equally as likely to operate from a single site (94% for both, compared with 95% of unregistered businesses and 92% of registered ones in 2022).

Businesses with no employees in primary, health and other services sectors were least likely to operate from more than one site (all 88%).

11.2 Business premises in residential settings

In the data tables accompanying this publication, table 20 shows whether or not businesses with no employees work away from their home.

Some 66% of businesses with no employees located the main work premises in their home, compared with 29% of SME employers. There was no change in this compared with 2022, while it was one percentage point lower than in 2021.     

Registered businesses with no employees were less likely to be operating from home than unregistered businesses (62% and 69% respectively).

By sector, businesses in information and communications (86%), professional and scientific (80%), primary (79%), construction (77%) and administration (74%) were most likely to be operating from a residential setting. Those in the retail and wholesale and manufacturing (both 37%), other services (43%), and arts and entertainment (49%), sectors were least likely to be home-based.

11.3 Age of business

In the data tables accompanying this publication, table 16 summarises the years that businesses with no employees have been established.

Of all businesses with no employees, 12% had been trading for less than six years (that is, they started trading between 2017 and 2022) (13% among SME employers). Some 16% started trading between six and ten years ago, 28% between 11 and 20 years ago, and 44% more than 20 years ago.

Businesses with no employees in transport and storage (20%), accommodation and food service (19%) construction (17%), and retail and wholesale (16%) sectors were most likely to have traded for less than six years. Businesses with no employees in primary (64%), manufacturing (53%), and professional and scientific (52%) sectors were most likely to have been trading for more than 20 years.

11.4 Legal status

In the data tables accompanying this publication, tables 14 and 15 summarise the legal status of businesses with no employees.

Businesses with no employees were most likely to be sole proprietors (46%, 58% in 2022, 46% in 2021). This compared with 7% of SME employers.

Some 39% of businesses with no employees were private limited companies limited by shares (Ltd), which was 10 percentage points higher than in 2022. This compared with 73% of SME employers.  A further 7% of businesses with no employees were partnerships, the same percentage as SME employers, and 4% were private companies limited by guarantee (6% of SME employers).

Unregistered businesses were more likely to be sole proprietors than registered businesses (68% and 21% respectively), although the proportion of unregistered businesses that were sole proprietorships was higher in 2022 (81%; 23% of registered businesses in 2022).  Registered businesses were more likely than unregistered businesses to be private limited companies limited by shares (Ltd) (59% and 21% respectively).

Businesses with no employees in financial and real estate (60%), administrative services (59%), and information and communications (50%) sectors were most likely to be private limited companies limited by shares. 

Partnerships were most common within primary (46%) and accommodation and food services (40%) sectors.

11.5 Number of owners/partners/directors

In the data tables accompanying this publication, tables 8, 23, 25, 26 and 27 summarise who owns or leads businesses with no employees.

As owners and partners are not included as employees, businesses with no employees may have multiple owners and partners.

Overall, 90% of businesses with no employees were majority owned by the person or family who set them up (compared with 75% of SME employers). Nearly all family-owned businesses reported that the person or family who majority-owned was actively involved in managing the business (99%, compared with 98% of all SME employers).

Most businesses with no employees (93%) had no directors in day-to-day control of the business who were not owners or partners (compared with 75% of SME employers).  Most of the remainder (4%) had one director (12% of SME employers).

The majority of businesses with no employees had no more than one owner, partner or director (73%, compared with 42% of SME employers); 20% had two owners, partners or directors; 5% had between three and five, and 1% had six or more.

Unregistered businesses were more likely than registered businesses to have no more than one owner, partner or director (84% compared with 59%).

By sector, businesses in the health (87%), other services (85%), professional and scientific (83%) and information and communication (81%) sectors were most likely to have no more than one owner, partner or director.

11.6 Women-led businesses

In the data tables accompanying this publication, tables 31 and 33 summarise the extent to which businesses with no employees are led by women.

In 2023, 18% of businesses with no employees were majority-led by women (defined as controlled by a single woman or having a management team of which a majority were women). This is compared to 20% in 2022 and 2021 and was three percentage points higher than among SME employers.

Women-led businesses were more common among unregistered businesses (24%) than registered businesses (11%).

By sector, women-led businesses were most common in the health (57%), other services (31%), accommodation and food service (30%) and retail and wholesale (24%) sectors. Women-led businesses were least common in construction and transport and storage (both 2%), and information and communications (6%) sectors.

Overall, it was not possible to classify 3% of businesses with no employees as women-led or male-led, as there was insufficient information provided for these businesses (uncertainty regarding owners/partners’ gender or refusal to supply the information).

11.7 Minority Ethnic Group-led businesses

In the data tables accompanying this publication, table 35 summarises the extent to which businesses with no employees are led by someone from an ethnic minority group.

About 6% of businesses with no employees were MEG-led (defined as having a person from an ethnic minority in sole control of the business or having a management team with at least half of its members from an ethnic minority. This was two percentage points higher than in 2022, and one percentage point lower than amongst SME employers in 2023.

