SERTeam - Stanworth and Purdy Oct 2008 - SME Facts and Issues

SME Facts & Issues
A Compilation of
Current Data & Issues on
U.K. Small & Medium-sized Firms
Professor John Stanworth

Professor of Enterprise Studies,
Westminster Business School,
University of Westminster
David Purdy
Future of Work Research Group,
Westminster Business School,
University of Westminster
Sponsored by
Second Edition, October 2008

The Small Enterprise Research Team
- SME FACTS & ISSUES -
A Compilation of Current Data and Issues on U.K. Small & Medium-sized Firms
FOREWORD
When invited by John Stanworth and David Purdy to write this introduction, I agreed without reservation
since this publication appears to me to be outstanding in having achieved what so few publications
in this field ever manage to achieve. It condenses substantial amounts of data and information
combined with an exciting sociological narrative. As such, it should represent a useful addition to the
bookshelves of all SME enthusiasts.
What particularly appealed to me about this publication was the manner in which it openly informs
readers on such a range of issues. For instance, ‘Who Are the Self-Employed ?’ The authors tell us
quite succinctly in terms of gender, ethnicity, age, skills, region and sector. Issues such as the likelihood
that women entrepreneurs, like their counterparts in the wider labour market, are substantially more
likely than men to progress their businesses on a part-time basis could have far-reaching strategy
implications for the future if we are to strive towards all individuals in our society achieving their true
potential.
I was interested to note the sheer polarisation of UK firms in terms of size. For instance, out of
around 4.5 million private businesses in the UK, 3.3 million are run predominantly by self-employed
people without employees. Fewer than 33,000 businesses have 50 employees or more. However, the
largest 6,000 businesses (approximately 1 in every 750) account for 41% of employment and 48%
of financial turnover. So, we still need large businesses just as we need small businesses, and the
large businesses of tomorrow will be drawn from the smaller businesses of today.
The bane of many small businesses is often seen as paperwork, regulation and compliance costs.
In this publication, we are provided with evidence that the UK is ‘lightly regulated compared with
its major competitors’. Nonetheless, we are also told that there is ‘evidence that entrepreneurs are
being distracted from running and growing their businesses by the cumulative burden of taxation,
employment, public protection and environmental regulation’.
Issues of regional variation in entrepreneurial vitality are investigated. Whereas we might well wish
for a profusion of start-ups in areas of economic deprivation, these are far more likely in already
prosperous areas due to the availability of capital, markets, skills and role models.
The UK appears to compare favourably on an international basis when it comes to self-employment

with the UK coming our high amongst the more industrialised countries in terms of entrepreneurship.
The publication also engages the interface between small and large firms in examining the trend
toward former employees of large firms sometimes subsequently working in the same sectors, or
even for the same firms, on a self-employed basis.
What perhaps impressed me most about this publication, in addition to its accessibility, is its sense
of balance. Stanworth and Purdy do not try to convince us that small firms can transform the UK
industrial/commercial landscape single-handedly. However, they do feel that sustained economic
progress cannot proceed without a healthy input of entrepreneurship
The Lord Randall of Budeaux

Chairman – The Genesis Initiative
www.genesis-initiative.org
SME Facts & Issues, Stanworth & Purdy, 2008

ACKNOWLEDGEMENTS
The original report of the Committee of Inquiry on Small Firms – the ‘Bolton Report’ – remains the
single most important document of its kind ever published in Britain. Twenty years later (in 1991),
John Stanworth and Colin Gray edited Bolton 20 Years On: the Small Firm in the 1990s with a preface
written by John Bolton himself. It could be argued that, in recent years, the small firm field has grown
so vigorously that no one publication has been able to distill the knowledge into a single accessible
overview. And so SME Facts & Issues addresses this task.
It is an updated and expanded version of a publication produced earlier by the Westminster Business
School, University of Westminster, an institution which must retain some of the credit for the
production of the current version. The author line-up remains the same: John Stanworth and David
Purdy. However, the publisher for this update is the Small Enterprise Research Team (SERTeam),
whose Chair is Professor Colin Gray, former President of the Institute for Small Business and
Entrepreneurship (ISBE). A Trustee and founding Chair is the legendary Graham Bannock (Research
Director of the original Bolton Report).
Given the generosity of Lloyds TSB and SERTeam’s long established relationship with Stephen
Pegge at Lloyds TSB, more research than previously has been poured into the current version of
this publication and we have also been able to produce a Presenter’s Edition including Microsoft
Powerpoint™ and Adobe Acrobat™ slides in order to assist lecturers and presenters.
The result is not groundbreaking new research but essentially research about research. The publication
draws together a mass of available published data on SMEs and distills it, with commentary, into a
form accessible to researchers, politicians and small business bodies.
We also have the support of The Genesis Initiative – the ‘Business Senate for Enterprise’. This
cross-party grouping draws together the widest range of small business interests to date assembled
in Britain under the capable leadership of Lord Randall of Budeaux as Chair and Alan Cleverly as
Executive Director. Lord Randall is also a member of Labour’s Finance & Industry Group (LFIG) whilst
Alan Cleverly is Chief Executive of the Conservative Party’s Small Business Bureau.
The authors acknowledge the special support of SERTeam in connection with the supply of data in
spreadsheet form for Figures 2 and 9. The source data for Figure 18 is the Office of National Statistics
Annual Population Survey, October 2004 - September 2005 (distributed by the Economic and Social
Data Service). Also, the full source details for any figure referring to NOMIS are: ‘Office of National
Statistics (Nomis), © Crown Copyright 1997-2008’. National Statistics website: www.statistics.gov.
uk. Crown Copyright material is reproduced with the permission of the Controller of HMSO and the
Queen’s Printer for Scotland.
Liability Disclaimer
Due care and attention has been paid to the collection and selection of the information contained
herein, and as such, is offered in good faith. The Small Enterprise Research Team (SERTeam)
regrets, however, that neither SERTeam, the project sponsors, nor the co-authors, are able to accept
any liability for losses or damages – beyond any rights afforded by U.K. statutory legislation – which
could arise for those who choose to act upon the information contained herein.
Competent professional advice should be sought before reaching a final decision to invest in any
business opportunity.

- SME FACTS & ISSUES -
A Compilation of Current Data and Issues on U.K. Small & Medium-sized Firms
CONTENTS
1. Introduction.................................................................................................................. 5
2. Who Are The Self-Employed ?..................................................................................... 5
3. Size Profile Of Firms In The U.K.................................................................................. 7
4. International Differences.............................................................................................. 8
5. Government Legislation..............................................................................................11
6. A Regional Perspective: Where Are The Successful Small Businesses ?.................16
7. The Small Firm In The London Economy...................................................................19
8. Small Business Owners, Own Account Self-Employed

& Disguised Wage-Workers....................................................................................... 26
9. Ethnicity..................................................................................................................... 30
10. Great Expectations ?................................................................................................. 32
11. Future Imperfect: A Bumpy Ride From ‘Throwaway’ To ‘Sustainable’....................... 36
References............................................................................................................................. 53
Appendices:
Definitions Of Self-employment................................................................................. 61
Climate Change......................................................................................................... 63
Peak Oil & Sustainability............................................................................................ 76
Small Business Threats & Opportunities................................................................... 79
WWW Links: Climate Change, Peak Oil & Sustainability.......................................... 84
Glossary: Climate Change & Sustainability............................................................... 87
© John Stanworth & David Purdy, Second Edition, October 2008

£50.00 – ISBN 978-0-9551626-6-4
The Small Enterprise Research Team

Open University Business School
Walton Hall, Milton Keynes MK7 6AA
www.serteam.co.uk
Accompanied by a Presenter’s CD-ROM (Microsoft Windows™-compatible) which includes

Microsoft Powerpoint™ 2003 and Adobe Acrobat™ v.5 files of the report figures

1. INTRODUCTION effects of unemployment and labour market
turbulence, structural changes in the economy
In the United Kingdom, considerable hopes are and, finally, the promotion of ‘enterprise culture’
vested by politicians, policy-makers, economic itself.
planners, re-generation agencies and the like,
in the potential of small firms to produce both 2. WHO ARE THE SELF-EMPLOYED?
jobs and wealth.
Using Labour Force Survey (LFS) data to
Since the publication of the seminal Bolton construct a profile of the characteristics of the
Report on small firms in 1971, the size of the self-employed in the U.K., we can address
small firm population has often been taken as such questions as who are the self-employed,
a signal of the health and vitality of the wider where they work, what kind of work do they do,
economy generally. Further, during the 1980s and what factors influence the propensity of
and first half of the 1990s, the smaller business various members of the workforce to become
was singled out as the principal ideological self-employed. By doing this, we find that:
standard bearer of the Thatcherite crusade to
construct (or reconstruct) an enterprise culture n The self-employed are an extremely
in Britain. heterogeneous group embracing high
level professionals through to low-skilled
The popularity of the allied notions of ‘enterprise manual workers.
culture’, ‘entrepreneurship’ and ‘individualism’,
have largely survived the movement of political n Men are around twice as likely as women
affections from Thatcher’s ‘New Right’ to Blair’s to be self-employed.
‘New Labour’. Indeed, they appear to under-pin
current BERR (/DTI) policy. We have simply n Overall, the self-employed are less likely
witnessed a less ideological interpretation of to work part-time than their employee
the notion of enterprise culture to embrace counterparts, but there are dramatic
inclusiveness. For instance, former DTI gender differences (Figure 1).
Secretary of State, the Rt. Hon Patricia Hewitt,
stressed that: n The propensity to be self-employed
appears to increase with age and is
“By extending entrepreneurial particularly high amongst those beyond
opportunities to all, whatever their normal retirement age. This reflects the
background, we will not only create a fact that the self-employed do not have
vibrant and growing economy, but also to retire at a specific age, but may also
make it easier for individuals to realise mean that some of the self-employed are
their own potential.” (Harding, 2002:2) unable to retire due to lack of adequate
pension provision.
This avoids some of the more grating edges of
Alex de Tocqueville’s original conceptualisation n Self-employment is much more likely
of Anglo-Saxon individualism so beloved of amongst married than single people. In
Margaret Thatcher. For example, denying the the event of separation, the male partner
existence of society as a reality exterior to appears more likely to inherit the business
its members (‘no such thing as society’) and than the female.
asserting the advantageous consequences of
the economic competition of free individuals n Compared with the ethnic majority Anglo-
(‘trickle-down’). Saxon population, Asian members of the
workforce are considerably more likely to
The growth in self-employment during the be self-employed, and Afro-Caribbeans
1980s and its relative stability during the 1990s much less so.
and early years of the 21st century has been
sustained by a number of factors operating at n Amongst men, there is a weak negative
different times and to different extents. The relationship between qualifications and
principal factors here have almost certainly been: self-employment rates though certain
the growth of the ‘externalisation’ of services qualifications (graduate professional
by large companies, the entrepreneurial ‘push’ and craft qualifications) are associated

Fig 1 - Population of U.K. Self-Employed: Male & Female, 1993-2007
4,500
Thousand
4,000
3,500
Source: National Statistics, Labour Force Survey, 2008a

3,000 Female Part-time
2,500 Female Full-time

Male Part-time
2,000
1,500
1,000 Male Full-time
500
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Q1
with higher than average male self- to services does not appear to have
employment rates. played a major role in the growth of self-
employment. Much more important has
n Amongst women, these specific been the movement within industries
professional and craft qualifications are towards self-employment resulting from
again associated with high likelihood of the ‘contracting out’ of services by large
self-employment. Thereafter, however, firms.
there appears to be an overall positive
relationship between level of qualifications n There are regional differences in self-
and self-employment propensity (the employment propensities with the
opposite of the case for men). Some highest rates of growth of VAT-registered
of the highest self-employment rates businesses occurring in London and the
amongst women occur amongst those East of England, and the lowest in North-
with graduate or equivalent qualifications. East of England, Scotland, and Wales.
One possible explanation offered for this
gender difference is difficulties faced n The inflow into self-employment from
by well-qualified women in achieving the unemployed is proportionately
career advancement within employing very high compared with their overall
organisations. representation in the workforce as a
whole. Unemployment forms an important
n The concentration of self-employment stimulus to entry into self-employment.
varies greatly with sector, with high
rates of self-employment in agriculture, n In general terms, geographical areas
construction and the private service of high unemployment have low self-
sectors, and low rates in manufacturing employment rates, suggesting that
and the public service sector. unemployment as a stimulus towards self-
employment is outweighed in the longer
n Although the self-employed are term by the fact that the areas involved
concentrated in growing industries, tend to provide the poorest economic
the overall shift from manufacturing

Fig 2 - Population Trend of U.K. Self-Employed
With/Without Employees, 1984-2004
4.0
Million
3.5
3.0
2.5
Self-employed without
employees
Source: ONS, Labour Force Survey, 2005

2.0
1.5
1.0
Self-employed with
0.5
employees
0.0
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
climate for the survival of new enterprises. in 2006, small firms employing up to 50 people
(including those without employees) accounted
n Propensities for self-employment are for 99% of businesses, 47% of non-government
strongly influenced by a tradition of self- employment and 37% of financial turnover. By
employment within families. way of contrast, the largest businesses (those
employing 250 or more, approximately 1 private
n Consistent with the popular stereotype business in every 750) still accounted for 41%
of the ‘workaholic’ small business of employment and 47% of financial turnover.
owner, the self-employed appear to work
considerably longer hours than their The construction sector has the highest
employee counterparts. concentration of the smallest businesses (86%
of all businesses in the sector being ‘sole trader’
n It appears that some time after an or similar businesses with no employees), in
increase in the number of new entrants to contrast, the hotel and restaurant sector has
self-employment, the number leaving self- the lowest concentration (similarly 16%).
employment also increases.
Regarding employment distribution, the
3. SIZE PROFILE OF FIRMS IN THE U.K. construction sector has the highest proportion
of employees related to ‘sole trader’ type
Of 4.3 million enterprises in the U.K. in 2004, businesses with no employees (41% of sector
fewer than 30,000 had 50 or more employees employment), and in contrast the financial
and 2.7 million were run by self-employed people intermediation sector has a substantial
without employees. Labour Force Survey data majority of its employees working for the largest
presented in Figure 2 demonstrate the actual firms (79% working for those employing 250
decline in the number of small businesses with or more).
employees in recent years and the significant
growth of those without. In terms of financial turnover, construction
and agriculture have proportionally the highest
Figures 3 and 4 adopt EU definitions of small, turnover generation amongst the very smallest
medium-sized and large firms and suggest that, businesses, each comprising around 23% of

Fig 3 - Share of Private Sector Enterprises, Employment & Turnover By
Size of Business, Start 2006
99.2%
100%
90%
80%
47% 37% 70% Proportion
60% of Firms
48% 50% in Size band
15%
40% for each
41% 30% Parameter
12% 20%
10%
Small (under 50 employees)
0%
0.6%
Medium (50-249)
0.1% Turnover (exc.
Large (250 or more) Finance
Employment
Intermediation)
Businesses
Source: BERR, 2007a
sector financial turnover. Meager, Kaiser and Dietrich (1992) conducted

a comparison of small firms in both the U.K.
More detailed sector statistics show employment and Germany – the most successful economy
to be particularly reliant on small firms in areas in Europe. Both economies experienced an
as varied as real estate, recycling, computing increase in self-employment during the 1980s,
plus the manufacture of wood and wood taking many labour market analysts and policy-
products. By way of contrast, some sectors are makers by surprise. Meager et al.’s research
still very much dominated by large businesses addressed the question of why both the U.K.
– gas and water supply, mining and quarrying, and Germany, in the 1970s and (especially) the
financial intermediation and manufacturing, for 1980s, witnessed a reversal in the previously
instance. For example, the sector perceived inexorable trend towards declining self-
as being under threat for some years, and employment. Is self-employment emerging
for which data is available – manufacturing as a new and significant form of employment
– relies on 65% of its turnover from large firms in the ‘post-mass production’ era, or had the
(those employing 250 or more). experience of the last two decades been
merely a ‘blip’ or deviation from the downward
4. INTERNATIONAL DIFFERENCES historical trend ? Their report examined the
characteristics of the self-employed, using
Figure 5 presents broadly comparable statistics the U.K. Labour Force Survey (LFS) and the
on international self-employment rates. As is German Mikrozensus, the key comparable
evident, self-employment rates in the U.K. rose sources of labour force information between
dramatically between 1979 and 1993 from 6.6% the two countries. Their major conclusions
to 11.9% of the non-agricultural workforce. The were that:
scale of this increase was relatively exceptional
at a time when comparable values for France, n Despite being an extremely
Austria, Denmark (and outside Europe, Japan) heterogeneous group, the profiles of the
were actually fairly static or falling and all self-employed in the two countries were
subsequently having lower self-employment very similar. In particular, many of the
rates than the U.K. same factors appeared to be associated
with greater likelihood of an individual

