Small and Medium sized Enterprises in the United Kingdom - Research Proposal Example

?Running Head: Research Proposal on SMEs in UK Research Proposal on SMEs in UK [Institute’s Research Proposal on SMEs in UnitedKingdom Introduction to the area of study: Small and Medium sized Enterprises constitute more than 99% of the enterprises, with almost more than a half of the private sector at 58% to employment and turnover at large in UK (BIS Department for Business and Innovation Skills, pp. 10-15, 2010). SMEs does not have an agreed universal definition as all the particular dimensions of the enterprises cannot be manifested by the differences among industries, firms, countries or the level of their operations overseas (Bank of England, pp. 23-39, 1999) . The highly accepted classification of SMEs in UK and EU attributes to “the number of employees or annual turnover, with small enterprises constituting of less than 50 employees and medium size enterprise at more than 50 and less than 249 employees” (BIS Department for Business and Innovation Skills, pp. 1-7, 2010). The nature of ownership in SMEs is either the individual entrepreneur or the family investments, which later on is inducted by directors on behalf of the majority shareholders. The SMEs sector in UK has jumped to an enormous boom in the last couple of years by increasing the net to 400,000 firms every year and even the micro businesses or self-employment has contributed a significant turnover for over ? 200 billion to the economy even in the severe economic turmoil of recession on inflation (Amble, pp. 20-29, 2004). The small and medium sized business has emerged as a powerful source in contributing to net revenue of the economy by intervening for almost 13 % in financial and business intermediation, such as real estate and business operations. In addition, by contribution in 12% to agricultural and fishing business, wholesales and retails at 21% indicating to largest contribution to the private sector turnover (BIS Department for Business and Innovation Skills, pp. 1-6, 2010). The role of SMEs enterprises has played a significant part in the economic and social growth followed by the industrialization, income, and employment generation to the economy (OECD Conference for SMEs, pp. 1-3, 2004). Research Aim: The important element of enterprises is to induct the easy or smooth availability of the capital for their start up or growing business. The imperfect capital market and the economic turmoil have created barriers for insufficient external funding to the SMEs that has forced the government intervention in equity and debt market to provide funds and loans to their ventures (Graham, pp. 56-64, 2004). The main aim of the dissertation of the proposal is to ‘Highlight and analyze the significance of the financing intervention within the small and medium sized enterprises and their attributes’. It also aims to analyze the following in order to bridge the gap between the finance providers and the small business. 1. Close analyses of the SMEs and their access to external finance. 2. The financial growth and government intervention in SMEs 3. The needs and supply capabilities between SMEs and financial intermediaries. Research Objectives: The objective of the dissertation includes the detail literature review and problems faced by SMEs deployment of financial funds. The purpose of this research is to recognize the factors influencing the financial decision making of SMEs and any other alternative option for funds. The study will also focus on critical factors discussed as below (Competition Commission, pp. 1-3, 2002): 1. Identify the policies and regulations for the provision of funds by the bank 2. Identify the various sources of finance available to the SMEs and their significance. 3. Identify and deployment of options which are used to improve the burden of cost and accountability of revenue and profits for SMEs. Research Questions: Following are the questions that highlight the main reasons for the research dissertation: 1. What are the factors that are affecting the SMEs financial market and access to banking finance? 2. What can be the alternate sources of finance keeping in view the different characteristics of the SMEs businesses? Research Methods: A multiple strategy approach will be under utilize to lessen the risk of possible human error and collection of data from different primary and secondary sources (Good, pp. 48-53, 2006) that will help in analyzing the situation. 1. Primary source: (a) This will attribute to telephone surveys constituting a sample of 100 small and medium-sized businesses that depicts the characteristics of their business operations, nature of ownership and control, information regarding the startup and present sources of finance. (b) To determine the behavior of SMEs towards banking finance, it is essential that an integrated survey questionnaire should be held among different SMEs businesses in different sector particularly wholesales, retails, agricultural and fishing businesses (Cruickshank, pp. 11-19, 2000). It would consist of 10 to 15 questions emphasizing on the difficulties faced by the entrepreneurs in funding their business operations and the burden of undue cost attached with public sector organizations. The survey questionnaire will be interpretive using online software’s and printed forms that could provide tool for local field surveys. (c) Interviews will be conducted with different entrepreneurs and SMEs owners, meanwhile data will be retrieved from local and international forums for funding of SMEs and the sources of finances used in last 10 – 20 years in UK. 2. Secondary source: (a) The data retrieved will consist of empirical theories and journals mainly but will also focus on existing research papers, books, magazines, government statistical reports, and financial catalogues. (b)To undermine the changes and challenges