MEG-led businesses were most common in the information and communications sector (13%), and least common within the primary (1%) and manufacturing (none) sectors.

Overall, 3% of all businesses with no employees could not be classified as either MEG-led or non-MEG-led, as there was insufficient information provided for those businesses (uncertainty regarding owners/partners’ ethnicity or a refusal to provide it).

12. Accompanying tables

The following tables are available in Excel format and ODS on the website for this publication:

• Longitudinal Small Business Survey 2023: businesses with no employees – data
• Longitudinal Small Business Survey 2023: businesses with no employees – data – cohort A
• Longitudinal Small Business Survey 2023: businesses with no employees – data – cohort B
• Longitudinal Small Business Survey 2023: businesses with no employees – data – cohort C

The survey microdata will be deposited with the ONS Secure Research Service, Integrated Data Service, and the UK  Data Service during the Autumn of 2024. This will be available to approved researchers.

13. Technical information

13.1 Aims of the survey

This report sets out some of the key findings for the 2023 Longitudinal Small Business Survey (LSBS), a large-scale telephone, CATI (Computer Assisted Telephone Interviews) survey of 9,681 UK small business owners and managers, commissioned by the Department for Business, Energy and Industrial Strategy (BEIS) until February 2023 and now managed by the Department of Business and Trade. This link provides further details about Machinery of Government change https://www.gov.uk/government/publications/making-government-deliver-for-the-british-people/making-government-deliver-for-the-british-people-html

This survey is the latest in a series of annual and biennial Small Business Surveys (SBS) dating back to 2003. The 2023 survey was conducted between October 2023 and April 2024 by BMG Research Ltd.

The 2023 survey follows surveys conducted annually since 2015.  Sample bases for each year from 2015 to 2023 are summarised in Table 1. The 2015 survey was the largest SBS undertaken yet, while the second highest sample was undertaken in 2018. The main reason for large sample sizes in both 2015 and 2018 was to enable the survey to have a longitudinal tracking element, so, in 2015, establishing, and in 2018 further boosting, a ‘panel’ of businesses that might be re-surveyed in subsequent years, enabling a detailed analysis of how combinations of factors affect business performance through time. Any panel has an element of attrition, hence the need for a large sample size in 2015 and a boost in 2018.

Table 1

Year	Sample size
2023	9,681
2022	9,524
2021	9,325
2020	7,636
2019	11,002
2018	15,105
2017	6,619
2016	9,248
2015	15,502

In 2023, 3,504 top up interviews were conducted. This was in addition to 6,177 interviews with enterprises that had already completed at least one LSBS survey between 2015 and 2022. Top-ups were needed for the following reasons:

• to represent sections of the SME population that were not active in the 2022 survey fieldwork period (businesses less than one-year old)
• to represent sectors in the raw data that may be under-represented due to businesses in the panel closing, or being hard to secure an interview with (e.g., in cases where businesses work away from their main offices)

All interviews were conducted with owner/proprietors, Managing Directors or other senior directors in UK-based enterprises. For the top-ups, named contact details were not supplied, and it was necessary to screen to find an appropriate respondent. The average interview length was 22.9 minutes (21.2 minutes for panellists, 24.9 minutes for top-ups).

The main aim of the survey is to collect a range of information on SMEs. The survey measures:

• recent turnover and employment growth
• capabilities (in terms of their ability to innovate, export, train staff, etc)
• experience of accessing finance
• use of business support
• expectations of growing turnover and employment
• the major obstacles that prevent SMEs fulfilling their potential
• the characteristics of SMEs such as the number of sites they occupy, the number of owners, whether they have separate business premises, whether or not they are a social enterprise (or a socially oriented SME) etc
• the characteristics of their owners and leaders

There are three main reports based on the 2023 LSBS:

• a cross-sectional report based on SME employers. A cross-sectional report is a snapshot of the state of SMEs at any particular stage in time, this one being the latter quarter of 2023 to the end of the first quarter of 2024 (including the first month of the second quarter of 2024)
• a cross-sectional report based on businesses with no employees
• a longitudinal report based on those businesses that responded in the last four years of the survey. This looks at the main changes that apply to the ‘panellists’ from year to year, and what appears to influence these changes

21 of the 9,681 interviews were with large employers with 250 or more employees. The reason for interviewing these is that these businesses were SMEs when first interviewed but have since grown. They form a part of the longitudinal analysis, but not the cross-sectional.

13.2 Survey method

Of the 9,524 interviews conducted in 2022, 8,479 (89%) agreed to a follow-up interview. The objective was to obtain the highest possible number of repeat interviews with these panellists. 4,715 were interviewed between October 2023 and April 2024 (56%, slightly lower than in 2022 - 60% and 2021 – 62%, but higher than in 2020 - 51% and 2019 - 53%). Of these, 858 had no employees, 16 were large businesses with 250+ employees, and the remainder (3,876) were SME employers. This group is known as the ‘full panel’.