Fig 4 - Number of Enterprises, Employment & Turnover in the UK Private Sector
Summary by Size of Enterprise & Industry Section, Start 2006
NUMBER OF BUSINESSES SIZE (number of employees)

(= 100%) None [1] 1-49 50-249 250+
A,B Agriculture, forestry, fishing 178,385 68.7% 31.2% 0.1% 0.0%
C,E Mining, quarrying, energy, water 9,455 87.1% 10.9% 1.2% 0.6%
D Manufacturing 325,875 65.9% 31.4% 2.1% 0.5%
F Construction 920,780 86.3% 13.5% 0.2% 0.0%
G Wholesale, retail, repairs 580,685 56.4% 42.6% 0.8% 0.2%
H Hotels and restaurants 139,150 15.8% 82.6% 1.4% 0.2%
I Transport, storage, communication 272,195 83.3% 16.0% 0.5% 0.2%
J Financial intermediation 66,620 74.9% 23.6% 1.0% 0.5%
K Real estate, business activities 1,109,665 71.2% 28.3% 0.5% 0.1%
M Education 128,840 87.7% 11.9% 0.3% 0.1%
N Health and social work 246,580 79.6% 19.5% 0.9% 0.1%
O Other social/personal services 488,465 81.4% 18.4% 0.2% 0.1%
4,466,700 73.0% 26.2% 0.6% 0.1%
EMPLOYMENT 000s
(= 100%) None [1] 1-49 50-249 250+
A,B Agriculture, forestry, fishing 439 40.0% 54.4% * *
C,E Mining, quarrying, energy, water 161 5.5% 5.6% * *
D Manufacturing 3,345 7.2% 25.8% 21.3% 45.7%
F Construction 2,010 41.1% 33.1% 9.1% 16.7%
J Financial intermediation 1,096 5.2% 9.6% 6.5% 78.7%
K Real estate, business activities 4,245 20.0% 36.2% 12.2% 31.5%
M Education 351 33.7% 31.0% * *
22,402 15.9% 31.2% 11.7% 41.1%
TURNOVER £million
(= 100%) None [1] 1-49 50-249 250+
A,B Agriculture, forestry, fishing 29,397 24.1% 64.9% * *
C,E Mining, quarrying, energy, water 88,875 1.9% 6.3% * *
D Manufacturing 501,486 1.9% 15.4% 17.2% 65.5%
F Construction 218,738 22.9% 32.5% 12.2% 32.4%
J Financial intermediation [2] - - - - -
K Real estate, business activities 387,506 15.6% 40.2% 14.6% 29.5%
M Education 14,067 23.3% 41.4% * *
ALL INDUSTRIES 2,613,907 7.9% 29.2% 14.8% 48.1%
[1] Sole proprietorships and partnerships comprising only the self-employed owner-manager(s)
and companies comprising only an employee director.
[2] Turnover excludes Section J (financial intermediation), where turnover is not available on a comparable basis.
Scope includes public corporations and nationalised bodies. Numbers of enterprises are rounded, in order to avoid
disclosure; * Replaces data where the count is deemed to be disclosive.
Source: BERR, 2007a

Fig 5 - International Comparisons of Self-employment (non-agricultural)
as a Proportion of Total Employment: 1993 vs. 1979
Greece
Italy
Spain
1979
Portugal
1993
Belgium
Ireland
United Kingdom
Finland
France
Netherlands
Sweden
Luxembourg
Source: DTI Small Firms in Britain, 1996

Germany
Denmark
Austria
EU15
1993:
Australia Austria, Belgium = 1992 data
Japan Ireland, Luxembourg = 1991 data
Canada Germany (unified) 1993 vs. W.Germany for 1979
United States
0% 5% 10% 15% 20% 25% 30% 35%
being self-employed. This was higher if recession than in Germany).

the individual was: male, older, married,
working in certain sectors (particularly n There was little or no evidence of self-
agriculture or the private service sectors employment growth in the U.K. having
or, in the U.K. at least, construction), been fuelled by a major change in
better educated (this applied more workforce attitudes towards ‘enterprise’.
strongly in Germany or to women in the
U.K.), in certain occupations (managerial, n A much higher proportion of the German
the liberal professions, construction self-employed took on employees.
and agriculture) or lived in a region of Moreover, this proportion increased in
lower than average unemployment and Germany in recent years, whilst in the
was largely associated with regional U.K. it continued to fall. This was thought
differences in industrial sub-structure. to be influenced by the fact that the
German initial training system is such that
n No single dominant factor emerged to many self-employed are able to employ
explain the growth of self-employment in apprentices at relatively little cost in terms
the 1970s and 1980s in either country. of wages or long-term commitment.
Rather, a number of factors appeared
to have contributed towards the growth The authors made what could be a major
in self-employment, such as structural breakthrough in our understanding of the
and demographic change, the greater complex relationship between unemployment
use of the self-employed by large firms, and self- employment. The thesis that
the emphasis on public policy and unemployment ‘pushes’ significant numbers of
unemployment. The faster growth of people into self-employment is well established
self-employment in the U.K. seemed to and endless studies of the self-employed have
be at least partly due to cyclical factors identified a sizeable minority as having been
(a deeper recession in the early 1980s pushed by either unemployment or the threat
and stronger economic growth after the of unemployment. Meager, Kaiser and Dietrich
10 SME Facts & Issues, Stanworth & Purdy, 2008

themselves noted quite definitely that “the denied that this Government was
unemployed are disproportionately (highly) more prone to legislate than previous
represented in the self-employment inflow”. administrations: ‘If you look at the
numbers of Acts of Parliament passed
Against this, the authors’ findings on flows in and statutory instruments issued
and out of self-employment did not link tidily each parliamentary session they are
with unemployment rates in either country. This broadly the same order of magnitude.
might be explained, the authors hypothesised, And it is important to remember that
by areas of high unemployment experiencing less than 5 per cent of statutory
high self-employment inflows, allied with instruments have a significant impact
depressed economic local conditions reducing on business.’”(Cabinet Office, 2000a)
chances of survival, thereby increasing
subsequent self-employment outflows. In contrast, the Cabinet Office Regulatory
Impact Unit said that government can and
Research covering the period 1966 -86 should do more to help SMEs:
indicated that self-employment tended to rise
in line with unemployment. However, in the “We found evidence that entrepreneurs
second half of the 1980s, as unemployment are being distracted from running
dropped, self-employment actually rose. By and growing their businesses by
way of contrast, in the early 1990s recession, the cumulative burden of taxation,
there was evidence of self-employment actually employment, public protection and
falling as unemployment rose. Meager et al.’s environmental regulation. ... We are
hypothesis can account for these observations looking for a change in the culture of
by taking into account relatively high survival policy making. Government guidance
prospects in the late 1980s and reduced already says that policy makers
survival rates in the early 1990s, i.e., we need to should ‘think small first’. However,
look at flows (in and out of self-employment) in the message about what running a
addition to the size of the self-employed ‘stock’ small business today is like does not
of businesses at any one time. appear to have been taken seriously
by policy-makers. Even though SMEs
5. GOVERNMENT LEGISLATION account for 99% of businesses in the
U.K. and employ 57% of the workforce,
Table 1 compares financial, safety, employment too few regulations show evidence of
and equality regulatory issues for the U.K., the regulators following either the letter
U.S., Italy and Germany, viewed from an SME or the spirit of the guidance.” (Cabinet
perspective. More generally, the government Office, 2000b)
has recently suggested that U.K. businesses
are not as disadvantaged as some lobby The implication being that the problem is deep-
groups claim: seated, irrespective of political intentions.
“Dr Mowlam emphasised that the

U.K. is relatively lightly regulated
compared with its major competitors.
‘Several surveys have dispelled the
myth that the U.K. is heavily regulated.
The OECD reported in 1999 that
the U.K. had the lowest level of
product market regulation and one
of the most lightly regulated labour
markets. The Economist Intelligence
Unit ranked the U.K. second only to
the Netherlands as the best location
for business and the CBI reported
that the U.K. has more flexible
labour market regulation than other
European countries.’ Dr Mowlam also
SME Facts & Issues, Stanworth & Purdy, 2008 11

Table 1 - A Comparison of the Financial, Safety, Employment and Equality
12
Regulatory Issues for The UK, The United States, Italy and Germany (mid-2000)
UK United States Italy Germany

FINANCIAL: Business Taxes
Companies with profits of up to £10,000 pay at Corporate capital gains tax is 15% on the first Corporate Income Tax is 37%, regional tax is Corporation tax is levied at 30% and 40% on
10%, rising gradually to 20% for profits between $50,000 net income, 25% on the next $25,000 4.25% giving a total tax level of 41.25%. distributed and retained profits.
£50,000 and £300,000, then rising gradually to and 35% above $75,000. The top tax rate for Municipalities tax business income. The rates
30% for profits of over £1.5 million. Companies individuals is 20%. vary between 13% and 20% of business income.
with profits below £1.5 million do not have to pay New Jersey rates: Up to $100,000 net income
corporation tax by quarterly installments 7.5%, over $100,000 is 9%.
(thresholds are reduced proportionately where Florida: 5.5% net Florida income.
companies are grouped or have associated California: C Corporations 8.84%,
companies). S Corporations 3.5%.
New York: Corp 9%, S Corp 7.87%.
FINANCIAL: VAT & Sales Tax Rates

17.5% standard rate. Other rates are 5% (e.g. Sales tax rates: Florida 6% plus county rates of 20% standard rate. Other rates are 4% and 10%. 16% Standard Rate.
domestic supplies of gas and electricity) and 0% up to 1%. No tax on groceries, medicines, Certain services such as banking, insurance, 7% reduced rate for selected items, i.e. food,
(e.g. books and most food). Certain services are household fuels and most services. financial services and the leasing of buildings and books, particular regulations for some tax-free
exempt from VAT (e.g. in finance sector). land are exempt. turnovers.
FINANCIAL: VAT Thresholds

Liability to register when taxable turnover in the No sales tax thresholds are in place for the four All businesses have to register, as there is no Taxation as a small entrepreneur under two
last 12 months or less exceeds £52,000, or where states researched, though the categories of threshold. However, there are administrative conditions: 1. Turnover in the current year is less
there are reasonable grounds for believing that goods exempted vary from state to state. simplifications on invoicing, record keeping and than DM 100,000 (£30, 928); 2. Turnover in
the value of taxable supplies in the next 30 days payment of tax. previous year was < DM 32,000 (£10,051). The
will exceed £52,000. De-registration level is DM 100,000 threshold is now the fourth highest
£50,000 limit in EU after UK, France and Ireland.
[UK VAT Registration threshold from 1st April 2005 onwards: £60,000]

FINANCIAL: VAT & Tax Returns
Individuals running businesses with an annual Taxpayers pay annually on the basis of self- >20 employees: tax returns on diskette Corporation tax, trade tax and net-worth tax
turnover of under £15,000 need only supply assessment. Audited accounts are not required to <20 employees: make paper returns returns are due on 31 May following the end of
abbreviated figures on their tax returns. accompany the tax return, but the return must be <10 employees: firms make unified tax and VAT the financial (calendar) year.
Company may prepare abbreviated accounts signed by a legal representative of the taxpayer. returns.
provided its turnover is below £2.8m and has State sales taxes are normally paid monthly.
either a balance sheet total of not more than £1.4
million or the number of employees is 50 or less.
FINANCIAL: Statutory Audit Requirements

Private limited liability company, unlimited No statutory requirement for audit. State rules Public limited liability company, private limited Public limited liability company, private limited
company, general partnership, and limited may require certain classes of companies (e.g. liability company, incorporated partnership are company, incorporated partnership are exempt if
partnership are exempt if they meet the following credit unions, benefit plans etc.) and charities to exempt if they meet the following criteria, Assets: they meet the following criteria, Assets: <DM 5.31
criteria, Assets: below £1.4 million; Employees: be audited. <LIT 3090 million (£1.06m); Turnover: <LIT 6180 million (£1.64m); Turnover: <DM 10.62 million
50 or less; Turnover: below £350,000 (subject to million (£2.12m); Employees: <50. (£3.28m); Employees: <50.
Parliamentary approval, to be raised to £1m for
financial periods ending after July 31 2000).
SAFETY AT WORK ISSUES

<5 employees: Firm is exempt from preparing a There is no requirement to record job-related <10 employees: no H&S report, self certification Only employers with more than 10 employees are
written H&S policy and bringing it to employees injuries and illnesses where: <10 employees or being sufficient; required to keep records on hazard classification.
attention, recording risk assessment findings, and ‘low hazard’ industries such as automobile <15 employees: exemption from annual H&S
recording H&S arrangements. dealers, eating and drinking places, finance, meeting;
Fire certificates are not required for any factory, insurance and real estate and furniture stores. <15 employees: employees’ H&S representative
shop or office in which: can represent more than one firm;
* not more than 20 persons are at work on the <30 employees: simplified H&S procedures &
premises at any one time; and employer can act as the accident prevention
* not more than 10 people work at any one time service;
elsewhere than on the ground floor <=30 employees: medical inspections need only
be done once a year (instead of twice).
14

EMPLOYMENT: Minimum Wage
No exemptions. National Minimum wage (of $5.15 an hour) Each industry has a national labour contract Most branches of industry have collective pay
applies only to firms with interstate commerce stipulating minimum wage and salary scales. agreements, which are negotiated between the
valued at $500,000 or more. social partners.
EMPLOYMENT: Working Time

Voluntary individual exemption (opt out) is Working Time regulations do not apply to firms Most trade union agreements are for a 40-hour The Act on Working Hours defines working days
allowed from the weekly working time limit of 48 with turnover below $500,000. week. as Mon to Sat and limits regular working hours to
hours, averaged over a 17 week referencing 8 per day i.e. 40 per wk. The max. time can be
period. extended to 10 hrs/day only if the average over 6
months or 24 weeks does not exceed 40 hrs.
EMPLOYMENT: Maternity Leave

<5 employees: Firms do not have the same Family and Medical Leave Act provisions do not No exemptions. No exemptions.
obligation as larger firms with regard to re- apply to employers with less than 50 employees.
employing women after taking “old style” Where it does apply, the maximum leave period
maternity leave. is12 weeks.
EMPLOYMENT: Statutory Maternity Pay

Small employers (who pay <£20,000 gross NICs) Where the Family and Medical Leave Act No exemptions. Women receive their full salary during statutory
may recover 100% plus an additional payment of provisions apply, maternity leave is unpaid. maternity leave; statutory health insurance funds
5% in compensation for the secondary (i.e. pay up to DM 25 (£7.73) per day, the rest is paid
employer) NICs paid on SMP payments. by the employer. In companies with 20 or fewer
employees, health insurance funds take on full
costs.
EMPLOYMENT: Trade Union And Employee Representation

<=20 employees: Firms are exempt from the No information available. >15 employees: Unions’ rights to hold meetings, <5 employees: No entitlement to elect a
Employment Relations Act requirement to grant elections, collect dues and put up notices apply. Betriebsrat (employees’ committee). The
recognition to unions for collective bargaining >200 employees: there is a requirement for a committee size is dependent on the number of
purposes. The Act gained Royal Assent in July permanent union representative. employees e.g. 5-20 emps.: 1 person elected as
1999 and the provision will be introduced in due a representative; 21-50 employees: 3 person
course. committee; 51-150 employees: 5 person
committee.