faced by the SMEs in getting the access to pool of finance in private and public sector and any relevant study that compares the past and current data of SMEs business and their characteristics that influence the decision making of choosing the sources of funding for their businesses. Introduction to the Sector: The construction or real estate developing SMEs is regarding as the largest contributor the SME exporting industry. It contributes the highest rate of employment at 84% in the private sector, the most significant number of enterprises mainly constituting at 899,000 at the advent of 2010 representing quarter of the private sector employment (BIS Department for Business and Innovation Skills, pp. 13-22, 2010). Discussion and Analysis: The surveys will be conducted to relish the wider pool of finance to SMEs. It also anticipated for comparison between present and last 10 years and for changes in decision making of choice of funds. The empirical and statistical evidence will help to understand the factual grounds on which the SMEs might face problems in getting access to various sources of finances. 1. The detail surveys will include questions from their daily business decision for small investments and origin of their funds. 2. The results from econometric models will also be highlighted as obtained by journals and books that will give air to basic and complicated financial outcomes faced by SMEs such as rejection of loans, discouragement, etc (WBS, pp. 39-47, 2005). 3. An important characteristic of SMEs is the size of its business and number of employees. A telephone surveys or web based surveys reveals the basic identification between the degree of control and ownership in the SMEs as it has a greater impact on the decision making power of financing. 4. The main evaluation of the survey is questionnaire as it will be the best way to interact with the appropriate problems anticipating the size of the structure and employee strength of the SMEs. It also facilitates the characteristics of business start up and potential growth of SMEs. The comparability with the sample population within the same industry will give a bird’s eye view of the strength of SMEs financing capabilities in the market for example for a construction businesses, it would be unlikely to be rejected for a financial loan as compared to wholesale and retail SMEs (Smallbone et. al., pp. 291-314, 2003). 5. The samples of SMEs operating in construction businesses will be included in the research to compare with other businesses due to their higher target market. Innovative and high technology businesses have a significant problem in obtaining external funds as compared to other sectors due to their expensive production cost and overheads (Freedman, pp. 51-2, 1994). 6. The questionnaire and telephone surveys will also reveal the ethnic or gender based issues regarding the financing of SMEs. The advent of women or ethnic based entrepreneurs will also accumulate the issues in start up funding of business and the effective running of day-to-day activities (Scottish Executive Central Research Unit, pp. 1-4, 2002). Anticipated Problems: The challenges and problems relish during the research focuses on reliability and accuracy of the data collected. The approximation of reliability and accuracy in the research is important for designing and illustrating the outcome of the research (Patton, pp. 34-55, 2001). The problems faced during the research will be: 1. The time consuming and momentous job will be field survey that addresses the issues of SMEs sources of finance and it was difficult as the owners or the running managers were reluctant to share information. 2. The survey questionnaires may return during the data retrieve process due to questioned not understood by them or they may consider this as sensitive information to share or interpret. 3. The telephone interviews conducted may show reluctance in sharing information regarding current issues of financing the business and provision of loans from the bank as they considered it sensitive information for discussion on phone. 4. It will be difficult to gather data from many zero businesses or self employed SMEs due to non-registration with the DTA. The accuracy and reliability of the data might be approximately less as compared to the registered SMEs. 5. The extent of data gathered from secondary sources may overcome the obstacles and coherent difficulties in interviews and surveys. References Amble, Brain. 2004. SMEs Blooming in UK PLC. Management-Issues Ltd. Bank of England. 1999. The financing of ethnic minority reports in the United Kingdom: a special report. BIS Department for Business and Innovation Skills. 2010. Statistical Release. Retrieved on July 11, 2011: http://stats.bis.gov.uk/ed/bpe/BPE_2010_-_Statistical_Release.pdf Competition Commission. 2002. The Supply of Banking Services by Clearing Banks to Small and Medium-Sized Enterprises. Springer. Cruickshank, D. 2000. Competition in UK Banking: a report to the Chancellor of the Exchequer. Stationery Office. Freedman, J. 1994. Small Businesses and the Corporate Form: Burden or Privilege. The Modern Law Review. Good, I. Phillip. 2006. Resampling methods: a practical guide to data analysis. Illustrated third edition. Graham, Teresa. 2004. Graham Review of the Small Firms Loan Guarantee Recommendations. Stationery Office. OECD Conference for SMEs. 2004. Promoting Entrepreneurship innovative SMEs in a Global Economy. Scottish Executive Central Research Unit. 2002. Business Finance and Security over Moveable Property .Scottish Executive. Smallbone, D., Ram, M., Deakins, D. and Baldock, R. 2003. “Access to finance by Ethnic minority businesses in the UK.” International Small Business Journal. Volume 21, Issue 3, pp. 291-314. WBS. 2005. A Report on the 2005 UK Survey of SME Finances Ethnic Minority Booster Survey. Warwick Business School Press. Read More