In addition, 8,047 businesses interviewed from 2015 to 2021 but not in 2022 could be re- approached for interviews (they had given permission for re-interview, had not refused to take part between 2015 and 2021, and had not ceased trading). 1,462 of these were interviewed in 2022, a response rate of 18% (16% in 2022, 18% in 2021, 13% in 2020, but still lower than the 21% achieved in 2019), of which 215 had no employees,1,247 were SME employers, and 5 were large businesses with 250+ employees. This group is known as the ‘past panel’.

In addition to these, 3,504 ‘top-up’ interviews were conducted, of which 788 had no employees and 2,716 were SME employers. As a result, the total sample size in the 2023 survey was 9,681, of which 1,861 had no employees, 7,799 were SME employers and 21 were large employers (250+ employees).

The top-ups were sampled using a method consistent with the 2015 to 2022 surveys:

• The sample was stratified within each of the four UK nations.
• Targets were set according to the employment size of enterprises and, within those targets, by 1-digit sector (using SIC 2007).
• The targets over-represented businesses with 5 to 249 employees substantially in comparison to their actual numbers within the business population.

For registered businesses, the Inter Departmental Business Register (IDBR) was used as the sample source. For unregistered businesses with no employees, a database from the commercial database provider Market Location was used. These contacts were screened out if they either had employees on their payroll or paid VAT, as these would have duplicated contacts found within the IDBR.

The IDBR is a record of all UK enterprises that pay VAT or PAYE, which contains around 2.7 million unique entries for enterprises. The DBT Business Population Estimates (BPE) publication 2023 estimated around 5.5 million enterprises in the UK in total. The difference in the figures is explained by the number of unregistered enterprises that do not pay VAT or PAYE, estimates of which derive from the Labour Force Survey (LFS). This is the reason why an alternative database was retained as the source for top-up businesses with no employees, as it contains records for both registered and unregistered businesses.

The targets within the sample stratification matrix were informed by the 2022 BPE(https://www.gov.uk/government/statistics/business-population-estimates-2022), the latest available at the start of fieldwork. However, survey findings were weighted to the 2023 BPE(https://www.gov.uk/government/statistics/business-population-estimates-2023) which were published a few months into the fieldwork period. The 2023 BPE was used for weighting as it more accurately represented the IDBR contacts used for the survey and provided a more up-to-date picture of UK small businesses than the 2022 BPE.

A 336-cell sample stratification matrix was devised, the targets within each cell informed by the 2021 BPE. These cells were defined by cross classifying the following three categories:

• 14 ‘one digit’ SIC 2007 categories (ABDE, C, F, G, H, I, J, KL, M, N, P, Q, R, S)
• 6 size categories (unregistered zero employees, registered zero employee, 1-4 employees, 5-9 employees, 10-49 employees, 50-249 employees)
• 4 nations (England, Scotland, Wales, Northern Ireland)

Once the sample was drawn, with sample sizes informed by differential likely tele-matching success rates for each cell (based upon experience from the previous surveys), no quotas were employed on size, sector, or any other criteria except for country, where Northern Ireland had a guaranteed minimum sample size set.

A review of the 2022 questionnaire was undertaken through consultations with stakeholders. This resulted in alterations to existing questions from previous surveys, as well as new questions being added and deleted. The changes were informed by the requirement to balance stakeholders’ latest needs with the desire to exploit the longitudinal power of the survey. The consultation was followed up by a ‘live’ pilot of 100 interviews of the adjusted year seven questionnaire.

Based on the whole sample, the response rate for full panellists was 56%, four percentage points lower than in 2022. For past panellists the response rate was 18%, two percentage points higher than in 2022, but the same as in 2021. For IDBR top-ups the response rate was 4%, as in 2022. For unregistered top-ups, the response rate was 5%, two percentage points higher than in 2022 and 2021. There is more detail in the technical report, which includes tele-matching rates and other forms of non-response.

13.3 Note on this report

Please note that the findings presented in this report relate to businesses with no employees only – SMEs with employees and large employers have been excluded from the dataset on which this report is based. This procedure is consistent with reporting of previous surveys. The overall sample size for non-employers across the UK in 2023 was 1,861.

13.4 Sample cohorts

One of the main reasons given by respondents who do not want to participate in LSBS is that the interview length is too long. In 2018, BEIS made a commitment to bring down the average interview length and introduced ‘cohort questions’, which we used again in 2023.

Three cohorts (A, B and C) were created. Each cohort was exclusively asked a series of non-key questions. For example, only cohort A was asked questions on business energy usage. Cohorts were chosen for respondents at random during their interview.

There were approximately 3,200 employers in each 2023 cohort: 3,230 in cohort A, 3,216 in cohort B and 3,214 in cohort C. Each respondent is part of one cohort only. Where a business is in each of the 2018, 2019, 2020, 2021, 2022 and 2023 datasets, its cohort for 2023 is entirely independent of its 2018, 2019, 2020, 2021 and 2022 cohorts (knowing a business was in cohort A in 2018 or 2019 or 2020 or 2021 or 2022 tells you nothing about which cohort it is in in 2023). Because of the different respondents answering questions for different cohorts, we have calculated separate cohort weights for analysing responses to the cohort questions. To analyse questions asked of cohort A in 2018, analysts should use the 2018 cohort A weights, for questions to cohort C in 2019 they should use the 2019 cohort C weights, and so on.