EMPLOYMENT: Redundancy Notice And Terms
No right if employed for less than two years. Employers with more than 100 employees (not No information. The following notice periods apply to all full time
Less than 20 employees potentially redundant - counting those who have worked less than 6 of employees.
no obligation to notify DTI of redundancy; 20-99 the last 12 months, or those who work an Employment Notice
employees potentially redundant - 30 days average of 20 hours a week), must provide 60
2 years 1 month to end of calendar month
notification; 99+ employees potentially redundant days notice when: a covered plant is shut down 5 years 2 months
- 90 days notification. for more than 6 months; or a layoff of 6 months or
8 years 3 months
longer affects 500 or more workers; or 50
10 years 4 months
employees lose their jobs during a 30 day period.
12 years 5 months
15 years 6 months
20 years 7 months
EQUALITY: Equal Pay

No exemptions. Equal Pay Act does not apply to firms with No exemptions. No exemptions.
turnover below $500,000.
EQUALITY: Race Or Sex Discrimination

Racial discrimination between partners or Civil Rights Act forbidding discrimination by race, No exemptions. No exemptions.
between partners and prospective partners is not colour, sex, religion, creed or national origin does
unlawful where there are <6 partners. not apply to firms employing less than 15 people.
EQUALITY: Disability Legislation

Employers with <15 employees (full or part time) Disability Rights legislation does not apply to Firms with 35 people or less are exempt from the No exemptions.
are exempt from the Disability Discrimination firms employing less than 15 people. requirement to employ disabled people in 15% of
Act’s employment provisions. the positions. Other exemptions apply to
businesses involved in rail, sea or air travel.
[UK: The Disability Discrimination Act was amended
to remove the small business exemption from 1st October 2004]
Source: Helping Small Firms Cope with Regulation - Exemptions and Other Approaches, Better Regulation Task Force, Cabinet Office, April 2000
6. A REGIONAL PERSPECTIVE: Mason first looked at the winners and finalists in
WHERE ARE THE SUCCESSFUL small firm competitions in the early 1980s. This
SMALL BUSINESSES ? revealed that firms winning such competitions
were concentrated in Southern England
Up to 60% of all new businesses cease (41%) and were largely absent from Northern
trading within five years (Figures 6a and 6b), regions (no more than 7% for the group of
although survival rates (see also Figure 6c) regions including the North, Scotland, Wales
appear to have improved over the last decade and Northern Ireland). Results of a location
or so. However, only a very small proportion quotient calculation of the data revealed that
of those that survive achieve any significant East Anglia, the South-West and the South-
growth, though the very small proportion of East all contained more than their share of
businesses that do grow are found to make a small firm competition winners relative to their
disproportionately large contribution to local stock of business activity. All other regions had
economic development. Rapid growth new a location quotient of less than 1, indicating an
businesses appear to be concentrated in under-concentration of winning enterprises,
certain regions and sub-regions. with the lowest values being in Northern
Ireland, Scotland, Wales and the North of
Mason (1989) studied variations between England.
regions and sub-regions of the U.K. in terms
of their capacity for small business formation, The second analysis involved the 1,000
survival and success, and has attempted unquoted companies with the highest growth
to explain the differences found. Mason’s rates in pre-tax profits listed in the Growth
empirical work here was based upon analyses Companies Register, 1986. The information was
of original data including the winners and drawn from a database of 10,000 companies
finalists in various small firms competitions, and, to be included, firms had to have achieved
the Growth Companies Register and small pre-tax profits in each of the latest 3 years,
and medium sized firms quoted on the Unlisted minimum pre-tax profits of £50,000 in the latest
Securities Market. Apart from mapping the financial year and consecutive increases in pre-
distribution of these firms, the data was tax profits over the previous three accounting
analysed using location quotients. periods. Mapping the locations of these 1,000
Fig 6a - Lifespan of Businesses Registered for VAT:

Proportion Remaining on Register
100%
90% Registered 1999

Registered 1988
Sources: DTI 1996; DTI Small Business Service, 2007
80%
70%
60%
50%
40% 40%
30%
20%
10%
0%
0 1 2 3 4 5 6
Year after first registering

Fig 6b - Lifespan of Businesses Registered for VAT:
Proportion Remaining on Register
Time since Registered Registered

registration (years) 1988 1999
Registered 1988 Registered 1999
0 100% 100%
0.5 93% 96%
1 84% 90%
1.5 75% 84%
2 68% 78%
2.5 61% 73%
3 55% 68%
3.5 51% 64%
4 47% 60%
4.5 43% 56%
5 40% 52%
5.5 37% 50%
6 35% 47%
Sources: DTI 1996; DTI Small Business Service, 2007
Fig 6c - Three-year 'Survival' Rates of VAT-Registered Businesses
80%
69.7% 71.3%
66.9% 68.5% 67.7% 68.3% 68.4%
70% 65.6%
60%
50%
Source: DTI Small Business Service, 2007
Proportion
Still Registered 40%
After 3 Years
30%
20%
10%
0%
1995 1996 1997 1998 1999 2000 2001 2002
Year of Registration

Fig 6d - 3-Year/1-Year 'Survival' Rates Of VAT-Registered Firms
By Region
United Kingdom
North East
North West
Yorkshire and the Humber
East Midlands
West Midlands
Source: DTI Small Business Service, 2007

East
London
South East
South West
England
Wales 3-year (2002 registration)
Scotland 1-year (2004 registration)
Northern Ireland
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Percent Still Trading
companies highlighted their concentration firms in the South-East included:

again in the South-East. Greater London was
found to contain 23% of the total and the rest n The difficulties encountered by firms in
of the South-East accounted for a further 21%, peripheral regions in obtaining venture
with the largest concentrations in Surrey, Essex capital.
and Kent. Significant concentrations were
found in Yorkshire and Humberside (11%) and n The limited local market opportunities
North-West England (10%), the West Midlands in Northern regions compared with the
conurbation and Strathclyde, while the North, high levels of consumer wealth in the
Wales and Northern Ireland all contained South-East and the high concentration
relatively small numbers. of government laboratories, industrial
research organisations, etc.
A final analysis was made of those small
and medium-sized firms joining the Unlisted n The occupational structures of the
Securities Market as at April 1985. This regions. Successful small firms tend to be
revealed a similar pattern with the South-East run by owner-managers from managerial
containing 59% of the total and the next largest backgrounds, especially in marketing or
share (8%) being in the South-West. Together technical areas and the South-East has
the North, Wales, Scotland and Northern the highest proportion of managerial,
Ireland accounted for only 7% of the total. Once professional and technical occupational
again the South-East had a location quotient groups.
greater than one and Northern Ireland, Wales,
the North of England and Scotland were again These findings were important for policy
the regions which appeared to be most under- formulation and a number of policy decisions
represented. The South-East was particularly were made in an effort to improve the supply
conspicuous for its share of the main growth of successful small businesses outside the
sector firms – services and electronics. South-East. These included the provision
of regional venture capital, the development
Mason suggested that the reasons for this of regional science parks and innovation
apparent concentration of successful small centres, and the introduction of more targeted
government support for small firms in the

more disadvantaged regions. However, the be risk takers, making a lower survival
main policy implication, that of picking and rate more likely. The mix of industries
nurturing potential winners, remains largely within a region also affects business
unaddressed. survival rates. Some sectors, e.g. retail,
hotels and restaurants have higher de-
The survival data for Figure 6d are taken from registration rates, so regions with a higher
the Inter-Departmental Business Register mix of these would have a lower survival
(IDBR), maintained by The Office for National rate.
Statistics. The IDBR holds records of all U.K.
businesses registered for VAT, representing 2.1 n The three-year survival rate for Northern
million (2007) of the 4.4 million U.K. enterprises Ireland is somewhat higher than all other
(2006). The turnover threshold for VAT regions (at 78% for firms registered in
registration in 1993 was £37,600, rising each 2002). The survival rate in Northern
year to £64,000 by April 2007. The VAT data Ireland can be contrasted with a lower
does not contain information about the very than average start-up rate. This suggests
smallest businesses, mostly self-employed a risk-averse culture where, because
individuals that operate below the threshold. fewer people are taking risks, the
business stock more becomes static
The units of measurement are the registrations (although perhaps less so of late, see
and de-registrations of the VAT-based Figure 8a).
enterprises. This differs from previous analyses
that used local VAT units. The VAT based 7. THE SMALL FIRM IN
survival rates show the share of the businesses THE LONDON ECONOMY
registering for VAT in each year that have not de-
registered by 12, 24 and 36 months. Businesses Figure 7 indicates the presence of around
have a higher chance of de-registering during one-third of all VAT-registered U.K. businesses
the first three years than at any other time. (mostly small) in London and the South-East,
After this period the year on year number of whilst Figure 8a suggests relatively high levels
de-registrations is much less. Adjustments are of variation in regional stock growth patterns,
made to the raw data to account for lags in the with stark variations between the relatively
reporting of the registration and de-registration. affluent South East, on the one hand, and a
These numbers are then expressed as the depressed region, such as Wales, on the other.
percentage still surviving. Figure 8b shows the sectoral trends, with a
flourishing real estate and renting sector, and
Those businesses that de-register are not declining agriculture.
necessarily failures. Research conducted by
Kingston University suggests that businesses Figure 9, extracted from the NatWest SBRT /
de-register for many different reasons. Twenty SERTeam Quarterly Survey of Small Business
nine percent of the businesses that de- in Britain, shows ‘low financial turnover’ to have
registered in the study were thriving at their been the most commonly experienced small
time of de-registration. business problem of the 1990s, thus indicating
the crucial importance of regional affluence
The Small Business Service has found (see and spending levels in sustaining small firms
also DTI Small Business Service, 2004): populations. This point was illustrated by
MacDonald (1996: 445), in a study of small
n There has been a general improvement business start-ups in Teesside, where he
in business survival rates. This is true for painted a picture of struggle, self-exploitation
both one and three-year survival rates in and crushed hopes, as the vast majority of new
most areas of the U.K. small businesses folded within a fairly short
period of time. His conclusions on the failure
n Between regions however, business of politicians’ attempts to convert ‘welfare
survival varies greatly. The number of dependency culture’ into ‘enterprise culture’
business closures often closely mirrors were depressing:
the number of business start-ups.
However, a high start-up rate can also “The businesses they (the newly
mean that more of the entrepreneurs will self-employed) temporarily ran,

Fig 7 - Trends: Regional Breakdown of VAT-Registered Businesses
in the U.K., 1994-2007
Total U.K.
Businesses
2,000,000 1,956,750
1,800,000
Northern Ireland
1,621,760
1,600,000 Scotland
Wales
1,400,000 South West
1,200,000 South East
1,000,000
London
800,000
East
Source: BERR 2007b

600,000
West Midlands
400,000 East Midlands
Yorkshire And The Humber
200,000
North West
0 North East
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
contrary to the claims of the local nationally. The proportion in the sector rose to
TEC, were not part of some new nearly 17% (1,960 firms) of all VAT-registered
thriving, entrepreneurial culture set businesses in the City of London (11,380 in total).
to rejuvenate the local economy and The City alone accounted for nearly 33% of
deserving of ministerial plaudits. It was London businesses in financial intermediation,
survival self-employment developed in compared to the City of Westminster’s share at
the face of permanently high rates of 25%, though Westminster is seven times the
local unemployment ... Survival self- area of the City of London (DTI Small Business
employment was part of a growing Service, 2004).
culture of new, informal and risky ways
of making a living at the margins of London accounts for quarter of all U.K. VAT-
depressed local economies”. registered businesses with employing 250 or
more employees (Figure 11). However, in 2000,
In the vastly more affluent Capital City of 98% of VAT-registered London businesses
London, financial and business services employed fewer than 50 employees.
contributed 39% of London’s GDP in 1994
compared with 26% nationally. Manufacturing, Figure 12 shows a distinct change in the
on the other hand, accounted for just 12% composition of the London workforce between
against a U.K. average figure of 20%. These 1986 and 1996. This involved particularly men
statistics denote the importance of London and witnessed a reversal in the position of
as both a capital city and a national and London from having a rate of unemployment
international business centre. lower than that of the country as a whole to having
a considerably higher rate of unemployment.
Figures 10a and 10b enables a broad sector This period witnessed a significant shift in
comparison to be made between VAT-registered both the proportions of London’s workforce
businesses in London and the U.K. who were employed and also those who were
self-employed. As can be seen, these changes
At the beginning of 2004, over 2% of such worked in opposite directions.
businesses in London operated in the financial
intermediation sector, compared with 1% Figures 13a/b further demonstrate the above

Fig 8a - Trends: Change in Number of U.K. VAT-Registered Firms 1994-2007:
Regional Comparisons
Stock of UK Firms
% Change 1994-2007
>=30%
20 to 29.9%
10 to 19.9%
0 to 9.9%
Change % Change
REGION 1994 2007 1994-2007 1994-2007
London 229,165 309,225 80,060 +34.9%

South East 243,280 306,920 63,640 +26.2%
East Of England 160,840 196,480 35,640 +22.2%
Northern Ireland 53,295 64,365 11,070 +20.8%
East Midlands 111,610 134,195 22,585 +20.2%
West Midlands 137,945 164,810 26,865 +19.5%
South West 156,145 183,420 27,275 +17.5%
North West 162,135 186,045 23,910 +14.7%
Yorkshire/Humber 122,600 139,970 17,370 +14.2%
North East 43,525 49,435 5,910 +13.6%
Scotland 121,005 136,890 15,885 +13.1%
Wales 80,210 84,995 4,785 +6.0%
Total U.K. 1,621,760 1,956,750 334,990 +20.7%
Source: BERR, 2007b

Fig 8b - Trends: Change in Number of U.K. VAT-Registered Firms 1994-2007:
Sectoral Comparisons
-30% -10% 10% 30% 50% 70% 90%
Real estate, renting and business activities
Financial intermediation
Education; Health and social work
Hotels and restaurants
Transport, storage and communication
Construction
Public administration; Other community, social and personal services
Mining and quarrying; Electricity, gas and water supply
Manufacturing
Wholesale, retail and repairs
Agriculture and forestry; Fishing
Change % Change
SECTOR 1994 2007 1994-2007 1994-2007
Real estate, renting and business activities 314,840 595,450 280,610 +89.1%
Financial intermediation 14,450 20,640 6,190 +42.8%
Education; Health and social work 23,280 30,440 7,160 +30.8%
Hotels and restaurants 112,285 141,735 29,450 +26.2%
Transport, storage and communication 70,390 85,305 14,915 +21.2%
Construction 194,155 228,770 34,615 +17.8%
Public admin.; Other community, social & personal services 128,235 147,820 19,585 +15.3%
Mining and quarrying; Electricity, gas and water supply 1,755 1,885 130 +7.4%
Manufacturing 163,075 153,510 -9,565 -5.9%
Wholesale, retail and repairs 434,970 404,050 -30,920 -7.1%
Agriculture; Forestry and fishing 164,145 146,965 -17,180 -10.5%
Total U.K. 1,621,760 1,956,750 334,990 +20.7%
Source: BERR, 2007c

Fig 9 - Trends: Selected 'Most Important Problems' for U.K. Small Firms,
1985-2007
50%
Interest Rates/Access to Finance
% Reporting
Problem Lack of Skilled Employees/High Pay
40% Low T/over or Lack of Business
Sources: NatWest/SBRT & NatWest/SERTeam Quarterly

Government Regulations & Paperwork
30%
Survey of Small Business in Britain

20%
10%
0%
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fig 10a - London VAT-Registered Businesses, by Sector, 2007
Education; Health & Social Financial Intermediation

