Half of Scottish businesses ‘based at home’

Prof Mason said that Policy-makers have been slow to appreciate the importance of home-based businesses to the Scottish economy. Picture: TSPL

Prof Mason said that Policy-makers have been slow to appreciate the importance of home-based businesses to the Scottish economy. Picture: TSPL

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HALF of all Scottish businesses are based at home, a new study has found.

Home-based firms also sustain around one in five private sector jobs and turn over £19.7 billion a year, according to the Federation of Small Businesses (FSB) report.

The study found almost two-thirds of Scotland’s 188,000 home-based businesses employ at least one member of staff.

The report argues that local government, regulators, banks and enterprise support agencies cannot ignore these businesses and should adapt their approach to better meet their needs.

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Believed to be the first in-depth profile of Scottish home-based businesses, the study was conducted by Professor Colin Mason of Adam Smith Business School at the University of Glasgow and Dr Darja Reuschke of the University of St Andrews.

Prof Mason said: “Policy-makers have been slow to appreciate the importance of home-based businesses to the Scottish economy. This report shows that Acacia Avenue is as much the home of entrepreneurship as any business park.

“These are serious businesses, accounting for 10 per cent of private sector turnover and 17 per cent of private sector employment. If our economic salvation lies in broadening and strengthening our small business base, we ignore their contribution and their needs at our peril.”

The FSB studied data from 999 business owners, 39 per cent of whom were home-based while a further 19 per cent owned businesses that grew out of the home.

The biggest concentrations of these enterprises are in catering, leisure, tourism, hotels and entertainment (24 per cent), and providing business services (12 per cent).

Smaller clusters were found in creative services (8 per cent) and construction (7 per cent). However, up to 6 per cent of all enterprises in all other business sectors (including engineering; real estate; and health & social work) are based in the home.

More than half of Scotland’s home-based businesses (54 per cent) have been established for 10 years or more. Around three quarters (73 per cent) of them turn over less than £100,000 a year, while 3 per cent generate more than £500,000.

The study also found that for a majority of businesses, home is seen as being the permanent location for their operations.

The most frequently cited reasons to operate a home-based business were the nature of the business (65 per cent), convenience (61 per cent) and to reduce costs (56 per cent).

One in three (31 per cent) specifically highlighted the high cost of commercial premises, with the same number citing improved work-life balance (31 per cent) and over a quarter (27 per cent) saying they wanted to avoid commuting.

Childcare considerations were cited more frequently by women than men.

Andy Willox, the Federation of Small Businesses’ Scottish policy convener, said: “Three key factors have powered the growth in home-based firms: new technologies; large public and private sector re-organisations; and everyone’s changing expectations about a work-life balance. But they are all proper businesses, providing services and generating revenues. Many are also creating jobs.

“The sheer scale and diversity of this sector means that regulators and local authorities need to make sure that their policies and regulations are right for those based in the home. We also need to tackle these firms’ biggest bugbears: unreliable broadband and a lack of suitable finance products.”

Alison Johnstone, Scottish Green MSP for Lothian, called for more support for small businesses.

She said: “This report shows how important small businesses are to the strength and diversity of our local economies. 94 per cent of Scottish private sector businesses have fewer than 10 employees, and it makes sense to help them grow and encourage new ones to follow.

“Access to finance and broadband must be addressed; another measure I’d like to see is a single-point regulator for very small enterprises in recognition of their scale. Instead of featherbedding multinationals who don’t pay their taxes, let’s unleash Scotland’s potential and support locally-owned, sustainable businesses.”

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