13.5 Sector definitions

Throughout this report, data tables show sectoral analysis by one-digit SIC 2007 codes. Because of relatively small numbers in the business population and survey sample, two of these sectors are grouped together: ABDE, labelled as primary, comprises (A) agriculture, fishing and forestry, (B) mining and quarrying, (D) electricity and gas, and (E) water, sewerage and waste management; KL, labelled as ‘financial and real estate’, comprises (K) finance and insurance, and (L) real estate.

To gain a better picture of the types of businesses that fall into each sector category, the following number of businesses with no employee in each sector and the percentage of them that are unregistered businesses:

• ABDE (primary). There were 110,200 non-employing businesses in this sector in 2023, of whom 13% were unregistered businesses
• C (manufacturing). There were 180,000 non-employing businesses in this sector in 2023, of whom 74% were unregistered businesses
• F (construction). There were 687,000 non-employing businesses in this sector in 2023, of whom 73% were unregistered businesses
• G (retail and wholesale). There were 299,000 non-employing businesses in this sector in 2023, of whom 48% were unregistered businesses
• H (transport and storage). There were 296,000 non-employing businesses in this sector in 2023, of whom 74% were unregistered businesses
• I (accommodation and food service). There were 79,000 non-employing businesses in this sector in 2023, of whom 69% were unregistered businesses
• J (information and communications). There were 242,000 non-employing businesses in this sector in 2023, of whom 54% were unregistered businesses
• KL (financial and real estate). There were 151,000 non-employing businesses in this sector in 2023, of whom 46% were unregistered businesses
• M (professional and scientific). There were 582,000 non-employing businesses in this sector in 2023, of whom 61% were unregistered businesses
• N (administrative services). There were 367,000 non-employing businesses in this sector in 2023, of whom 74% were unregistered businesses
• P (education). There were 288,000 non-employing businesses in this sector in 2023, of whom 95% were unregistered businesses
• Q (human health and social work). There were 281,000 non-employing businesses in this sector in 2023, of whom 90% were unregistered businesses
• R (arts and entertainment). There were 252,500 non-employing businesses in this sector in 2023, of whom 86% were unregistered businesses
• S (other services). There were 295,000 non-employing businesses in this sector in 2023, of whom 91% were unregistered businesses

More detail on the sectors is available in the DBT Business Population Estimates.

13.6 Uncertainty

Since the LSBS questioned a sample of UK SMEs, rather than all of them, there is inevitably a level of uncertainty around the estimates we derive from the survey and how close they will be to the true values.

13.7 Coverage and representativeness

In order to ensure the sample used in this survey is adequately representative of the UK SME population, we have used two sampling frames to draw our sample from. One is the IDBR from the Office for National Statistics, which has excellent coverage of registered businesses in the UK, as it is regularly updated with information from HMRC. In 2023 we used the Market Location service to provide us with a sample of unregistered businesses.

The coverage of the unregistered business population is less well understood. It is likely that the Market Location frame is good for well-established businesses that advertise their presence in trade directories for example. You can imagine a small business owner that relies on word of mouth and a few repeat customers and has no wish to expand the business for the moment (for example, there are people who make birthday cakes and other cakes in their own kitchens at home, who might have at most a Facebook page or Instagram account to advertise themselves). Neither of our sampling frames is likely to list this kind of small business.

Our sample is deliberatively unrepresentative in the sense that it overrepresents larger SMEs and overrepresents non-English businesses. This is to ensure that we have reasonable sample sizes for medium-sized businesses, Scottish businesses etc., otherwise we would not be able to obtain robust estimates for important subgroups. A truly proportionate sample would otherwise contain just a handful of medium-sized businesses. We produce survey weights so that analysts can nevertheless arrive at estimates that take due account of the actual distributions in the population – micro businesses have larger weights than medium-sized businesses for example.

Another way that our sample might be unrepresentative is that the businesses that take part in the survey (which is after all voluntary) are different from the businesses that we sample but do not agree to take part, with respect to the various questions we ask. This is known as non- response bias. For example, if struggling businesses are more likely to refuse to take part than thriving ones, then our final achieved sample will underrepresent struggling businesses, and estimates of things like future ambition, that might differ considerably between struggling and thriving businesses, might be biased.

It is hard to quantify non-response bias. We have taken a number of standard steps to try to minimise its risk. The research company that conducted our interviews made multiple attempts for each sampled business for which we could obtain a telephone number, so that we can get more of the reluctant businesses, and we did not have hard quotas for each of our ‘target cells’ (quotas for a target cell, for example 25 interviews of micro businesses in finance and real estate in Wales, can encourage an interviewer to give up quickly on reluctant businesses and focus on snapping up as many easier businesses as possible in order to meet their quota as quickly as possible). Sampled businesses were also given contact details for government officials so they could confirm the survey was genuine and official.