Transport, Storage & Work 2.1%
Communication 1.5% Mining & Quarrying;
3.4% Electricity, Gas & Water
Hotels & Restaurants Supply
6.0% 0.1%
Agriculture & Forestry;

Fishing
0.3% Real Estate, Renting &
Business Activities
Public Administration; Other London 43.2%
Community, Social &
309,225 firms
Personal Services
11.4%
Manufacturing
5.8%
Construction
7.0% Wholesale, Retail & Repairs
19.2%
Source: BERR, 2007c

Fig 10b - U.K. VAT-Registered Businesses, by Sector, 2007
Education; Health & Social Financial Intermediation
Work 1.1%
Transport, Storage & 1.6% Mining & Quarrying;
Communication Electricity, Gas & Water
4.4% Supply
Hotels & Restaurants 0.1%
7.2%
Real Estate, Renting &
Agriculture & Forestry;
Business Activities
Fishing
30.4%
7.5%
Public Administration; Other United Kingdom

Community, Social & 1,956,750 firms
Personal Services
7.6%
Manufacturing
7.8% Wholesale, Retail & Repairs
20.7%
Construction
11.7%
Source: BERR, 2007c
Fig 11 - Share of VAT-Registered Businesses By Employee Size:

London vs. Rest of U.K., 2000
84%
83%
75% 90%
84%
80%
70%
60%
16%
50% Proportion
of
17% 40%
Small (1-49 employees) Size-band
25% 30%
Medium (50-249) 20%
10%
Large (250+) 16% 0%
ALL FIRMS Rest of UK
London
Source: ONS, 2000

Fig 12 - Components of the U.K. & London Labour Forces, 1986 & 1996
Total Labour
Self- Others in ILO Force 000s
Employees Employed Employment Unemployed (=100%)
(†)
MALES
London
1986 73.8% 13.9% 0.8% 11.5% 1,985
1996 69.3% 16.3% 1.3% 13.1% 1,948
U.K.
1986 73.5% 13.2% 1.7% 11.6% 16,040
1996 73.7% 15.4% 1.3% 9.7% 15,992
FEMALES
London
1986 83.8% 6.3% 0.8% 9.1% 1,472
1996 82.4% 7.3% 1.3% 8.9% 1,557
U.K.
1986 82.2% 5.9% 1.2% 10.6% 11,606
1996 85.7% 6.6% 1.4% 6.3% 12,561
(†) Covers people on government-supported employment and training schemes,

unpaid family workers and those who did not state their employment status
Source: ONS Labour Force Survey, 1996
Fig 13a - Employee Job Population Trends: London & Great Britain,
1995-2007
120
London Employee Jobs

115 116
117
Source: ONS (NOMIS), Estimates Of Workforce In Employment, 2008
110
115
105 110
G.B. Employee Jobs
Index100
(1995=100)
95
90
85
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Fig 13b - Self-Employment Job Population Trends:
London & Great Britain, 1995-2007
135
130
125
Source: ONS (NOMIS), Estimates Of Workforce In Employment, 2008

120 131
115
110
105 London Self-Employment Jobs
Index (1995=100) 107
100
95
106
90
85
80 90 G.B. Self-Employment Jobs
1995 1996
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
trends. As the economy grew in the late 1980s, maintenance in the building industry, jobbing
so employment in London grew, peaking at engineering and specialised retail outlets such
2.8 million in 1990. London, however, suffered as bookshops). Finally, and crucially from the
more severely from the early 1990s recession viewpoint of the current discussion, are small
than the country at large and employment fell to firms performing the role of ‘Satellites’. Here the
a trough of 2.5 million in 1994. It had recovered small firm is highly dependent upon a single
to 2.6 million by Spring 1996. Fluctuations in the larger business for the majority of its trade.
number of self-employed over this period were Many of the self-employed without employees
even more profound but followed a similar path would appear to fall into this third category.
in London to the country as a whole.
One of the most profound changes in the
8. SMALL BUSINESS OWNERS, OWN structure of the British workforce after the
ACCOUNT SELF-EMPLOYED, AND early 1980s was the dramatic growth in the
DISGUISED WAGE-WORKERS number of self-employed without employees
(Curran and Reid, 1992; Druker, Stanworth and
The pioneering Bolton Committee researchers Conway, 1997). Another was the emergence
were attracted to the idea of classifying the roles of the larger business in its new incarnation
of small firms according to the type of market as a ‘down-sized’, work intensified, externally
they supply (Bolton, 1971: 31-32). Accordingly, sourced, ‘anorexic’ organisation (Atkinson
they located small firms along a typology of and Meager, 1986; Cordova, 1986; Hakim,
reliance upon large firms. ‘Marketeers’ are 1987 and 1990; Hunter and MacInnes, 1990;
those firms which actually compete in the same MacGregor and Sproull, 1991; Rainbird, 1991;
or similar markets as large firms (examples Walsh, 1991; Brewster, Hegewisch, Lockhart
are computer software companies, fashion and Mayne, 1993; Turnbull and Wass, 1995).
merchandise manufacturers and independent However, these two processes are becoming
restaurants). ‘Specialists’ are those firms which increasingly inter-twined, with the larger
carry out functions that large firms do not find it organisation searching for ‘leanness’, achieved
economic to perform, though they may include by means of internal staff reductions and
large firms amongst their customers (examples by ‘externalising’ many functions previously
are car component manufacturers, repair and performed in-house.

The terms ‘small business’ and ‘self-employed’ workplace which characterises those
have often been regarded as inter-changeable. who are genuinely self-employed”
However, the tendency to conflate two kinds of (1996: 2).
economic entity – those with and those without
employees – can be misleading unless we Druker, Stanwor th and Conway (1997)
accept the notion that those without employees made similar observations concerning the
are simply situated at an early growth stage hairdressing sector. There were around
prior to taking on employees and growing 125,000 people working in the sector, of whom
their businesses. In reality, though, there is 25,000 are classified as self-employed and are
a growing body of evidence to suggest that mainly salon owners. However, an additional
many of them are not necessarily young and number, estimated at 35,000, fell into the
nor are they likely to ever create employment category of freelance hairdressers. This figure
for anyone other than their ‘owner’. includes those working as home or mobile
hairdressers, chair renters (self-employed
As evidence for this alternative and segmented hairdressers ‘renting’ chairs in salons owned by
view of the ‘small business’ population, we others) and session stylists. Freelancers may
have, on occasions, witnessed whole classes or may not be registered as self-employed for
of employees with no real aspirations to tax purposes and are referred to in the industry
become entrepreneurs, making the transition as the ‘unregulated sector’ and regarded as
from employment to self-employment, often part of the ‘hidden economy’.
continuing to work partly or wholly for their
former employers. For instance, in the U.K., Research into self-employed editors and
the late 1980s and early 1990s witnessed proof-readers in the British book-publishing
the emergence of over 8,000 self-employed industry (Stanworth and Stanworth, 1995;
franchised diary roundsmen (British Franchise Granger, Stanworth and Stanworth, 1995),
Association / National Westminster Bank, has observed a shift in employers’ labour-use
Franchise Survey, 1993: 3; Boyle, 1994). strategies resulting in former in-house editorial
These were: staff becoming externally located (home-
based) and changing their employment status
“ ... laid off as full-time employees of to ‘self-employed’. Many of the publishing
the major dairies and (subsequently) industry freelancers studied were ‘pushed’
enfranchised as self-employed into self-employment. ‘Entrepreneurial pull’
businessmen to deliver milk” (Boyle, was, at best, a minority form of explanation
1994). for the change in status from employed to self-
employed. Force of circumstance pervaded in
For further evidence of this trend, there is the majority of cases, redundancy being the
the case of the construction industry which most common factor inducing the change in
accounted for around one-fifth of all U.K. small employment status. Given the nature of the
businesses in the 1990s. Within the industry, work involved – editing and proof-reading
84% worked in businesses employing fewer – and the sector’s early historical precedents
than 100 people (DTI, 1996: 89) and 44% of for freelancing, it is perhaps not surprising that
the workforce were self-employed (ONS LFS, freelancing grew so rapidly when economic
1996: 10; see also Figure 4 for more recent pressures threatened the very existence of
data conveying a similar picture). Druker and so many publishing houses in the 1980s and
Macallan observed: early 1990s. Freelancers in publishing are
unlikely to grow their businesses. They typically
“Many of those working in the employ no one, own little or no capital, and
construction industry who are called have no capacity to extract surplus value and
‘self-employed’ are employees in all accumulate capital. Most experience poorer
but name. Some of them have worked pay and conditions than equivalent employees
continuously for the same employer and are heavily reliant usually upon just one or
over several years and are in effect two customers (Figure 14).
‘in-house’ self-employed. Others have
less regular and more casual work. In Consistent with this growth trend in the
both cases, they are quasi-employees, numbers of self-employed without employees,
with little of the autonomy in the the Department of Trade and Industry in Britain

28
100%
90%
80%
Main client
70%
55% Turnover
Proportion 60%
of Sample
n = 345
50% Median
Cumulative Two largest
Distribution clients
40%
30% 82% Turnover

Amongst Book-publishing Freelances
20%
Main Client Main & Next Largest
10%
Source: Stanworth & Stanworth, 1997

0%
Fig 14 - Contribution to Turnover/Income by Main/Next Largest Clients
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Proportion of Turnover/Income

Fig 15 - Changes In Self-Employment And
In The Proportion Of The Self-Employed Who Are Employers 1983-90
OECD, 2000 (corrected), Excluding agricultural sector and unpaid family

Change in the proportion of
self-employed who are
6
employers (%)
Portugal
4 Spain
France
2
Japan Denmark Greece Change in self-employment (%)
0 Netherlands
Ireland
Italy
-20 -10 0 10 20 Germany
30 40 50 60
Australia
-2
Canada
-4 Luxembourg
-6
United Kingdom
-8
-10
-12
has said: without employees are simply ‘disguised

wage-labourers’, others may informally create
‘The growth in the total number of work for others such as spouses, members of
businesses is largely the result of the wider family, casual labourers, formal and
the increasing number of micro informal partners, etc.
businesses. This is illustrated by the
rapid increase in self-employment, The source of these one-person-businesses
particularly amongst those without appears to have been attracting increased
employees’. (DTI, 1995: 6) attention recently (Burchell, Deakin and
Honey, 1999). One fashionable hypothesis
Labour Force Survey statistics show that the might be that they are located firmly in areas
number of small businesses with employees in of the burgeoning ‘new economy’, using high
the U.K. actually fell from over 1 million in 1985 to technology (Stanworth C., 1998), teleworking
860,000 in 1997, whereas the population of the from home, formulating virtual business
self-employed without employees grew from 1.7 configurations and pushing forward the outer
million to 2.5 million. Relatively little is known of reaches of dot.com distribution. In reality,
the self-employed without employees (Curran however, what appears more likely is that
and Reid, 1992) but they are typically regarded the bulk of the growth here is explained by
as micro small businesses passing through the continuity with the past rather than a departure
early stages of business growth. However, the from it (Figures 15 and 16):
above statistics indicate that growth, in a job
creation sense, may be an atypical process “... several countries, at different
and that the situation of a good proportion of times, have seen growing numbers
the self-employed without employees is best of self-employed people who work for
regarded as a hybrid situation located mid-way just one company, and whose self-
between employment and self-employment. employment status may be little more
However, Rainbird’s (1991) qualitative small than a device to reduce total taxes
sample work in the small business field has paid by the firms and the workers
shown that, whilst many of those identified in concerned.” (OECD, 2000:155)
Labour Force Survey data as self-employed

Fig 16 - Changes In Self-Employment And
In The Proportion Of The Self-Employed Who Are Employers 1990-97
8
Change in the proportion of self-
OECD, 2000 (corrected, Luxembourg off-scale and thus omitted for sake
employed who are employers Spain
6
(%)
of clarity), Excluding agricultural sector & unpaid family workers

4 Greece Portugal
Japan
2 Ireland Netherlands
France
Change in self-employment (%)
0 Mexico
-20 -10 0 10 20 30 40 50 60
-2
Denmark
-4
Italy Australia
-6 United Kingdom
Germany
-8
-10
Canada
-12
Recent economic restructuring has resulted the shortcomings of life in the externalised
in many businesses reformulating themselves workforce, or whether the weak bargaining
around their ‘core’ activities whilst sub- position of atomised, self-employed freelances,
contracting and outsourcing to small businesses the lack of social protection and exclusion from
many of the jobs previously undertaken in- employment rights for this group will persist.
house. On occasions, it appears likely that
single changes in employment patterns will 9. ETHNICITY
be measured twice. For instance, downsizing
in the U.K. publishing industry amongst literary Government research by the Women & Equality
staff during the 1980s and 1990s resulted in Unit, using Labour Force Survey data, (Hibbett,
officially recorded ‘job losses’ by publishing 2002), reported that there were around 2.3
houses as a direct result of ‘downsizing’ and, at million ethnic minority women and just under
the same time, ‘job creation’ in the form of new 2.4 million ethnic minority men in the U.K.
firm formations when many of those displaced Ethnic minorities are on average younger than
continued working from home as self-employed the White population, the difference in average
freelance ‘teleworkers’ undertaking the same age being particularly large for Pakistani/
work and often for the same client or client Bangladeshi people and those of mixed
group as previously (Granger, Stanworth and ethnic origin. People from ethnic minorities
Stanworth, 1995; Stanworth and Stanworth, are generally more likely than White people to
1997). be not in work and on benefits (excluding child
benefit). In terms of mainstream employment,
All the indications are that the self-employed employment rates for ethnic minorities are
without employees will be a growing feature generally lower than those for Whites. Across
of the U.K. labour market. The public policy all ethnic groups, women are less likely to be
implications of this are that this form of employed than men are.
freelancer self-employment is here to stay, and
must be viewed as an increasingly common In terms of self-employment amongst ethnic
work position in the late twentieth century. minority groups, a marked disparity amongst
A question for the future will be whether the different groups has been known for some
measures will develop that might ameliorate while (see also Figures 17 and 18), and the

Fig 17 - Proportion of Self-Employed of All In Employment,
By Ethnic Group And Gender, 2002
28%
23%
30%
13% 25%
15%
11%
20% Proportion
8% Of All In
Chinese (*) 15% Employment
Other ethnic group (*) 6% 15% (for given
11%
10% ethnic group)
Asian/Asian British
White 5%
Black/Black British 6% 0%
(*) = Fewer than 10,000
amongst females, value All
ALL IN SELF-EMPLOYMENT
not shown Men
Women Source: Ethnic Minority Women In The UK,
Women & Equality Unit, 2003
Hibbett research noted that: “Explanations of the formation of

ethnic minority businesses tend to
n Self-employment is more common than stress the importance of cultural
average for Asian and less common for resources (particularly family and
Black British people. The highest self- community ties); the ‘push’ effect
employment rates are found for Pakistani/ occasioned by discrimination in wider
Bangladeshi men and Chinese men. society; or similar motivations to the
general small firm population (making
n Women are less likely to be self-employed money, the desire for autonomy, and
than men are, and this holds across all so on). Evidence is presented here to
ethnic groups where sample sizes allow a suggest that limited opportunities for
comparison. many ethnic minorities continues to be
an important influence on the decision
A Cabinet Office Strategy Unit report (2003: to become self-employed. The
93), noted that, in 1997, people from ethnic importance of familial and community
minority backgrounds represented 5% of the ties needs to be set against the
British population, while entrepreneurs from context of the opportunity structure for
ethnic minority backgrounds were responsible ethnic minorities. Relatedly, African-
for 9% of new business start-ups. Moreover, Caribbean under-representation in
ethnic minority businesses represent almost self-employment is more adequately
7% of the total business stock in Britain. accounted for by the nature of the
However, areas where ethnic minorities live still socio-economic context than pure
tend to have lower levels of business activity, culturalist explanations.” (Ram &
because they are often in deprived areas. In Jones, 1998: 3, see also 2008)
four out of five local authorities where there are
significant concentrations of ethnic minorities, The authors note the distinctions in raising
there are levels of business activity lower than finance, whereby the South Asians’ utilisation
the national average. By way of an insight into of informal sources of support (such as family
ethnic minority businesses, Ram and Jones and friends) is often regarded as advantageous,
say: in contrast to African-Caribbeans, who appear

