SMALL BUSINESS SECTOR

Small Business Sector

Small Business Sector: UK and Saudi Arabia

Introduction

It seems so each and every day there is a new headline regarding the small business sector, how the sector can be assisted and prospects for the future. This has led many to believe that the small business sector will ultimately decide how a great number of UK voters use their power in the general election expected in 2010. The government's plan to force banks to increase levels of finance aimed at the small business sector in exchange for rescue capital appears to have backfired in the short term with very little additional funding available over recent weeks(Longenecker Carlos Petty Palich 2008 pp. 768). There are grave concerns that many small businesses will go under in the early part of 2009 with the economy set for a further downward move unless serious inroads are made into the finance sector. Small businesses are the future of the UK economy and while this is an area which is often overlooked there are serious consequences if the sector is not fully funded and assisted into the future.

Definition of Small Firm

There is no comprehensive definition of the small firm sector. This is largely because most advanced economies have a wide diversity of business enterprises across both industry and service sectors. An early attempt at identifying the key characteristics of a small firm in the UK was the Bolton Committee Report of 1971, which concluded that three main characteristics had to be taken into account:

1-A small firm is one that has relatively small share of it market

2-It is managed by its owners or part-owners in a personalized way, and not through the medium of a formalized management structure.

3-It is independent, in the sense that it does not form part of a large enterprise, so that its owner-managers are free from outside control when taking their principal decision

Report also recognized that the precise definition of a 'small firm' might also depend on the sector in which the firm operated : for example, a firm of 200 employees or less might be regarded as small in the manufacturing sector but a firm having 25 employees or less might be regarded as small in the construction sector.

In general terms a small business is one that:

Is independently owned and operated

Is not dominant in its field of operation

However qualification to this category must comply with certain criteria in regards to its number of employees and its annual sales, and this is not a worldwide standard, in other words the criteria varies from one country to another.

In company law, a small company is defined in terms of its turnover, balance sheet and number of employees. This is in contrast to the definition used in the Finance Act for taxation purposes where a small company is defined as a company whose total profits are 300,000 or less. The EU in terms of the number of employees has provided a standard classification for small medium ...