13.8 Sampling uncertainty

It is possible to quantify the amount of uncertainty that arises from using a sample instead of interviewing the entire population. There are a number of ways of doing this, but we will focus on using a statistical tool known as confidence intervals.

In order to run our survey, we drew a random sample. This means that on another day we would have drawn a different sample. With our actual sample, we estimated that 73.1% of businesses with no employees in 2023 made a profit or generated a surplus in the previous financial year. But it is possible that another random sample might have found that number to be 71.0%, or 75.2%, even though the actual true figure is unchanging. This is known as sampling variability.

What we can do is produce a 95% confidence interval around an estimate. The interval has been calculated using a method that, for 95% of the possible random samples we could have drawn, will produce an interval that contains the true value of this profitability measure. Each different random sample would have a different confidence interval, but 95% of the time the interval produced will contain the true value. So, our actual survey estimate is 73.1%, and we are 95% confident that the true value is in the range 71.0% to 75.2%.

Our survey contains hundreds of measures, and it is not practical to produce confidence intervals for each one of them. Instead, Table 2 summarises the sampling uncertainty for the key measures reported in this publication.

Most of the estimates from this survey are presented as proportions or percentages (such as 10%). If this was an estimate relating to all UK businesses with no employees, then we look at the ‘all UK’ row and the column for estimates at 10%. The confidence interval is given as +/- 1.4%. So, our confidence interval around the 10% estimate is 10% +/-1.4%, that is, from 8.6% to 11.4%. We are 95% confident that the true figure is between those values.

If the estimate had been closer to 30% or to 70%, then our interval would have used +/-2.1% instead of +/- 1.4%, according to Table 2. When estimates are close to 50%, that is the ‘worst case scenario’ in the sense that the confidence intervals are at their widest. They narrow more as the estimate moves away from 50% (in either direction). Thus, the intervals are slightly narrower for 30% or 70% estimates, and narrower still for 10% and 90% estimates.

Confidence intervals get narrower when you have larger sample sizes too. If our 10% estimate is for registered business with no employees rather than for all UK businesses with no employees, we use a different row of the table and find the confidence interval to be +/- 1.6%. If we have an estimate of 65% for the construction sector, that is pretty close to 70% so we use that column of the table and arrive at an approximate confidence interval of 65% +/- 6.2 %.

Table 2 is useful for estimates of proportions but cannot be used for other measures. For example, we have estimated a mean of external finance sought for by non-employers - £185,700.

Table 2 cannot be used to produce a confidence interval for this estimate, though it can be done in the data analysis software, and in this case, is calculated at +/- £101,200. The underlying data tables published alongside this report contain something called ‘standard errors’ for estimates that are not proportions, such as amount of finance sought, or number of employees. Standard errors are another way of quantifying the sampling variability. As a rule of thumb, twice the standard error gives you the ‘+/-’ for a 95% confidence interval.

Table 2

	Sample size	Confidence interval for an estimate of 10% or 90%+/- (%)	Confidence interval for an estimate of 30% or 70%+/- (%)	Confidence interval for an estimate of 50%+/- (%)
All UK	1,861	1.4	2.1	2.3
England	1,457	1.5	2.4	2.6
Scotland	174	4.5	6.8	7.4
Wales	133	5.1	7.8	8.5
Northern Ireland	97	6.0	9.1	10.0
Unregistered businesses without employees	563	2.5	3.8	4.1
Registered businesses without employees	1,298	1.6	2.5	2.7
ABDE. Primary sector	131	5.1	7.9	8.6
C. Manufacturing	108	5.7	8.6	9.4
F. Construction	207	4.1	6.2	6.8
G. Retail and wholesale	211	4.1	6.2	6.8
H. Transport and Storage	82	6.5	9.9	10.8
I. Accommodation and Food	67	7.2	11.0	12.0
J. Information and communication	121	5.4	8.2	8.9
KL. Finance and real estate	90	6.2	9.5	10.3
M. Professional and scientific	357	3.1	4.8	5.2
N. Administration and support	154	4.74	7.24	7.90
P. Education	107	5.68	8.68	9.47
Q. Human health	66	7.24	11.06	12.06
R. Arts and entertainment	73	6.88	10.51	11.47
S. Other services	87	6.30	9.63	10.51

For cohort questions, the margins of error increase by about 70% - for example +/- 2.0% becomes +/- 3.4% (to increase a number by 70%, multiply it by 1.7).This table applies to estimates of proportions.

13.9 Which differences are statistically significant?

Generally, throughout this report where we talk about differences (between the estimate for a subgroup and the total, say, or between two subgroups) we mean they are different even after taking account of the sampling variability. This is often described as statistically significant. Where we simply list numbers that are different (for example ‘England (41%), Scotland (38%), Wales and Northern Ireland (both 36%)’) this does not necessarily mean that they are statistically significantly different from each other. Where we draw attention to some estimate being ‘higher’, or a subgroup being ‘most likely’, or single out a sector as higher than the rest, this is a statistically significant difference.