Fig 18 - Proportion of Self-Employed of All In Employment (UK),
By Religion And Gender, 2004-05
39%
32%
27%
22%
24%
23% 21%
40%
19%
11% 35%
30%
Jewish 19% Proportion
14% 25%
Muslim Of All In
Buddhist Employment
20%
Any other religion (for given
9% 19% 15% Religion/
Sikh 14%
Gender)
No religion at all 10%
Christian 5%
Hindu
9%
0%
NB Disregards self-employed respondents All

All Source: ONS, Annual Population
identified as agency-salaried or as sole Men
Survey, October 2004 -
directors; No age restrictions Women September 2005; Ormerod, 2007
to lack this facility and do not make use of bank businesses – in particular Black-owned
finance to the degree other minority groups do. businesses – were less satisfied with the
There is some debate on whether the problems level of service from their finance provider
that ethnic entrepreneurs are reputed to have and paid higher banking charges than White-
with the banks are ‘business-related’ or ‘race- owned businesses. Bangladeshi- and Black-
related’. owned businesses had the fewest financial
assets and tended to be located in the most
A government study, undertaken by the economically and socially deprived areas.
University of Warwick (DTI, 2006), and using Black African owner-managers were the most
data from 910 ethnic minority and 2,373 white qualified in terms of academic and financial
businesses, reported that an econometric qualifications and were the most likely to
analysis of the extent to which differences in engage in business planning at start-up. But
finance outcomes amongst ethnic minority Black-owned businesses had higher rates of
businesses could be explained by differences financial delinquency (missed debt repayments
in risk factors and financial relationships. and unauthorised overdraft borrowing) than
other ethnic groups.
There was, however, a residual element
of ethnic based differences (‘unexplained Growing policy interest in ethnic minority
ethnicity variations’) in finance outcomes enterprise has given rise to a number of
after controlling for risk factors and financial initiatives and agencies with a specific remit for
relationships. Unexplained ethnicity variations addressing the problems of black businesses.
may be due to ethnic discrimination by finance However, recent evidence on the experiences
providers. However, the author noted that it of enterprise support professionals engaged
is important to point out that these variations in the ‘front-line’ provision of services to ethnic
could have alternative explanations which are minority firms highlight significant obstacles.
based on non-ethnic factors. These include a lack of clarity over objectives,
the nature of funding regimes, the persistence
The report also noted that ethnic minority of programme-led interventions, and a lack of

appropriate networking. “... SMEs as a class have lower
productivity than larger firms ... SMEs
10. Great EXPECTATIONS ? (in the U.K.) still account for a smaller
proportion of the economy than in
Is the future small ? Meager, Kaiser and Dietrich other EU member states ... SMEs in
(1992), in their study of small businesses in the other EU countries have better skills
United Kingdom and Germany, concluded that in foreign languages than U.K. SMEs
the reasons for the reversal of historical trends ... we have almost double the EU
towards small firm decline were many and average who see no need for training
varied and, in all probability, excluded any major ... The export record of U.K. SMEs is
changes in workforce attitudes. Further, they not as strong as that of our European
observed that, in times of increasing complexity neighbours”.
and uncertainty, conditions could yet again
combine to yield unexpected outcomes. Outsourcing
Whilst events over the last two decades have Current predictions suggest future growth rather
combined, to the surprise of many, to reinforce than decline in the small business population or
the role of the small business in a modern at least, the self-employed without employees.
economy, it would be dangerous to now be The continuing trend towards outsourcing by
lured into the trap of under-estimating the large companies appears to be still a major
role, current and future, of the large firm. For driver here, although a change of employment
instance, Curran (1997: 34) has said: mode may account for some of the activity
(Financial Times, 2003: 3):
“Small businesses, on any realistic
assessment of their role in the U.K. “Stephen Alambritis, of the Federation
economy, are not likely to transform of Small Businesses, said the rise in
it by themselves into a major player self-employment partly reflected the
in the global economy though they “fired on Friday, come back on Monday
will play a part in that process. Large culture”, where highly skilled staff are
enterprises, particularly those willing pushed out of direct employment only
to invest at high levels in R&D and to be rehired by the same company as
modernise their operations to operate consultants.”
at the global level, will be at least
as important in these processes. In Largely as a result of outsourcing generally,
short, both small and large firms are the Department for Education and Employment
important in the economy”. (1996:13) projected self-employment to grow
by as much as 25% (equivalent to almost
The DTI (1997: 16-18), in a publication, 800,000 jobs) in the 10 years up to 2006.
Competitiveness U.K. – A Benchmark for ‘Micro businesses’ and ‘second job self-
Business, reviewed the performance of 7 key employment’ were expected to feature large
business sectors in the U.K. and also examined in these statistics.
the performance of the smaller firms sector,
relative to other EU countries. The document However, in the event, the period 1996-2000
observed that: actually witnessed a modest decline in the
number of self-employed in the U.K. (ONS
“Many of the U.K.’s star performers Labour Market Trends, 2004: 403). Thereafter,
– for example in IT, biotechnology according to published statistics, the level
and financial services – are SMEs. appears to have increased, but for reasons
Their productivity is well in excess of over which there is some debate. Of particular
the U.K. average and ahead of their interest is the claimed rise of 282,000 amongst
international counterparts. Much the self-employed in the year to September,
progress could be made if the U.K. 2003. Since then, further self-employment
had more such firms.” growth has been reported, but on a reduced
scale.
Thereafter, however, the report pointed out
that:

Fig 19 - Annual UK Population Growth 1971-2006
(Change On Year Earlier)
0.7%
Births-Deaths
0.6%
A8 net migration
0.5% Non-A8 net migration
0.4% Total population growth
0.3%
0.2%
0.1%
0.0%
1971 1976 1981 1986 1991 1996 2001 2006
-0.1%
-0.2% Source: Office for National Statistics, cited in Blanchflower et al., 2007
Attempts to explain the relatively substantial profits introduced in 2002) and also the
(and unexpected) 2002/3 rise have included establishment of stakeholder pensions may
a suggestion from the Bank of England that have encouraged start-ups, particularly
this might have been related to house price incorporated businesses.
inflation, resulting in the increased collateral
under-pinning new entrepreneurial ventures. However, the act of incorporation actually
However, such an analysis would appear to fly reduces owner-managers to employees in
in the face of the available evidence. After all, such companies and, as such, renders them
house prices had been rising for the previous outside the scope of reckoning for LFS self-
decade whilst business start-up rates had employment statistics (Ormerod, 2007). But
been flat. Also, business start-up rates are some owners of incorporated small firms
often counter-cyclical, i.e., individuals tend to might report themselves to the LFS as ‘self-
set up businesses when economic factors are employed’ rather than ‘directors’ – especially
hazardous rather than favourable due to the during the early stages of transfer – despite
influence of such factors as redundancy and their tax status as employees.
job insecurity.
The Banking, Finance & Insurance sector
Tax incentives was the main group claimed to be driving the
2003 increase in self-employment, accounting
An alternative explanation rests upon a change for 120,000 of the 282,000 growth. Here, it
in Labour Force Survey (LFS) methodology, was claimed that substitution was a driver via
although LFS sources claim that this can redundancy, with employee levels falling in line
account for no more than a 70,000 increase with self-employment growth.
in self-employment. It has been suggested
that changes in the tax system, designed But an alternative motivation by government
to encourage small businesses, may have for the conversion from self-employment to
contributed to the claimed increase in self- employed – via incorporation – has been
employment. The reform of Capital Gains speculated by the Federation for Small
Tax, reductions in Corporation Tax for smaller Businesses. In their report, The Self-Employed
companies (0% on the first £10,000 of versus Incorporated Businesses, they asked

(Scotland on Sunday, 2003: 4): Poland, Slovakia and Slovenia – joined
the European Union (EU). From that
“... whether there is a hidden agenda date, nationals of Malta and Cyprus
behind the Chancellor’s decisions to have had full free movement rights and
grant major tax advantages to small rights to work, throughout the EU. Prior
incorporated businesses in his past to enlargement, existing EU member
five Budgets. The report argues that states had the right to regulate
the overriding motive behind the huge access to their labour markets by
financial incentive to incorporate is nationals of the other eight countries
a desire to ensure a more closely – the ‘Accession 8’ or ‘A8’. The UK
regulated small business sector and Government put in place transitional
greater government control.” measures to regulate A8 nationals’
access to the labour market (via the
A spokesman said: Worker Registration Scheme) and to
restrict access to benefits.” (Home
“The Inland Revenue certainly finds it Office, 2007)
easier to collect taxes from companies
than from the self-employed. The influx was somewhat underestimated: the
Incorporation gets everyone into the Home Office concluded that likely net flows to
same, well-regulated basket. If our the U.K. might be between 5,000 and 13,000
suspicions about a hidden agenda annually, but it came to pass that 176,000 EU
are correct there is a danger that once accession country migrants had registered
greater numbers incorporate there will under the Worker Registration Scheme (WRS)
no longer be a reason to retain this in the first 11 months (Department for Work
generous tax regime.” and Pensions, 2005: 4, 7). Subsequently, the
Home Office reported (2007) that 683,000
In Spring 2004, the 0% Corporation Tax rate for applicants had applied to register on the WRS
incorporated businesses rose to 19% (on the between May 2004 and June 2007, but this did
first £50,000 of profits), supposedly to address not indicate the number of long term migrants
tax avoidance due to individuals reclassifying of A8 workers into the UK as most intend to
income as dividends. But the Institute for Fiscal come for short periods. NB Workers who are
Studies also noted that they had forecast self-employed do not need to register and are
£1bn a year in lost revenues – almost four-fold therefore not included in these figures
the cost envisaged for 2003-04 (Financial
Times, 2004: 4). In any case, the total number The agriculture and fishing sectors were
of incorporations fell by only a fifth, and subject to the most significant changes at
limited liability trading remained an attractive the outset, but the impact is likely to extend
alternative to self-employment, according to across other sectors – for example, with the
the Daily Telegraph (2004: 33). labour demand in the construction industry
continuing to be satisfied by the ongoing flow
Finally, the Construction sector was claimed to of migrant workers from Eastern Europe (RICS
have grown by 50,000 self-employed. Not only Economics, 2007).
was self-employment seen as having increased
here, but the proportion of self-employed labour The backdrop to this is a rising population,
in the sector was seen as having grown from influenced by net inward migration, as noted
35% to 37%. by Bank of England economists (Blanchflower
et al. 2007):
In future years, it will be interesting to observe
the influence of East European migration, “The UK population grew by 2.8 million
arising primarily from the extension of the (4.9%) between 1971 and 1999, but
European Union in 2004 (see also Figure the population has subsequently risen
19). by a further 1.8 million (3.2%). The
main cause of this increase has been
“On 1 May 2004, ten countries a rise in net inward migration... the
– Cyprus, Czech Republic, Estonia, scale of net inward migration to the
Hungary, Latvia, Lithuania, Malta, UK has been much lower than in most

other EU countries until recently, and n experts producing long-term forecasts (10
even now remains below the levels of years and upwards) are wrong more often
both Italy and Spain.” than they are right
n experts are slightly more accurate in their
Great things are still expected of small forecasts than non-experts
businesses and rigorous research will continue n forecasts made by experts in a
to be crucial in order to separate the rhetoric field outside their speciality are no
(and wishful thinking) from the reality. less accurate than those of experts
specialising in the field concerned
11. FUTURE IMPERFECT: A BUMPY RIDE n forecasts concerned with the continuance
FROM ‘ThroWAwaY’ TO ‘SUSTAINABLE’ of the technological status quo at a given
moment are no more accurate than
This chapter has been added for the 2008 forecasts concerned with technological
update, and widens the discussion to explore innovation, and,
historical trends and future forecasts for some n the effects of technological development
key issues which may represent opportunities are less easy to forecast than the
(e.g., rising demand) or threats (e.g., increased developments themselves
competition or costs) for small businesses,
namely: Godet drew attention to three factors:
n Climate Change n inaccurate data coupled with unstable

n Peak Oil, Energy Conservation & models
Sustainability n lack of a global [‘holistic’], qualitative
approach, and
There are, however, a number of caveats to n explanation of the future in terms of the
bear in mind. past
Firstly, it should be noted that these are not and noted that:
isolated issues, but that they have varying
degrees of inter-dependence. “The future should not be seen as
a single predetermined line, an
Secondly, the ‘small business’ scope here extension of the past: on the contrary,
includes the very smallest entity, namely, it is plural and indeterminate
the self-employed sole trader, working either [emphasis added]. The plurality of
full-time or part-time. Indeed, the potential the future and the scope for freedom
or ‘would-be’ entrepreneur may also be of human action are mutually
included. explanatory; the future has not been
written, but remains to be created.”
The Problems Of Forecasting With
Accuracy A number of ‘futures methodologies’ have been
developed – see Figure 20 – with varying time
In ‘Reducing The Blunders In Forecasting’ horizons (Cabinet Office, 2001), but are likely
(1983), Michel Godet cited an earlier analysis to be beyond the resources of many small
of a range of forecasts made in the US between firms:
1890 and 1940 on technological progress and
the impact of innovation. This was based on n 1-3 years – Quantitative Trend
1,556 forecasts of technological advances Analyses, Qualitative Trend Analyses &
(some of which materialised, others did not) Delphi Survey, leading to Megatrends
in 18 specific areas of technology; and the n 5-10 years – Scenario Methods & Wild
anticipated social, economic or political effects Cards
of these changes. The author of the earlier n 1-10 years – Future Workshops
analysis (working for General Electric’s R & D
Centre) came to five conclusions: Interestingly, generalised characteristics can
remain valid for relatively long periods.
In the early 1990s, a series of in-depth

Fig 20 - Methods In Futures Work: Application, Advantages & Disadvantages
METHOD APPLICATION ADVANTAGES DISADVANTAGES

Quantitative Typically used in areas l Objective method l Not as neutral as may
Trend analyses such as demographics, l Valid and logical appear
Time-series, economics, and l Easy to communicate l Accepted as a kind of
extrapolations, S- technology, i.e. areas l Economical and easy truth about the future
curve, envelope curve, where solid and long to handle l Narrow and isolated
cycles and long-waves data series exist. Ought l Extrapolation of the
analyses, neural not to stand alone past
networks
Qualitative All areas. Though l Early warning tool l Relies strongly on the
Trend analyses typically social, l Outlining possibilities observer
Trend spotting, institutional, commercial and risks l Difficult to distinguish
megatrend analyses, and political topics. l Starting point for fads from long-term
cross-impact, scanning, Often focusing on formulating scenarios trends, trends from
environmental change and areas in l Gives an overview counter trends
scanning, relevance change. By definition, of the system and l Megatrends can often
trees megatrends are inspiration be too general
relevant to all areas
Delphi survey Any subject, but l Produces more l To some it is
Multi-round anonymous especially within reliable forecasts than considered a ‘method of
expert evaluation technological those of an individual last resort’ – when there
techniques forecasting and often expert is no other way to base
combined with other l Quite fast and a forecast
methods economical with the use l Difficult to define
of IT who is qualified as an
l Is often considered ‘expert’
‘scientific’ l Is often considered
‘scientific’
Scenario Methods Unstable systems or l Scenarios can be l Difficult to transform
Normative scenarios, changing environments used as: into decisions and
Explorative scenarios, can also be used for - a checklist/early actions
Strategy scenarios exploring possibilities warning l A qualitative method
of change. In line with - a debate creating tool applied to a world used
the assumption that the - a tool for creating to quantification
future is uncertain the a common frame of l Gives the decision-
method is becoming reference makers a choice of
widely used - a strategic tool futures
- an evaluation tool
- a training tool
l Gives the decision-
maker a choice of
futures
Wild Cards All areas and settings l Works with the l No explicit method
Shocks possible futures l Rests heavily on the
l As early warning observer
exercise
Future Originally a method l Founded on l Can be seen as too
workshops for mobilising the participation and ‘soft’ or emotional
Visioning, backcasting, ‘silent majority’. Today potentially leading to l A negative
brainstorming, used by wide range empowerment experience if it’s
brainwriting, group idea of institutions, e.g. l Defining the preferred not followed by
generation techniques companies, ministries, future as an alternative implementation in line
political parties, trade to the many methods with the conclusions
unions working with probable l The risk of projecting
futures people’s fears and
hopes of the past
Source: Cabinet Office, 2001

