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New figures prompt call for revision to policy

Half of Scottish businesses are based in the home

home workingHalf of all Scottish businesses are based in the home, sustaining around one in five private sector jobs and turning over £19.7 billion a year, according to new figures.

In what is thought to be the first survey of its kind, the figures explode some popular myths about home working, revealing that almost two-thirds of such businesses employ at least one member of staff.

There were found to be 188,000 firms based in the home and there are now calls for governments, banks and development agencies to rethink policy to ensure they are properly supported in economic strategy.

The research was conducted by Professor Colin Mason from Adam Smith Business School at Glasgow University and Dr Darja Reuschke of St Andrews University on behalf of the Federation of Small Businesses.

Professor Mason said: “Policymakers 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% of whom were home-based and a further 19% owned businesses that grew out of the home. The research highlights that these firms operate across every sector and geography.

Most of them are in catering, leisure, tourism, hotels and entertainment (24%), and providing business services (12%). Smaller clusters were found in creative services (8%) and construction (7%).  However, up to six per cent of all enterprises in all other business sectors (including engineering; real estate; and health & social work) are based in the home.

Far from being start-ups, more than half of Scotland’s home-based businesses (54%) have been established for ten years or more. Around three quarters (73%) turn over less than £100,000 a year, while 3% generate more than £500,000.

The study Home Truths: The true value of home-based businesses 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%), convenience (61%) and to reduce costs (56%).

One in three (31%) specifically highlighted the high cost of commercial premises, with the same number citing improved work-life balance (31%) and over a quarter (27%) saying they wanted to avoid commuting. Motivations for male and female home-based business owners were generally similar, but childcare considerations were cited more frequently by women than by men.

The survey also challenges ideas of home-based businesses being parochial.  In fact, they are more likely to have a broader customer base than other businesses – with a larger proportion trading nationally and internationally and utilising e-commerce compared to firms in commercial premises.

Andy Willox, the Federation of Small Businesses’ (FSB) Scottish policy convenor, said: “This report tells some home truths about how important this army of businesses is to our economy. Some people start up in the home to supplement their household income and work around other commitments, while others are manufacturing, trading internationally and turning over hundreds of thousands of pounds a year.

“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. ”

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