For example, we have stated the following: Businesses in finance and real estate (89%) and professional and scientific (81%) sectors were more likely than average to have generated a profit or surplus. Those in other services (57%), transport and storage (65%), accommodation and food (67%), arts and entertainment (67%) and education (68%) sectors were less likely than average to have done so.

This does not mean that finance and real estate businesses were statistically significantly more likely to have generated a profit or surplus than professional and scientific businesses, but both these sectors were statistically significantly more likely than other businesses with no employees i.e., they were more likely to than average. Similarly, we are 95% confident that the four sectors mentioned were less likely than average to have done so, even though there is some uncertainty over those specific figures.

14. Definitions

Term	Description
Business, enterprise, firm	In this report these terms all mean the same – they are interchangeable.
Cohort	We use this term to describe the way the survey samples from 2018 onwards are divided into three separate groups (the cohorts) and answer some questions that are for their cohort only. This was done to increase the number of questions asked in the survey without increasing the average length of interview.
EFTA	European Free Trade Association. This comprises the countries of Iceland, Liechtenstein, Norway and Switzerland. The three countries apart from Switzerland are part of the European Single Market as members of the European Economic Area.
EU	The EU is the European Union. This comprises the countries of Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden
Exports	In this report this means a British business selling goods or services to a customer outside the UK. An English business selling to a Northern Irish business is not exporting, but a Northern Irish business selling to a customer in the Republic of Ireland is exporting.
Family-owned business	This means a business where a majority of the owners are in the same family. A business with a single owner is automatically a family-owned business, although a business with no owners is not. ‘Majority’ means more than half, but ultimately, we require the respondent to the survey to interpret this: where a business has more than one working owner or partner, they are simply asked if the business is family-owned and this is defined in the questionnaire as ‘majority-owned by members of the same family’.
Finance	In this report when we talk about businesses accessing finance or applying for finance, we usually mean borrowing money for business reasons. This might be from banks or other financial institutions or might be less formal arrangements such as money borrowed from friends and family.
Health sector	The health sector in this report is more accurately described as the ‘human health and social work sector’. It does not include veterinary services (which fall under the professional and scientific sector). As this survey covers the private sector, the National Health Service (NHS) does not come under the health sector for this survey; but private sector healthcare providers do.
Imports	In this report this means a British business buying goods or services from a business outside the UK. A Northern Irish business buying from a Welsh business is not importing, but a Northern Irish business buying from a business in the Republic of Ireland is importing.
Innovation	This refers to a business implementing a new or significantly improved product or process (which can also include new marketing methods or organisational methods). The international manual on collecting data about innovation is known as the Oslo Manual.
Longitudinal	A longitudinal study is one which collects data from the same unit as different times. We call this survey longitudinal because each year we try to re-interview businesses that took part in the survey in previous years. Analysts have specific methods for analysing longitudinal data. This report focuses on cross-sectional analysis – even when we refer to results from earlier years of the survey, we take no particular account of the fact that some businesses will have contributed to both years of the survey (in other words, the analysis is not longitudinal). We have longitudinal analysis in the panel report which we publish separately, and the dataset is available to approved researchers to perform their own longitudinal analysis if they wish.
Mean	A measure of the average which takes the total of whatever is being measured and divides it by the number of units being measured. (For example, mean turnover of micro-businesses in 2023 is the total turnover of micro-businesses in 2023 divided by the total number of micro-businesses in 2023.) As the LSBS is a sample survey, the mean is estimated, as we can only estimate the relevant total for example. The mean is a common and well-known statistical measure, but it can be affected by extreme values which make it poor as a measure of the ‘typical’ value of whatever is being measured. This is often a problem with business statistics as there are often many ‘extreme’ values.
Median	The median is an alternative measure of the average which is not affected by extreme values in the way that the mean can be. As such it is often a better way of finding a ‘typical value’ of whatever is being measured. The median is the middle value of what is being measured if all the measured values are put into order from smallest to largest value. As with the mean, in the LSBS we can only estimate the median as we are working from a sample.
Medium-sized business	A business which has between 50 and 249 employees (whether they are full-time or part-time). These are the largest SMEs, since businesses with 250 or more employees are defined as large businesses in this survey. Alternative definitions of business size are sometimes used by other studies (which might include consideration of annual turnover or total assets belonging to a business).
MEG-led business	A business where at least half of the leadership team comes from minority ethnic groups (as this is a UK survey, minority ethnic groups are those that are not of any White background, including White British,etc). The leadership team comprises the directors and working owners. We can include members of several ethnic groups and can include people who describe themselves as mixed ethnicity where White British background is one of those ethnicities.