Fig 21 - Ten Principal Sources Of UK Strengths & Weaknesses c.1990
Strengths Weaknesses
1 Tradition of inventiveness and pure 1 Weaknesses in product development and
research skills marketing
2 World-class industries/institutions in fields 2 Strong historical cultural influences
such as aerospace, beverages, chemicals, unfavourable to business
pharmaceuticals, computer software,
retailing, business services, the arts,
tourism, etc
3 Stable social fabric of society 3 Elitist educational system and under-
resourced training base
4 Command of an international language 4 Short-termist attitudes to investment in
- English industry and commerce
5 Near self-sufficiency in fossil fuels 5 Weak manufacturing base, with a thirst for
imported goods
6 Signs of movement politically towards the 6 Regional inequalities promoting uneven
middle ground rather than the ideological ‘hot’ and ‘cold’ spots in the economy
extremes
7 Industrial relations institutions and attitudes 7 The low status of engineers and technical
becoming more modern specialists
8 Becoming more self-reliant and 8 An insular and xenophobic outlook allied to
enterprising a reluctance to learn other languages
9 Signs of Britain’s ethnic minority groups 9 Still suffer ‘great-nation’ delusions
becoming upwardly socially mobile
10 Becoming increasingly open to adopting 10 Poor transport infrastructure, e.g., no fast
more successful economies as role-models rail network
Source: Stanworth & Stanworth, 1991
interviews with key decision-makers and 1 A buoyant economy well able to pay its
opinion leaders were analysed with regard to way in the world and, in some areas, still
the future prospects for industry, employment able to take a lead
and society in the UK’s new millennium (Work 2 An economy still able to boast certain
2000, Stanworth & Stanworth, 1991). The strengths but very much feeling the heat
26 interviewees included such people as in an increasingly competitive world
former Prime Minister Jim Callaghan, former 3 Simply a Third World-status assembly
chairman of the National Coal Board Derek plant for foreign goods
Ezra and former Head of British Steel, Charles 4 Suffering deindustrialisation, general
Villiers, and they were sub-divided into three economic collapse and widespread social
groups: ‘past masters’, ‘special interests’, and, disorder
‘practitioners’.
Approximately 80% selected the second
Each interviewee was invited to indicate which scenario – ‘an economy still able to boast
of the following options represented the most certain strengths’ – as the most likely optimistic
likely optimistic and pessimistic scenarios for outcome, with an even distribution over
the country: scenarios 2, 3 and 4 for the most likely
pessimistic outcome. The interviews were also
distilled into a set of principal strengths and

Fig 22 - Public Perception Of Professions
Generally Trusted To Tell The Truth (2003)
Doctors 91%
Teachers 87%
Professors 74%
Judges 72%
Clergyman/Priests 71%
Scientists 65%
Television news readers 66%
The Police 64%
The ordinary man/woman in the street 53%
Pollsters 46%
Civil Servants 46%
Trade Union officials 33%
Business Leaders 28%
Government Ministers 20%
Politicians generally 18%
Journalists 18%
0% 20% 40% 60% 80% 100%

Source: MORI (2,141 British Adults Aged 16+), 2003
weaknesses (Figure 21). warming, extreme weather events and

climate fluctuations of the sort never
As generalisations, many still appear to hold before experienced in recorded history,
true, although some may warrant qualification. United Nations Secretary-General
For instance, instead of looking forward to a Ban-Ki-moon today challenged the
period of self-sufficiency in fossil fuels in the world’s nations to take decisive action
1990s, the U.K. is now facing a marked decline this year to tackle the climate change
in Continental Shelf oil and gas production threat head-on.
(Figure 28). Also, the intervening period has
witnessed the conclusion of the Channel “I am convinced that this challenge,
Tunnel, directly linking the U.K. and France and what we do about it, will define
by high-speed rail. And although a London St. us, our era and, ultimately, our global
Pancras connection was brought into service legacy. It is time for new thinking,”
in 2007, it still means that even by the fastest Secretary-General Ban said, opening
direct train, Sheffield will take longer to reach the General Assembly’s first-ever
from London than London to Paris. Thus there thematic plenary debate devoted
remains no short-term prospect of comparable exclusively to climate change. “We
high-speed connections north of the capital cannot continue with business as
city (Jack, 2007). usual. The time has come for decisive
action on a global scale,” he said,
Climate Change – Who To Believe ? urging Member States to work together
to translate the growing scientific
The public has been presented with some bold consensus on the problem into a broad
assertions regarding the possible impact from political consensus for action.
a changing climate, for instance, as in this
statement from the United Nations (2007): Recalling the findings of the
Intergovernmental Panel on Climate
“With human activity driving global Change, which unequivocally affirmed

Fig 23 - Who Do You Think Is The Most Responsible
For Climate Change ?
We are all responsible 53%
Governments and the laws they pass 21%
No one, it is just natural change 9%
Oil companies 8%
People who drive big cars 6%
Don't know 2%
None of these 1%
0% 10% 20% 30% 40% 50% 60%

Source: Rose et al., Members of the public, n=1000, 2005
the warming of the world’s climate mathematical background and knowledge of

system and linked it directly to human physics and chemistry”, IACS, 2007
activity, the Secretary-General painted
a dire picture of an escalating global Thus the domain poses a problem for not
emergency – from the Arctic, where only the layperson, but also for many non-
melting icecaps were threatening that specialists who would like to attain a basic level
region’s people and ecosystems, to of appreciation.
the African continent, where changing
weather patterns threatened to Accordingly, many may feel that they have
exacerbate drought, food insecurity little alternative but to be guided by someone
and desertification ...” else – perhaps by a friend or colleague who
is known and trusted – and who has a valued
But the layperson is at something of a viewpoint (but not necessarily any relevant
disadvantage in even attempting to comprehend expertise).
the basic issues, given that climate science is a
complex field of understanding. However, for a Alternatively, if it’s simply a matter of blind faith
simplified perspective, a schematic illustrating – bearing in mind that weather forecasters are
the processes of climate change is shown in not noted amongst the public for their infallibility
Figure 29 in Appendices. – then the scientific communities enjoy a higher
standing in the public’s perception than many
Although for someone wishing to tackle other professions (MORI, 2003, illustrated in
the issue via a career, then, for example, Figure 22). And whilst Government ministers
a Masters course in Atmospheric and may not appear to be rated very highly, the
Climate Science (MSc) seeks: “quantitative 2003 level of 20% adults indicating that
knowledge on atmospheric dynamics as well ministers generally could be relied on to tell the
as physicochemical processes and cycles, on truth, is quite favourable when compared with
the interpretation and prediction of weather and only 11-12% in 1993 and 1997. Nonetheless,
climate, and on paleoclimatology regarding the public seems to have settled on a limited
Earth science disciplines sedimentology and number of main causes for climate change,
stratigraphy. Prerequisites are a profound with very few admitting to ‘not knowing’ (Rose

Fig 24 - UK Government Predictions Of Rising Temperature Impacts
Temperature increase
above pre-industrial Impacts
levels
1-2ºC Major impacts on ecosystems and species; wide ranging impacts on
society
2-3ºC Greenland ice cap starts to melt, major loss of coral reef ecosystem;
considerable species loss; large impacts on agriculture; water resources;
health; and economies. Terrestrial carbon sink could become a source
1-4ºC North Atlantic circulation at increasing risk of collapse
2-4.5ºC West Antarctic ice sheet at increasing risk of collapse
Source: DEFRA, 2006
et al. 2005, Figure 23). [emphasis added] Indeed, when

Albert Einstein was informed of the
But in forming a view, it is possible that the publication of a book entitled 100
wider public might be helped by being aware Authors Against Einstein, he is said
of the process of ‘peer review’ in academic and to have remarked, ‘If I were wrong,
scientific circles, and a process used by the then one would have been enough!’
key body in assessing the likely impacts arising (Hawking, 1988); however, that one
from climate change, the Intergovernmental opposing scientist would have needed
Panel on Climate Change (IPCC, established proof in the form of testable results.”
by the World Meteorological Organization (IPCC, 2007b)
(WMO) and by the United Nations Environment
Programme (UNEP) in 1988): First signs
“Science may be stimulated by The discover y of the ‘Keeling Cur ve’ –

argument and debate, but it generally commencing in 1958, and by detecting
advances through formulating rising CO2 (Carbon Dioxide) concentrations
hypotheses clearly and testing them in the atmosphere – first sounded alarm
objectively. This testing is the key to bells over the build-up of the gas in the
science. In fact, one philosopher of atmosphere, and eventually led to the tracking
science insisted that to be genuinely of greenhouse gases worldwide. It arose out
scientific, a statement must be of suspicions that atmospheric CO2 levels
susceptible to testing that could might be increasing due to the burning of fossil
potentially show it to be false (Popper, fuels. The measurements were taken in the
1934). In practice, contemporary South Pole and Hawaii, where CO2 levels were
scientists usually submit their research initially around 315 ppmv (parts per million by
findings to the scrutiny of their peers, volume), and by 2005 they had risen to about
which includes disclosing the methods 378 ppmv (Briggs, 2007).
that they use, so their results can be
checked through replication by other The Debate
scientists. The insights and research
results of individual scientists, even S u b s e q u e n t r e s e ar c h, i n c l u d i n g t h at
scientists of unquestioned genius, are und er t aken by t he Interg over nment al
thus confirmed or rejected in the peer- Panel on Climate Change (IPCC), led to a
reviewed literature by the combined statement being issued on behalf of several
efforts of many other scientists. It national science institutions, which noted:
is not the belief or opinion of the
scientists that is important, but “Climate change is real
rather the results of this testing. There will always be uncertainty in

understanding a system as complex flow of emissions is accelerating,
as the world’s climate. However as fast-growing economies invest
there is now strong evidence that in high-carbon infrastructure and as
significant global warming is occurring. demand for energy and transport
The evidence comes from direct increases around the world. The level
measurements of rising surface air of 550ppm CO2e could be reached
temperatures and subsurface ocean as early as 2035. At this level there is
temperatures and from phenomena at least a 77% chance – and perhaps
such as increases in average global up to a 99% chance, depending on
sea levels, retreating glaciers, and the climate model used – of a global
changes to many physical and average temperature rise exceeding
biological systems. It is likely that most 2°C.”
of the warming in recent decades can
be attributed to human activities (IPCC Others at the time also used emotive language
2001). This warming has already led to – such as, ‘Ten years to save the planet’
changes in the Earth’s climate.” Joint (IPPR, 2006) – but Stern’s ‘now and forever’
Science Academies, 2005 (see also impact has been dismissed by one critic
the Appendix on climate change). as ‘preposterous’ because it assumed that
society will never get used to higher but stable
A somewhat dramatic sentiment was expressed temperatures, to changed rainfall patterns, or to
in the Stern Review on the Economics of higher sea levels. It is argued that it contradicts
Climate Change, a report to the Prime Minister what is known about technological progress,
and the Chancellor of the Exchequer (Stern et adaptation, and evolution (Tol, 2006). Tol noted
al., 2006): that Stern’s 550 ppm CO2e target coincided
with a climate change target adopted earlier
“Climate change presents a unique by the UK government (produced by the Royal
challenge for economics: it is the Commission on Environmental Pollution,
greatest and widest-ranging market in 2000), and so, “the Stern Review should
failure ever seen ... Using the results therefore not be understood as a revision”.
from formal economic models, the He concluded:
Review estimates that if we don’t act,
the overall costs and risks of climate “In sum, the Stern Review is very
change will be equivalent to losing at selective in the studies it quotes on
least 5% of global GDP each year, the impacts of climate change. The
now and forever ... selection bias is not random, but
emphasizes the most pessimistic
The current level or stock of studies ... The report claims that a
greenhouse gases in the atmosphere cost-benefit analysis was done, but
is equivalent to around 430 parts per none was carried out. The Stern
million (ppm) CO2 equivalent [CO2e], Review can therefore be dismissed as
compared with only 280ppm before alarmist and incompetent.”
the Industrial Revolution. These
concentrations have already caused However,
the world to warm by more than half a
degree Celsius and will lead to at least “This is not to say that climate change
a further half degree warming over is not a problem, nor that greenhouse
the next few decades, because of the gas emissions should not be reduced.
inertia in the climate system. There are sound arguments for
emission reduction. However, unsound
Even if the annual flow of emissions analyses like the Stern Review only
did not increase beyond today’s rate, provide fodder for those skeptical of
the stock of greenhouse gases in climate change and climate policy
the atmosphere would reach double – and may well further polarize the
pre-industrial levels by 2050 – that is debate ... Climate policy is for the
550ppm CO2e – and would continue long-term. It will only be successful if
growing thereafter. But the annual a broad coalition – of countries and of

stakeholders within countries – claims that a scientific consensus
supports climate policy and continues blames humans as the primary cause
to support climate policy. To my mind, of global temperature increases since
this calls for a sober analysis, rather 1850,” said Hudson Institute Senior
than hyperbole.” Fellow Dennis Avery ...”
Nonetheless, a section of the public remains SourceWatch says that whilst the Hudson
sceptical that ‘climate change’ or ‘global Institute describes itself as ‘non-partisan’
warming’ occurs as a result of human activity, and prefers to portray itself as independently
and some see it as a self-serving conspiracy ‘contrarian’ rather than as a conservative think
exploited by government and/or corporate tank, it gains financial support from many of
interests or influential environmental lobby the foundations and corporations that have
groups. For example, the latter view is shared bankrolled the conservative movement. Also,
by some politicians, such as an MEP who the Hudson Institute has been assessed as
argues that: a 7 on an ideological spectrum, with 8 being
‘Free Market Right’ and 1 ‘Radical Left.’
“... Of course, there is no doubt that (SourceWatch, 2007).
climate change is happening. The
world has got slightly warmer in the Another sceptic is Professor David Bellamy,
last 30 years. But it got cooler in the well-known botanist and TV-presenter, who
previous 30 years, and, by 1970, the believes that global warming is largely a natural
alarmists were warning of the coming phenomenon that has been with us for 13,000
Ice Age ... The hottest year recently years:
was 1998, so there has been no
further global warming since then. “Up and down, up and down – that
Many scientists believe that changes is how temperature and climate have
in climate are cyclical, driven largely always gone in the past and there
by astronomical factors and the sun. is no proof they are not still doing
On this basis, it seems we are just exactly the same thing now. In other
going through the peak of a cycle and words, climate change is an entirely
that we can expect global cooling over natural phenomenon, nothing to do
coming decades... The green zealots with the burning of fossil fuels. In
are determined to punish motorists, fact, a recent scientific paper, rather
and holidaymakers and just about unenticingly titled ‘Atmospheric Carbon
everyone else in their push for reduced Dioxide Concentrations Over The
CO2 emissions ...” Helmer, 2007 Last Glacial Termination,’ proved it. It
showed that increases in temperature
Several hundred of such scientists have been are responsible for increases in
identified by the Hudson Institute, a non-profit atmospheric carbon dioxide levels, not
think tank headquartered in Washington D.C. the other way around.” Bellamy, 2004
(Hudson Institute, 2007):
Finally, a former editor of the New Scientist is
“A new analysis of peer-reviewed also critical of ‘global warming’ being attributed
literature reveals that more than 500 to human activity, and has noted:
scientists have published evidence
refuting at least one element of current “The early arrival of migrant birds in
man-made global warming scares. spring provides colourful evidence
More than 300 of the scientists found for a recent warming of the northern
evidence that 1) a natural moderate lands. But did anyone tell you that in
1,500-year climate cycle has produced east Antarctica the Adélie penguins
more than a dozen global warmings and Cape petrels are turning up at
similar to ours since the last Ice Age their spring nesting sites around nine
and/or that 2) our Modern Warming days later than they did 50 years ago?
is linked strongly to variations in the While sea-ice has diminished in the
sun’s irradiance. “This data and the list Arctic since 1978, it has grown by
of scientists make a mockery of recent 8% in the Southern Ocean. So one

