Critically assess the case of government support of small business, both in terms of business start - up and development

Essay by apmerkelUniversity, Master'sA, March 2004

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Teaching for entrepreneurial development and small business has played a significant part in governments' policy approach to economic development .

It is beyond doubt that there has been a significant growth in self employment and small business development over the past few years .

As it can be seen from the quotes, small businesses are becoming more and more important and by now 99.1% of all businesses fulfil the characteristics of a small business

In this essay, I intend to discuss the reasons why government should, or should not intervene (i.e. support) in small enterprises. In the appendix B I will also outline some of the latest European support programmes for business start-ups and small business development.

2Main Part

2.1Definition of small enterprises

The most commonly used definition of small businesses can be found in the Companies Act 1985. It states that small enterprises are companies with a turnover of below 2.8

million pound sterling per annum, a balance sheet total of below 1.4 million pound sterling per annum and the number of employees must not exceed 50. For a company to be regarded as a small enterprise it has to meet two or more of these conditions at the beginning of the financial year .

2.2Reasons for government support

Governments intervene in companies for several reasons. Below I will outline some of the reasons why governments spend large amounts on money every year supporting small businesses.

2.2.1Start-up support

This means governments supporting individuals to set up a company or newly created companies to survive in the market. Support takes place in different ways, such as financial support, managerial and entrepreneurial training.

One of the main reasons why governments support start-ups is, that they are a major employment creator in every economy. When a new business is started,