Micro business	A business which has between one and nine employees (whether they are full-time or part-time).
National Minimum Wage, National Living Wage	The National Minimum Wage has been in operation in the UK since 1999. This sets a minimum value for the hourly rate of pay that employers must pay, though this level depends on the age of the employee and differs for apprentices. It does not depend on the size of the employing business. It is usually updated once a year following a (non-binding) recommendation by the Low Pay Commission but ultimately determined by the UK Government. The National Living Wage is a minimum wage that applies to workers from the age of 25 and has been in place since 2016.  It was extended to 23- and 24-year olds on 1st April 2021. As it is higher than the National Minimum Wage it effectively supersedes it for employees aged 25 or more.
PAYE	This stands for ‘pay as you earn’ and describes the system where employees’ taxes on income are deducted automatically from their pay before they are paid. If this is done accurately then the employee does not face an annual tax bill for these taxes. The relevance for this survey is that businesses that we describe as ‘unregistered’ will not be registered for PAYE with the UK tax authorities – so if a business is registered for PAYE we know that it ought to be included in our sampling frame for registered businesses, the IDBR.
Private sector, public sector	The survey is one of private sector businesses, which are businesses where the government ‘does not exercise significant control over the general corporate policy’ of the business. The Office for National Statistics follows international guidance to determine whether something is in the public sector, and have more information on their process here. Note that the private/public sector distinction is not the same as the market/non- market distinction and in particular note that charities and social enterprises can be in the private sector (in fact the majority of these are). The ONS page has more detail on this.
R&D	This stands for ‘research and development’ and in this survey is usually referred to in the context of ‘R&D spending’, meaning spending on creative and systematic work to increase the stock of knowledge or to devise new applications of existing knowledge. The international manual on collecting data about R&D is known as the Frascati Manual.
Red tape	This is an informal term used to refer to regulations or requirements that are imposed on a business or person. In this survey it is sometimes cited by businesses as an obstacle. Different businesses may have different ideas as to what counts as red tape, and the ultimate source of regulations that are perceived as red tape could be governmental or non- governmental.
Registered business	In our survey we use ‘registered’ businesses to mean those that are registered for PAYE (and so are employers) or registered for VAT (and so have an annual turnover above a certain threshold set by the UK Government). In either of these cases such businesses ought to be included in our sampling frame for registered businesses, the IDBR. Some unregistered businesses do appear in the IDBR, but we use a separate sampling frame for unregistered businesses which has better coverage of them.
Sector	In this report businesses are classified into one of a number of non- overlapping sectors. We use the Standard Industrial Classification but have combined some of the categories to make them more practical for our survey. See the ‘sector definitions’ section of this report for more detail.
SIC 2007	This is the specific version of the Standard Industrial Classification that is used for this survey, in common with most official statistics in the UK. This is a useful page from the Office for National Statistics website for more detail on SIC 2007.
Small business	A business which has between 10 and 49 employees (whether they are full-time or part-time). In some contexts, people use the term ‘small business’ to refer to all businesses that are smaller than large and medium- sized businesses (in other words all businesses with fewer than 50 employees) but in the LSBS we always use the narrower definition when referring to small businesses specifically.
SME	This stands for ‘Small and Medium Enterprises’, but this is commonly meant to refer to all businesses, firms and enterprises that have fewer than 250 employees, including those that have no employees at all. This means that in the LSBS ‘SMEs’ actually comprise business with no employees, micro businesses, small businesses and medium-sized businesses.
Surplus	Our survey includes not-for-profit enterprises and for many of these it is more appropriate to use the term ‘surplus’ to refer to an excess of revenue (money coming in, from all sources) over expenditure (money going out, for all reasons).
Trade credit	Trade credit is typically used to refer to when a business receives goods or services from another business but does not pay for it in full at the time of delivery. We ask about it in the survey in the section on finance, but we do not treat it as a form of external financing – rather, it is contrasted with late payments, so it is better thought of as a form of agreed delayed payment, with late payments a delayed payment that has not been agreed.
Turnover	In the LSBS this term is usually synonymous with ‘sales’. Although for the purposes of preparing accounts ‘turnover’ may be defined differently from ‘revenue’ or ‘sales’ we do not specify a particular definition in our questionnaire and assume that respondents interpret it to mean revenue from sales which do not take account of costs.
VAT	Value-added tax is tax which businesses are liable to pay if their annual turnover is above a certain threshold. Businesses which are registered for VAT with the UK tax authorities are considered to be ‘registered’ businesses for this survey and ought to be included in our sampling frame for registered businesses, the IDBR.
Women-led business	Women-led businesses are defined as those majority-led by women, that is controlled by a single woman or having a management team of which a majority are women. ‘Majority’ here means more than 50%.

