Entrepreneurship And Smes In The Uk After Recession Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

This research explores the impact of entrepreneurship and Small and Medium Enterprises (SMEs) on the UK economy after recession. How the entrepreneurship and SMEs are playing very significant role in UK economy? Recent global recession has influenced many businesses in the UK and rest of the world.

Currently being employed by SME myself and a very strong believer of entrepreneurship knowing what can be the best practices for entrepreneurship and SMEs in the UK after Recession for faster and sustainable economic recovery is a really good topic to explore for me.

Business cycle phase of a deteriorating economy, which results in less business and consumer spending and depression of real estate prices, specifically defined as two consecutive quarters with negative economic growth is known as Recession.

This past recession was severe and worse in last hundred years in British Economic history, as it was rightly predicted by Ed Balls PMs Closest ally on his 9th Feb 2008 address. In a surprising confession about the severity of the economic downturn, Ed Balls even predicted that current recession's affects would still be felt 15 years from now.

The Schools Secretary's comments carried added weight because he was a former chief economic adviser to the Treasury and regarded as one of the Prime Minister's closest allies. Mr. Balls predicted "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out."

He warned that events worldwide were moving at a "speed, pace and ferocity which none of us have seen before" and banks were losing cash on a "scale that nobody believed possible".

But after six consecutive quarters of hardships at last UK's economy has come out of recession as per official figures from Office of National Statistics on Wednesday 27 January 2010.

The UK economy has come out of recession, after figures showed it had grown by a weaker-than-expected 0.1% in the last three months of 2009.

The economy had previously contracted for six consecutive quarters - the longest period since quarterly figures were first recorded in 1955.

There have been recent recovery signs - in January 2010, UK unemployment fell for the first time in 18 months.

The UK's had been the last major economy still in recession. This can be confirmed by the figures from the Organization of National Statistics. Following picture explain the past economic recession forecast in UK.

Courtesy: http://www.marketoracle.co.uk

1.1 Facts and Figures of Past Recession

Following are some of the key facts and figures of the UK's past Recession.

According to Bank of England Governor Mervyn King, the economy shrank by around 5% in 2009, the largest fall in output since 1931. The slump cost 6% of the nation's economic output so far - on a par with the early 1980s, according to the ONS. National income is around 10% below the level it would have reached in the absence of the financial crisis, Mr. King has said.

At the worst point of the recession in the first three months of 2009, output fell 2.5% - the fastest rate in more than 50 years, according to the ONS Unemployment rose by 877,000 from April 2008 to hit 2.49 million in the three months to October 2009.

The recession saw a 12-month slump for manufacturers with output down almost 14% year on year at its worst point - the lowest seen since the 17% fall in output in13 successive months of decline between 1979 and 1980.

Borrowing is set to hit a record £178 billion in the last financial year - 12.6% of the country's entire output - due to a slump in tax take and higher spending on unemployment benefits and economic stimulus measures.

To combat recession the Bank of England slashed interest rates to just 0.5% in March 2009 - the lowest since the Bank was founded in 1694.

Entrepreneurs and SMEs are the back bone of the UK economy. The word entrepreneurship is a mixed blessing. On the positive side, it connotes a special, innate ability to sense and act on opportunity, combining out-of-the-box thinking with a unique brand of determination to create or bring about something new to the world.

There are approximately 26 SMEs per 1000 inhabitants in the United Kingdom, which is below the EU-27 average of almost 40. Consequently, SMEs appear to play a slightly less important role in the economy of the United Kingdom than in the EU on average.

Conceptual Framework

To carry out this research some of the key concepts used should be defined and explained in this section.


Entrepreneurship is the act of being an entrepreneur, which is a French word meaning "one who undertakes an endeavour". Entrepreneurs assemble resources including innovations, finance and business acumen in an effort to transform innovations into economic goods.

Drawing an extended analysis of the literature following definitions are proposed for Entrepreneur, Entrepreneurship and Entrepreneurial Activity.


Entrepreneurs are the persons (Business Owners) who seeks to generate value, through the creation or the generation of the economic activity, by identifying and exploiting new products, processes or markets.

Entrepreneurial Activity

Entrepreneurial Activity is the enterprising human action in pursuit of the generation of the value, through the creation or expansion of the economic activity, by identifying and exploiting new products, processes or markets.

Entrepreneurship is also known as the phenomena associated to Entrepreneurial Activity. This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity or necessity.

The most obvious form of entrepreneurship is that of starting new businesses; however, in recent years, the term has been extended to include social and political forms of entrepreneurial activity.

Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail. Nevertheless such undertaking supposes the development of more than just a business venture.

Entrepreneurial activities are substantially different depending on the type of organization that is being started. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities.

2.4 Small and Medium Enterprises (SMEs)

According to Enterprise and Industry publications of European Union Commission category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.'