Fig 25 - All UK CO2 Emissions Allocated To High-Level Consumer Need
(Million tonnes, Annual)
Recreation & leisure 116 MtCO2
Space heating 88
Food & catering 82
Household 82 Key of emission sources

Direct
Hygiene & health 80
Indirect
Clothing & footwear 59 Tr avel
Commuting 48
Education 29
Chart Total 608 MtCO2
Other government 18 Exclusions 40 MtCO2 Aviation fuel emissions
Communication 6 Grand Total 648 MtCO2
Direct emissions are the emissions associated with the direct consumption of (non-transport related) fossil fuels and electricity in the
household. Travel-related emissions include emissions from transport fuels and the indirect emissions from transport goods and services
(e.g. buses, coaches and taxis). Indirect emissions include the supply chain emissions from other goods and services, including emissions
from space heating or lighting by the service and government sectors.
Source: Carbon Trust, 2006
awkward question you can ask, when and the fact that the ocean’s thermal inertia
you’re forking out those extra taxes and ability to mix delay any temperature signal
for climate change, is “Why is east from the ongoing absorption of heat. The local
Antarctica getting colder?” It makes no geography also plays a dominating role...” ).
sense at all if carbon dioxide is driving
global warming. While you’re at it, you The view of John Christy, Professor of
might inquire whether Gordon Brown Atmospheric Science, an IPCC lead author, is
will give you a refund if it’s confirmed somewhat circumspect:
that global warming has stopped.
The best measurements of global air The signature statement of the 2007
temperatures come from American IPCC report may be paraphrased as
weather satellites, and they show this: “We are 90% confident that most
wobbles but no overall change since of the warming in the past 50 years is
1999.” (Calder, 2007) due to humans.”
Counter-arguments to such assertions are We are not told here that this assertion
offered by the web site ‘How to Talk to a Climate is based on computer model output,
Skeptic’ (Beck, 2006 , for example, respectively, not direct observation. The simple fact
“CO2 did not trigger the warmings, but it is we don’t have thermometers marked
definitely contributed to them – and according with “this much is human-caused” and
to climate theory and model experiments, “this much is natural”.
greenhouse gas forcing was the dominant
factor in the magnitude of the ultimate change”, So, I would have written this
and, “... it is completely in line with model conclusion as “Our climate models are
expectations that CO2-dominated forcing incapable of reproducing the last 50
will have a disproportionately large effect in years of surface temperatures without
the north. The reasons lie in the much larger a push from how we think greenhouse
amount of land in the northern hemisphere gases influence the climate. Other

processes may also account for much n The 10 warmest years on record
of this change.” (Christy, 2007) have all been since 1990. Over
the last century average global
Impacts temperatures have risen by 0.6
degrees Celsius: the most drastic
One of the main greenhouse gases, CO2, temperature rise for over 1,000 years
seems to be emitted in connection with almost in the northern hemisphere.
every aspect of our daily lives (see Figure
25). n Extreme events are becoming
more frequent. Glaciers are melting.
“Global warming will produce stay- Sea ice and snow cover is declining.
at-home tourists over the next few Animals and plants are responding to
decades, radically altering travel an earlier spring. Sea levels are rising
patterns and threatening jobs and and are forecast to rise another 88cm
businesses in tourism-dependent by 2100 threatening 100m people
countries, according to a stark globally who currently live below this
assessment by UN experts. The UN level.
Environment Programme, the World
Meteorological Organisation and the n The number of people affected by
World Tourism Organisation said floods worldwide has already risen
concerns about weather extremes from 7 million in the 1960s to 150
and calls to reduce emissions-heavy million today.
air travel would make long-haul
flights less attractive. Holiday- n In Europe alone, the severe floods
makers from Europe, Canada, the in 2002 and had an estimated cost of
United States and Japan were $16 billion.
likely to spend more vacations in or
near their home countries to take n This summer we have seen violent
advantage of longer summers, they weather extremes in parts of the UK.
said. In a report prepared for a U.N.
conference on climate change and These environmental changes and
tourism, they projected that global severe weather events are already
warming would reduce demand for affecting the world insurance industry.
travel between northern Europe and Swiss Re, the world’s second largest
the Mediterranean, between North insurer, has estimated that the
America and the Caribbean, and economic costs of global warming
between northeast Asia and southeast could double to $150 billion each year
Asia.” (MacInnis, 2007) in the next 10 years, hitting insurers
with $30-40 billion in claims.
UK Government By the middle of this century,
temperatures could have risen enough
Whilst many messages are couched in to trigger irreversible melting of the
uncertainty, one thing that can be assured, Greenland ice-cap – eventually
will be a steady – maybe burgeoning – flow of increasing sea levels by around seven
messages, incentives and disincentives from metres. There is good evidence that
the government. And if some members of the last year’s European heat wave was
public have their doubts, then, collectively, the influenced by global warming. It
government doesn’t. resulted in 26,000 premature deaths
and cost $13.5 billion. It is calculated
For example this extract is from the Prime that such a summer is a one in
Minister, speaking at an event for the Prince of about 800 year event. On the latest
Wales’s Business and the Environment charity modelling climate change means that
in 2004: as soon as the 2040s at least one year
in two is likely to be even warmer than
“... Let me summarise the evidence: 2003.

... But people are confused about what clear. But of course it is far more than
they can do. It is individuals as well 50%...” (Blair, 2004)
as Governments and corporations
who can make a real difference. The Individually, though, the eagerness may be a
environmental impacts from business tempered a little:
are themselves driven by the choices
we make each day. To make serious “Alistair Darling’s enthusiasm for
headway towards smarter lifestyles, building roads and airport runways
we need to start with clear and is to be curbed by new measures
consistent policy and messages, forcing the transport secretary to take
championed both by government and into account Britain’s international
by those outside government. Telling commitment to tackling climate
people what they can do that would change. Transport is to be included in
make a difference... The situation the government’s target of achieving
therefore can be summarised in this a 20% reduction in carbon dioxide
way: emissions by 2010, which was set
out in the Kyoto treaty... Mr Darling is
1 If what the science tells us about due to set out a long-term strategy on
climate change is correct, then transport next week, which will include
unabated it will result in catastrophic revised targets for road, rail and cycle
consequences for our world. use.” (Clark & Brown, 2004)
2 The science, almost certainly, is The government’s use of what some see as
correct. contentious material for educational purposes
has not gone unchallenged.
3 Recent experience teaches us that
it is possible to combine reducing In 2007, a parent in Kent argued that ex-US
emissions with economic growth. vice president Al Gore’s climate change
documentary – An Inconvenient Truth – was
4 Further investment in science and unfit for schools because it was politically
technology and in the businesses partisan and contained serious scientific
associated with it has the potential to inaccuracies (BBC News, 2007a). The Oscar-
transform the possibilities of such a winning film had been distributed to all
healthy combination of sustainability secondary schools in England, Wales and
and development. Scotland, and a High Court judge said that
it contained ‘nine scientific errors’, but ruled
5 To acquire global leadership, on this that it could be shown in schools on condition
issue Britain must demonstrate it first that it was accompanied by guidance giving
at home. counter-arguments (sections 406 & 407 of the
Education Act 1996 prohibit the promotion of
6 The G8 next year, and the EU partisan political views in the teaching of any
Presidency provide a great opportunity subject, and where political issues are brought
to push this debate to a new and better to the attention of pupils they are offered a
level that, after the discord over Kyoto, balanced presentation of opposing views,
offers the prospect of agreement and DCSF, 2007).
action.
The judge said nine statements in the film
None of this is easy to do. But its were not supported by mainstream scientific
logic is hard to fault. Even if there are consensus. Examples of the errors included:
those who still doubt the science in its a) Gore’s assertion that a sea-level rise of
entirety, surely the balance of risk for up to 20 feet would be caused by melting of
action or inaction has changed. If there ice in either West Antarctica or Greenland
were even a 50% chance that the “in the near future”. The judge said this was
scientific evidence I receive is right, “distinctly alarmist” and it was common ground
the bias in favour of action would be that if Greenland’s ice melted it would release
this amount of water – “but only after, and

over, millennia”, and, b) the assertion that the hydrofluorocarbons, perfluorocarbons and
disappearance of snow on Mount Kilimanjaro sulphur hexafluoride) by 5.2% below 1990
in East Africa was expressly attributable to levels over the period 2008-2012.
global warming – the court heard the scientific
consensus was that it cannot be established Only Annex 1 countries have legally binding
the snow recession is mainly attributable emissions reduction targets under the Kyoto
to human-induced climate change. (BBC Protocol. For example, the European Union
News, 2007b). Not all of the inaccuracies in and its member states agreed to a reduction
the film were fully considered by the court as of emissions from 1990 levels of -8%, Japan
the judge requested a sample on which to and Canada to -6% per cent, Russia and the
consider the case (a witness statement listed Ukraine to return to 1990 levels, and Australia
20 inaccuracies in the film, The New Party, was allowed an 8% increase.
2007).
As well as setting targets, the Kyoto Protocol
Kyoto Protocol also establishes four flexible mechanisms:
This ‘Kyoto’ section is taken from DEFRA, n Bubble Policy – Where the European
2007a. See also the glossary at the end. Union and its Member States have agreed
to meet a joint target of a an 8 per cent
The United Nations Framework Convention on reduction in greenhouse gas emissions
Climate Change (UNFCCC) was agreed at the below 1990 levels by 2012. This ‘bubble’
Earth Summit in Rio de Janeiro in 1992 and, at arrangement allows the EU’s target to
the time of writing, 189 countries had signed it, be redistributed between member states
including the United States and Australia. The to reflect their national circumstances,
ultimate aim of the Convention is to stabilise requirements for economic growth, and
greenhouse gases in the atmosphere at a level the scope for further emission reductions.
that would avoid dangerous climate change. The UK agreed to reduce its emissions by
It also placed a non-binding commitment on 12.5 per cent, which is its legally binding
developed countries to reduce their greenhouse target under the Kyoto Protocol. Targets
gas emissions to 1990 levels by 2000. for other member states ranged from -21
per cent for Germany and Denmark, to -6
The UK is one of a small number of countries per cent for the Netherlands, +13 per cent
who met this voluntary target. The most up-to- for Ireland and +27 per cent for Portugal.
date data on the UK’s emissions suggest that
CO2 emissions fell by 6.4% between 1990 and n Joint Implementation – Where a
2005 and total greenhouse gas emissions fell developed country can receive ‘emissions
by 15.3% over the same period. reduction units’ when it helps to finance
projects that reduce net greenhouse-
It was quickly recognised that the UNFCCC gas emissions in another developed
could only be a first step in the international country (in practice, the recipient state is
response to climate change. Climate prediction likely to be a country with an ‘economy
models suggest that deeper cuts in emissions in transition’). An Annex I Party must
will be needed to prevent serious interference meet specific eligibility requirements to
with the climate. The Kyoto Protocol, agreed participate in joint implementation.
in 1997, was designed to address this issue.
The Protocol has since been ratified by over n Clean Development Mechanism
166 countries, and entered into force (became – Where developed countries may finance
legally binding) in February 2005. greenhouse-gas emission reduction or
removal projects in developing countries,
The Kyoto Protocol is the first ever international and receive credits for doing so which
treaty to set legally binding emissions reduction they may apply towards meeting
targets on developed countries that have mandatory limits on their own emissions.
ratified it. Developed (Annex 1) countries
agreed to targets that will reduce their overall n Emissions trading – Where an Annex
emissions of a basket of six greenhouse I Party may transfer Kyoto Protocol
gases (carbon dioxide, methane, nitrous oxide, units to or acquire units from another

Annex I Party. An Annex I Party must the CCP
meet specific eligibility requirements to l It may not be possible to achieve the
participate in emissions trading. reductions necessary to meet long term
government aspirations
All of which are designed to help Annex I l There is a range of options available
Parties cut the cost of meeting their emissions to policy makers to improve the current
targets. situation
l UK policy depends on international
Bali Conference 2007 developments, most directly the EU
emissions trading scheme
Formally know as the United Nations Climate l Long term success depends on
Change Conference, held in December 2007, convincing businesses, their financial
the ‘Bali roadmap’ initiates a two-year process stakeholders, and their customers, that
of negotiations designed to agree a new set there are gains to be made by moving
of emissions targets to replace those in the towards low carbon options. (POST,
Kyoto Protocol. Agreement was reached after 2004)
a U-turn from the US, which had wanted firmer
commitments from developing countries. Key legislation includes The Climate
Change and Sustainable Energy Act
The EU had pressed for a commitment that 2006: “The principal purpose of the
industrialised nations should commit to cuts Act is to enhance the UK’s contribution
of 25-40% by 2020, a bid that was implacably to combating climate change. It is
opposed by a bloc containing the US, Canada also aimed at alleviating fuel poverty
and Japan. Environment groups said they and securing diverse and long-term
were disappointed by the lack of firm targets energy supplies for the UK... The Act
for reducing emissions. incorporates a wide variety of measures
covering the role of local authorities and
The final text does not mention specific parish councils, microgeneration, energy
emissions targets, but does acknowledge that efficiency, Building Regulations, dynamic
“deep cuts in global emissions will be required demand technologies, community
to achieve the ultimate objective” of avoiding energy schemes and renewable heat,
dangerous climate change. It also says that a and electricity from renewable sources.
delay in reducing emissions will make severe It also imposes a number of reporting
climate impacts more likely (BBC News, requirements on the Government in
2007c). relation to greenhouse gas emissions,
progress towards our energy efficiency
Implications For Businesses target, progress on implementing the
microgeneration strategy and steps taken
In addition to any psychological pressure for to promote community energy projects
businesses to reduce or limit the growth of and renewable heat.” (HMSO, 2006).
CO2 and other greenhouse gas emissions, Also, a proposed The Climate Change
there are a number of controlling measures and Bill, which sets up a framework for the
initiatives, encouraging businesses of various UK to achieve its long-term goals of
sizes to do so. The national and EU positions reducing carbon dioxide emissions and to
being summarised as: ensure steps are taken towards adapting
to the impact of climate change, namely:
n UK: “The Government’s Climate Change l Setting emissions reduction targets in
Programme (CCP) is aimed at reducing statute and carbon budgeting
UK emissions of carbon dioxide (CO2) l The creation of an independent
by a fifth, against 1990 levels, by 2010. advisory body, The Committee on Climate
Several of the measures included in the Change
programme specifically target emissions l Trading scheme powers
from business... Key points: l A new reporting framework
l Adaptation: “The Bill will set out a
l Business has significantly reduced its procedure for assessing the risks of the
CO2 emissions since the introduction of impact of climate change for the UK,

and a requirement on the Government to the planet as a whole, the rate of petroleum
to develop an adaptation programme on production tends to follow a bell-shaped
matters for which it is responsible. The curve.
programme must contribute to sustainable
development” Early in the curve (pre-peak), the production
l Policy measures to reduce emissions, rate increases due to the discovery rate and
including: “providing a power to pilot local the addition of infrastructure. Late in the
authority incentives for household waste curve (post-peak), production declines due to
minimisation and recycling” (HMSO, resource depletion.
2007)
The Hubbert peak theory is based on the
n European Climate Change Programme observation that the amount of oil under the
The European Commission has taken ground in any region is finite, therefore the rate
many climate-related initiatives since of discovery which initially increases quickly
1991, when it issued the first Community must reach a maximum and decline. Extraction
strategy to limit CO2 emissions and roughly follows the discovery curve after a time
improve energy efficiency. These lag (typically about 35 years) for development
include: a directive to promote electricity (Wikipedia, 2008).
from renewable energy, voluntary
commitments by car makers to reduce In the mid-1950s, Hubbert speculated that
CO 2 emissions by 25% and proposals on world peak oil might occur around the year
the taxation of energy products. 2000 (Figure 26 inset, Hubbert, 1956).
However, it is claimed that action by Hubbert’s method has been challenged for
both Member States and the European incorporating economic or technical factors
Community needs to be reinforced if the that influence productive capacity; and for
EU is to succeed in cutting its greenhouse ignoring the impact of both price and demand,
gas emissions to 8% below 1990 levels both major drivers of production (CERA, 2006).
by 2008-2012, as required by the Kyoto The critics suggest that global production will
protocol. eventually follow an ‘undulating plateau’ for
one or more decades before declining slowly.
The Commission responded in June Thus various studies suggest a range of dates
2000 by launching the European (Figure 27), but for the UK, the indigenous oil
Climate Change Programme (ECCP). production peaked in 1999 (BERR, 2007d), see
The goal of the ECCP is to identify and also Figure 28.
develop all the necessary elements of
an EU strategy to implement the Kyoto With this background, the following points have
Protocol. The development of the first been made by an American Energy Analyst
ECCP involved all the relevant groups of with Weeden & Co. (Maxwell, 2004), having
stakeholders working together, including worked in the oil industry since 1957:
representatives from the Commission’s
different departments (DGs), the Member “Over the next 25 years, a new world
States, industry and environmental energy economy will arrive in three
groups. waves. We are near the top of the first
and smallest one, a warning wave.
A second European Climate Change A second more powerful wave likely
Programme (ECCP II) was launched in will hit in the 2009-2010 period when
October 2005. (Europa, 2007) the non-OPEC [Organization of the
Petroleum Exporting Countries] world
Hubbert Peak Oil, Energy may reach its all-time highest output
Conservation & Sustainability of crude oil, subsequently declining
to become ever more dependent
Hubbert peak theory derives from an American on OPEC for incremental barrels of
geophysicist – M. King Hubber t – who production. The final wave should
suggested that for any given geographical break around 2020, or earlier, as even
area, from an individual oil-producing region OPEC’s vast reserves are tapped at