15. Further Information

15.1 Future updates to these statistics

The Department for Business and Trade (DBT) intends to continue the survey for at least three further waves. The delay to field start date that occurred in 2020 impacted in turn on the 2021 and 2022 fieldwork dates. Interviewing which was planned to commence in July 2020 and continue to February 2021 was delayed to September 2020 and continued to April 2021 because of the uncertainty and upheaval caused by the coronavirus (COVID-19) pandemic. In 2022, this had a further impact in delaying field start to November 2021, which then continued to the end of April 2023.  Interviewing for the 2023 survey took place between the 2nd October 2023 and the 26th April 2024. We anticipate that the field dates for the 2024 survey will follow those of 2023. 

15.2 Related statistics

The related publication of statistics relating to SME employers is on the same day as this publication. DBT will also publish a panel report in Autumn 2024 which focuses on businesses that have taken part in several waves of this survey and associated longitudinal analysis. On the same day as the panel report we will publish the technical report which will include the questionnaire used for the 2023 survey.

The Scottish Government usually produces its own publication based on the same data but focused on Scottish businesses Small Business Survey Scotland: 2022-2023 - gov.scot (www.gov.scot)

DBT publishes the Innovation Survey which covers the topic of innovation in much greater detail and covers large businesses (which the LSBS excludes) but not micro businesses and non-employers (which the LSBS includes). Also, the National Survey of Registered Businesses (NSRB) which covers business sentiment around exporting and trade. The survey focuses on businesses with a turnover over £500,000 or more due to their higher potential to export.

As outlined elsewhere in this report DBT publishes the Business Population Estimates (BPE) which details the structure of the UK’s business population (and which the LSBS uses for determining sample sizes and for weighting). The BPE contains information about employment and turnover in different sectors and includes information at regional level as well as nationally.

The Office for National Statistics conducts many surveys of businesses, many of which cover topics that the LSBS examines too. A good starting place is the Annual Business Survey, which does not cover all the sectors of the economy but has very good coverage of large businesses.

The Department for Culture, Media and Sport (DCMS) publishes Social Enterprise  Market Trends, which takes a deeper look at the social enterprises that are identified in the LSBS. BEIS and DCMS worked to improve the survey questions used to identify social enterprises, with the new questions being used in the 2017, 2019, 2021 and 2023 surveys.

The Department for Education (DfE) conducts the Employer Skills Survey. The Employer Skills Survey for 2022 was published in September 2023  Employer Skills Survey , Calendar year 2022 - Explore education statistics - GOV.UK (explore-education-statistics.service.gov.uk). DfE also publishes statistics about apprenticeships by industry characteristics in England based on administrative data.

15.3 Uses of these statistics

As a wide-ranging survey of SMEs, the LSBS is of interest to many Government departments and agencies. Department for Energy Security & Net Zero makes use of the questions on energy use by SMEs to develop policies on business energy such as non-domestic smart meters. Statistics are used by the Government Equalities Office to monitor rates of women-led businesses in the SME population. The figures for MEG-led SMEs are published by the Government’s Race Disparity Unit as part of its  Ethnicity Facts and Figures service. DBT also uses the LSBS data to understand more about the export and import behaviour of UK SMEs and the operation of the UK internal market. As mentioned above DCMS makes use of the social enterprises data and the Scottish Government uses the data for evidence and analysis on a broad range of policy areas. 

In the past the Department for the Environment, Food and Rural Affairs (Defra) has analysed rural SMEs, and the Low Pay Commission has looked at what businesses say about the National Minimum Wage and National Living Wage. HM Revenue and Customs has sponsored questions looking at SME preparedness for the Making Tax Digital Programme. Innovate NI looks at Northern Irish companies and their innovation activities. The British Business Bank makes use of the data on access to finance.

The LSBS is increasingly widely used in the academic and research community, in the UK and abroad. We will run a mini competition later in 2024 for research teams to apply for small grants to conduct research using the latest LSBS data, and the data will continue to be made available by the ONS Secure Research Service,Integrated Data Service and the UK Data Service for approved researchers. The Institute for Family Business makes use of the survey in its ‘State of the Nation’ reports, and the Federation for Small Businesses has used the LSBS in its research work, for example the Unlocking Opportunity report https://www.fsb.org.uk/resource-report/unlock.html

15.4 User engagement

Users are encouraged to provide comments and feedback on how these statistics are used and how well they meet user needs. Comments on any issues relating to this statistical release are welcomed and should be sent to [email protected].

The department statement on statistical public engagement and data standards  sets out the department’s commitments on public engagement and data standards as outlined by the Code  of Practice for Statistics.

15.5 Statistics error and revision policy

The statistics error and revision policy sets out the revisions policy for these statistics, which has been developed in accordance with the UK Statistics Authority Code of Practice for Statistics.

15.6 Pre-release access to statistics

Principle T3 of the Code of Practice for Statistics requires that access to official statistics before their public release is limited to certain individuals. This includes those involved in the production of the statistics and the preparation of the release, and those involved for quality assurance and operational purposes. Pre-release access may only be granted in accordance with the rules and principles set out in the Pre-release Access to Official Statistics Order 2008. In addition, the order requires that records are published of those who have access prior to public release.

Below is the list of roles for people who received pre-release access to Longitudinal Small Business Survey 2023:

• Secretary of State, Department for Business and Trade (DBT)
• DBT Parliamentary Under Secretary of State, Minister Gareth Thomas
• DBT Special Advisers
• DBT Permanent Secretary
• DBT Deputy Director, Chief Statistician
• DBT Press Officers x1
• DBT SME Analyst x1

16. Contact

•        Responsible statistician: Jayshree Varsani

Email: [email protected]

•      Media enquiries: 020 7215 2000
•      Public enquiries: 07741 703241