'Micro, small and medium-sized enterprises (SMEs) are the engine of the UK economy. They are an essential source of jobs, create entrepreneurial spirit and innovation in the UK and are thus crucial for fostering competitiveness and employment.

2.5 UK GDP after Recession

Gross Domestic Product (GDP) increased 0.1 per cent in the fourth quarter of 2009, compared with a decrease of 0.2 per cent in the third quarter. The rise in output was due to growths in services and production. Services output rose 0.1 per cent, compared with a fall of 0.2 per cent in the previous quarter. Distribution, hotels and restaurants contributed most to the increase.

Courtesy: Office of National Statistics

Distribution, hotels and restaurants rose 0.4 per cent, compared with an increase of 0.7 per cent in the previous quarter. Motor trades and retail contributed most to the increase. Transport, storage and communication showed zero growth, compared with an increase of 0.7 per cent in the third quarter.

Business services and finance showed zero growth in the fourth quarter, compared with a decrease of 0.8 per cent in the previous quarter. Government and other services rose 0.2 per cent, compared with a decline of 0.2 per cent in the previous quarter. Health made the largest contribution to the increase.

Total production output rose in the fourth quarter, increasing 0.1 per cent, compared with a fall of 0.9 per cent in the previous quarter. Manufacturing made the largest contribution to the increase rising 0.4 per cent, compared with a fall of 0.2 per cent in the previous quarter. Mining and quarrying output rose 1.0 per cent, compared with a decrease of 5.7 per cent in the previous quarter. Electricity, gas and water supply fell 3.3 per cent, compared with an increase of 0.2 in the previous quarter.

Construction output showed zero growth in the fourth quarter, compared with an increase of 1.9 per cent in the previous quarter.

Agriculture, forestry and fishing output decreased 0.6 per cent, compared with a fall of 2.8 per cent in the previous quarter.

Literature Review

To accomplish my research objectives I will clarify some of the very vital concepts in literature review which are back bone of this research. Entrepreneurship and SMEs and their practices to conduct everyday business will be the centre point of debate.

For sometimes there has been wide spread recognition that Entrepreneurship is the engine that drives the economy of the most nations.

This has lead to an increasing interest in the development of education programmes to encourage and enhance Entrepreneurship, and a recognition that much research needs to be carried out into what makes an Entrepreneur and how these characteristics may best be imparted (Patricia G.Greene, and Mark P.Price 2007).

A review of the entrepreneurship literature suggests that differences among entrepreneurs and among their ventures are as great as the variation between entrepreneurs and non-entrepreneurs and between new firms and established firms. A framework for describing new venture creation integrates four major perspectives in entrepreneurship: characteristics of the individual(s) who start the venture, the organization which they create, the environment surrounding the new venture, and the process by which the new venture is started.

Major thrust of most entrepreneurship research has been to prove that entrepreneurs are different from non-entrepreneurs (Brockhaus 1980a, 1980b; Carland, Hoy, Boulton, and Carland, 1984; Colins, and Moore, 1964; Decarlo, and Lyons, 1979) and that entrepreneurial firms are different from non-entrepreneurial firms (Colins, and Moore, 1970; Cooper, 1979; Smith 1967).

Similarly, understanding the Small and Medium Enterprises (SMEs) and their needs are very significant in order to assess what can be the best practices after recession for sustainable and rapid economic recovery, and how an economy can benefit from SMEs by maximizing their potentials?

Previous researches on SMEs show that easy access to capital, continuous innovation and improved access to Research & Development (R&D) play significant role in SMEs growth.

Entrepreneurship and SMEs are very vital for any developed or developing economy, their practices are very important for economy as a whole.

Research Objectives

The aim of this research is to understand the characteristics of the firms and their products which determine the success of different types of strategy in sharing and using knowledge and retaining organisational memory. The research objectives can be summarised as follows:

To identify the best practices in entrepreneurship and SMEs in the UK after the Recession.

To analyse the importance of these practices and understand how the strategies and practices in operation contribute positively or negatively to competitive advantage.

To understand the practices which enable the development of organisational memory for future predictions and being prepared for all sort of economic conditions.

To understand the best procedures, characteristics and suitable structure of a firm which determine the success of different types of strategies after Recession?

To develop a list of key practices for Entrepreneurship and SMEs and a clear route for implementing these practices successfully for rapid and sustainable economic recovery after Recession.

4.1 Research Design and Methodology

To approach the question of best practices of entrepreneurship and SMEs in the UK after recession for faster and sustainable economic recovery, it is first necessary to ascertain how Entrepreneurship and SMEs are coping with current economic conditions and what were their business processes during recession and how they will use their experience for rapid and sustainable economic growth?

This study will use different online forums to access up to 100 Entrepreneurs and SMEs in order to survey their best practices after recession. Some of these forums are as follows









The surveys will be carried through a number of media:

1. Blog / forum - this will be posted on the forums website for members to read, reply to, and comment on.

2. Questionnaires - these will be distributed through the forums, either by being sent to regular Newsletter subscribers, by an online form or by hand.

3. Interviews - these will be carried out face to face, over the phone or through the medium of web based conferencing.

Through the forums, a number of businesses will be identified as specific case studies to focus on with regards to their practices. This will provide comparative data to further analyse the gap between Entrepreneurs and SMEs and their practices.

These findings and analysis will provide the basis or the arguments for the best practices of Entrepreneurship and SMEs in UK after Recession for rapid economic recovery.

This research will be submitted on Wednesday 31st March 2010.

Data Collection and Analysis

I intend to perform research in UK as for as interviews with Entrepreneurs and Directors of SMEs goes. There are so many SMEs around and access to carry out the interviews and survey will be feasible in given time frame. I believe that I require at least 20 organisations to make a comparison of the best practices and their effectiveness for Entrepreneurship and SMEs. I have contacted fifteen organisations and have obtained a verbal agreement for access from eleven of them so far. I am confident that I will be able to gain the required number of participating organisations, however if I have less participants I can modify my research approach and increase the number of interview and survey participants at each organisation and complete a more in-depth study.

In order to make the process run smoothly and to obtain a speedy and efficient response to the surveys I intend to run one or two sessions in the organisation where all of the participants will be present and during which I will hand out and collect the questionnaires. This will both ensure a high response rate and that the correct participants answer the survey. In addition, it will enable me to explain clearly the aims of the research control how the survey is administered and make clear the type of information required for the open-ended part of the questionnaires.

Using the inductive approach, the analysis of the interviews will be mostly qualitative, with the interviews used to understand the business environment, characterise knowledge strategies and canvas individual opinion on their effectiveness. Quantitative analysis of the questionnaires will be used to map the characteristics of the organisations and discover patterns in the responses within organisations. Consideration of the data and patterns found in all of the organisations will be used in conjunction with academic theory to try to explain the findings and answer the research objectives.

4.3 Validity and Reliability

In the design of the research approach I have considered the following:

Internal validity - Increased through use of multiple sources of evidence, structured interviews and questionnaires (both closed and open questions). The design of questions and survey will be based on understanding of the theory from the literature and pilot testing of the interview and questionnaire will be used to make sure questions are understood as intended.

External validity - Multiple cases considered to examine whether findings can be generalised over a number of organisations. There is no requirement to make a statistical analysis of the results for generalisation here as the approach chosen examines practices and their effectiveness for Entrepreneurship and SMEs. The aim is to explain the findings and explore generalise ability through a comparison of findings with theory.

Reliability - Structured interviews with questions derived from literature in order to examine cases in same way. Surveys to back up the interviews and obtain views from a wider group Entrepreneurs. Questionnaires all administered at the same time and in controlled manner, explanation to ensure participants all understand research in same way.

Research Ethics

The interviewees and survey participants will be given a clear written description of the purpose, scope and intended outcomes of the research. The type of information required for the research will be clearly stated as will the policy for anonymity and confidentiality.

The research will be carried out in a way that will ensure confidentiality of the participant organisations and the individual participants in the surveys. The organisations which participate in the research will not be named in the dissertation, nor will the interviewees and the questionnaires will be anonymous.

The interview questions and questionnaire will be designed to examine only the practices of Entrepreneurship and SMEs, no confidential product or customer information will be required. Even so, this is because confidential information may be discussed in the interviews and also commented upon in the questionnaires, this information will not be included in a way which will breach confidentiality in the dissertation.

Timescale and Resources

The plan for the research project timescales is shown in the stacked chart (Gantt chart) below. In summary, there are the following considerations in the project plan:

Literature review -Already performed background literature search to help formulate research ideas, anticipate further extensive period of research before writing the Literature Review. Final literature survey before completion of the manuscript to cover any newly published work.

Questionnaire/ Interview Design - Have form of questionnaire which needs adapting for use. Intend to design the structured interview and questionnaire after the majority of the literature review is complete, will both be piloted and their design reviewed.

Interviews and Surveys -Visit participant organisations to carry out interviews and surveys during February and March 2010. Visits should be booked in soon and reconfirmed during February 2010. An efficient and rapid response is expected as surveys issued and collected whilst at the participant organisations.

Data Analysis -Structured interviews with responses analysed qualitatively. Surveys coded and responses analysed quantitatively.

Dissertation Drafts - Produce drafts of the dissertation sections for content discussion with supervisor throughout the timescale below, then draft dissertation will be of required standard with only minor revision required for submission.

Provided this approach is agreed by the Supervisor