Fig 26 - World Peak Oil Production: Hubbert Prediction, 1956 (Billion Barrels/Year)
vs. Updated Forecast, 2007 (Thousand Barrels/Day)
120000
Refinery gain
The supply gap ?
110000 Asia-Pacific off
100000 Asia-Pacific on
Middle East off
90000
Middle East on
000s of bbls oil per day
80000 Africa off
70000 Africa on
E Europe/FSU off
60000
E Europe/FSU on
50000 W Europe off
40000 W Europe on
L America off
30000
L America on
20000 N America off
10000 N America on
1.8% demand
0
1945 1955 1965 1975 1985 1995 2005 2015 2025
Sources: Hubbert, 1956 (inset); Smith, 2007
Fig 27 - Key Estimates Of The Timing Of Peak Oil
(u)
(t) After 2030
(s) After 2030
(r)
(q)
(p)
(o) After 2020
(n)
(m)
(l)
(k)
(j)
(i)
(h)
(g)
(f)
(e)
(d)
(c)
(b)
(a)
2000 2020 2040 2060 2080 2100 2120
Source: US GAO, Crude Oil Report, 2007

Fig 28 - UK Continental Shelf Oil & Gas Production 1968-2016
By Sector (Million Barrels/Day Of Oil Equivalent)
5.0
4.0
2008
3.0
2.0
1.0
0
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Northern North Sea Central North Sea Southern Gas Basin Atlantic Margin Other Onshore
Source: Ricketts, Wood Mackenzie, 2007
a maximum rate of production. After that the world faces an oil supply
that, oil volume should head down and crunch over the next decade. It said
keep falling, never to revive... that OPEC, which currently produces
about 40 per cent of the world’s oil,
There will be many who claim that will have to provide all of the one-third
the root of the problem is that we increase in global demand forecast
are “running out of oil.” This is not an by 2030 because production in non-
accurate way to describe the situation. OPEC countries has peaked. Much of
We are running out of the ability to this burden will fall on Saudi Arabia.”
produce 2% more barrels each year
to meet world demand that increases Maxwell continued:
about 2% annually. The potential loss
of the incremental barrels of output “For the period 1987 to 2003, the
in the non-OPEC world as early as historical range of oil prices was
2009-2010 would put the availability of approximately $10 to $40 per barrel,
additional barrels – and power over the with an average of $20. For 2004 to
price at which the world’s consumers 2010, the price range could be $30 to
might purchase them – in the hands $60, with an average of $40. For 2011
of five OPEC nations: Saudi Arabia, to 2020, the range could be $50 to
Iraq, Kuwait, the United Arab Emirates $100, with an average price of $70 per
and Iran ... (see Figure 40 in the barrel...”
Appendices showing regional energy
reserves) Such prices would unleash both
destruction and creativity throughout
It is interesting to note that his ‘second wave’ industry and finance. As occurred
– peak non-OPEC production in 2009-2010 in the 1970s, the design of cars,
– arrived prematurely (Webb, 2007): trucks, ships, planes and trains would
change, commercial buildings and
“This month, the normally conservative homes would be modified; chemical
International Energy Agency warned and industrial processing and most

machinery would be redesigned to us all, according to the Ecological
emphasize fuel economy or substitute Footprint Sustainability Measure, an
fuels; tax systems would be thoroughly independent measure based on UN
overhauled, with changed incentives statistics.
and penalties. Urban planning and Even current consumption and
residential patterns would change. production levels appear to be 25
Living standards might slip a bit and per cent higher than the earth’s
they would recover in different shape: sustainable carrying capacity. This
Cooler rooms in winter and warmer means that humanity is eroding the
rooms in summer, changing clothes planet’s natural capital at a significant
instead of thermostats, taking quicker rate.”
showers and buying fewer hot tubs,
using less lighting, indoors and out, Heinberg, in Peak Everything (2007: 7, 19),
accepting smaller and lighter cars, argues that we are enmeshed in a classic self-
walking and bicycling more, and using reinforcing feedback loop:
public transportation; these are the
obvious changes to come. Europeans,
who long ago forced themselves to Higher More fossil
energy demand fuel extraction
accept this lifestyle by imposing high
energy taxes, might at last receive an
economic return on their investment,
while the U.S. struggles to change.” Population More available
growth energy
At the time of writing, early 2008, oil had been

trading at $100/barrel, with options to purchase Increased extraction
of other resources,
at $200/barrel subsequently reported as tripling and production of food
and other goods
(Campbell, 2008a and 2008b); see also Figure
38 in the Appendices, showing the historical Source: Heinberg, 2007
trend of crude oil prices since 1861. And that:
Sustainability “The simple fact is that growth in

population and consumption cannot
According to the United Nations Commission continue unabated on a finite planet.
on Sustainable Development (UNCSD, If the increased availability of cheap
c2003): energy has historically enabled
unprecedented growth in extraction
“The 15 per cent of the world’s rates of other resources, then the
population living in high-income coincidence of Peak Oil with the
countries account for 56 per cent of peaking and decline of many other
the world’s total consumption, while resources is entirely predictable ...
the poorest 40 per cent, in low income just a few core trends have driven
countries, account for only 11 per cent many others in producing the global
of consumption. While most people problems we see today, and those
are consuming more today – with the core trends (including population
expansion of the world’s economy in growth and increasing consumption
the 1990s and rising living standards in rates), themselves constellate around
many countries – consumption for the our ever burgeoning use of fossil
average African household is 20 per fuels. Thus, a conclusion of startling
cent less than it was 25 years ago. plainness presents itself: our central
survival task for the decades ahead,
But sustainable consumption is not as individuals and as a species,
only a matter of the equitable use of must be to do this as peacefully,
resources. If everyone in the world equitably, and intelligently as
were to live like an average person in possible.“ [original emphasis]
the high income countries, we would
need 2.6 additional planets to support

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a Strategy for Addressing a Peak and
Decline in Oil Production, February
WALSH, T. (1991)
The Reshaping of ‘Flexible’ Labour ?:
European Policy Perspectives, in:
Blyton, P. & Morris, J. (Eds.), A Flexible
Future: Prospects f or Employment and
Organisation, De Gruyter, pp. 349-364
Warren, Jolin (2007)

The Railways Mean Business: Attracting
Business Travellers from Air to Rail,
TRANSform Scotland, November
Watkins, Kevin (2007)

Fighting climate change: Human solidarity
in a divided world (Human Development
Report 2007-08), United Nations
Development Programme
WEBB, TIM (2007)

Can Saudi square the oil circle?, The
Observer, November 18
Wikipedia (2008)
Hubbert peak theory, downloaded 5th
January, http://en.wikipedia.org/wiki/
Hubbert_peak_theory

APPENDIX Integration
Definitions of self-employment n disciplinary/grievance procedure

n inclusion in occupational benefit schemes
Source: Self-employment in the U.K. labour
market, ONS Labour Market Trends, 2003: Economic reality
450-451
n method of payment
There is no accepted definition of self- n freedom to hire others
employment. There are guidelines laid out n providing own equipment
by the Inland Revenue and The Employment n investing in own business
Act of 1996; however, ultimately the decision n method of payment of tax/NI
rests with the courts in any dispute or tribunal, n coverage of sick pay/holiday pay
who generally adhere to their own guidance,
or with a decision made by Inland Revenue for Mutuality of obligation
tax purposes.
n duration of employment
Employment Rights Act 1996 n regularity of employment
n right to refuse work
Section 230(1) of the employment rights act of n custom in the trade
1996 defines an employee as:
Inland Revenue
‘an individual who has entered
into or works under a contract of Document IR56 offers guidance on the
employment’. classification of people as employed or self-
employed by way of a series of questions.
Section 230(2) goes on to say:
Employed people probably:
“in this act ‘contract of employment’
means a contract of service or n have to do the work themselves rather
apprenticeship, whether express or than hire someone to do it for them;
implied, and (if it is express) whether n have someone at work who can tell them
oral or in writing”. at any time what to do or when and how
to do it;
The Court n are paid by the hour, week or month and
might be able to get overtime pay;
The Court will also consider whether a contract n work set hours, or a given number of
exists between the individual and the alleged hours a week or month; and
employer, and, if it does, the nature of that n work at the premises of the person
contract is then examined. A contract for service they work for, or at the place he or she
is regarded as a contract of employment, decides.
whereas an individual who contracts to provide
tangible goods or services is regarded as Self-employed people probably:
self-employed under the common law. This
is mmonly established via the application of n have the final say in how the business is
four tests: control, integration, mutuality of run;
obligations and economic reality. The factors n risk their own money in the business;
examined under each test are as follows. n are responsible for meeting the losses as
well as taking the profits;
Control n provide the main items of equipment
needed to do their job, not just the
n duty to obey orders small tools many employees provide for
n discretion on hours of work themselves;
n supervision of mode of working. n are free to hire other people on their own
terms to do the work they have taken on,
and pay them out of their own pocket; and

n have to correct unsatisfactory work in
their own time at their own expense.
Labour Force Survey
The definition of self-employment is left entirely

to the respondent and with no guidance or
prompt. This could result in a lack of coherence
with other measures of the self-employed
such as the Inland Revenue’s Survey of
Personal Incomes (SPI) or with measures
of jobs based largely on employer surveys
such as workforce jobs. There is currently a
consistency check to the LFS which recodes
some respondents’ employment status to
employee if the occupation they claim to
do is inconsistent with self-employment (for
example self-employed policeman). However,
this edit will be discontinued when the LFS is
reweighted later this year (see also pp477-83,
Labour Market Trends, September 2002).
Worker
Some employment law bypasses the boundary

of employment and self-employment in order
that it includes all ‘workers’. Thus organisations
cannot deny their workers employment rights
by altering the workforce’s employment status
to suit,and more people are given rights which
they otherwise might have forfeited. The
Employment Rights Act 1996, section 230(3)
defines a worker as:
“an individual who has entered into or

who works under ... (a) a contract of
employment, or (b) any other contract,
whether expressed or implied and
(if it is expressed ) whether oral or
in writing, whereby the individual
undertakes to do or perform personally
any work or services for another party
to the contract whose status is not by
virtue of the contract that of a client
or customer of any profession or
business carried on by the individual.”
This category potentially includes freelance

workers, agency workers, sole traders,
homeworkers, and casual workers of various
kinds. Adoption of this definition would
remove many of the problems associated with
measuring the ‘grey’ areas of self-employment/
employment.

APPENDIX: CLIMATE CHANGE
Fig 29 - Schematic View Of The Components Of The Climate System,

Their Processes And Interactions
Source: IPCC, 2007a
Another common confusion of these issues is

What is the Relationship between
thinking that a cold winter or a cooling spot on the
Climate Change and Weather?
globe is evidence against global warming. There
are always extremes of hot and cold, although
Climate is generally defined as average weather,
their frequency and intensity change as climate
and as such, climate change and weather are
changes. But when weather is averaged over
intertwined. Observations can show that there
space and time, the fact that the globe is warming
have been changes in weather, and it is the
emerges clearly from the data.
statistics of changes in weather over time that
identify climate change. While weather and
Meteorologists put a great deal of effort into
climate are closely related, there are important
observing, understanding and predicting the
APPENDIX: Climate Change
differences. A common confusion between

day-to-day evolution of weather systems. Using
weather and climate arises when scientists are
physics-based concepts that govern how the
asked how they can predict climate 50 years from
atmosphere moves, warms, cools, rains, snows,
now when they cannot predict the weather a few
and evaporates water, meteorologists are typically
weeks from now. The chaotic nature of weather
able to predict the weather successfully several
makes it unpredictable beyond a few days.
days into the future. A major limiting factor to
Projecting changes in climate (i.e., long-term
the predictability of weather beyond several
average weather) due to changes in atmospheric
days is a fundamental dynamical property of the
composition or other factors is a very different and
atmosphere. In the 1960s, meteorologist Edward
much more manageable issue. As an analogy,
Lorenz discovered that very slight differences
while it is impossible to predict the age at which
in initial conditions can produce very different
any particular man will die, we can say with
forecast results.
high confidence that the average age of death
for men in industrialised countries is about 75.
This is the so-called butterfly effect: a butterfly

flapping its wings (or some other small (aerosols), as well as from changes in land use,
phenomenon) in one place can, in principle, alter for example. As climate changes, the probabilities
the subsequent weather pattern in a distant place. of certain types of weather events are affected.
At the core of this effect is chaos theory, which For example, as Earth’s average temperature
deals with how small changes in certain variables has increased, some weather phenomena have
can cause apparent randomness in complex become more frequent and intense (e.g., heat
systems. waves and heavy downpours), while others have
become less frequent and intense (e.g., extreme
Nevertheless, chaos theory does not imply a cold events).
total lack of order. For example, slightly different
conditions early in its history might alter the day IPCC, 2007a, Climate Change 2007: The
a storm system would arrive or the exact path Physical Science Basis. Contribution of
it would take, but the average temperature and Working Group I to the Fourth Assessment
precipitation (that is, climate) would still be about
Report of the Intergovernmental Panel on
the same for that region and that period of time.
Because a significant problem facing weather
Climate Change [Solomon, S., D. Qin, M.
forecasting is knowing all the conditions at the Manning, Z. Chen, M. Marquis, K.B. Averyt,
start of the forecast period, it can be useful to M.Tignor and H.L. Miller (eds.)]. Cambridge
think of climate as dealing with the background University Press, FAQ
conditions for weather. More precisely, climate
can be viewed as concerning the status of the See also: POST 2007 (Parliamentary Office
entire Earth system, including the atmosphere, of Science and Technology), Climate Change
land, oceans, snow, ice and living things (see Science, POSTnote Number 295, November,
Figure 1) that serve as the global background
http://www.parliament.uk /parliamentary_
conditions that determine weather patterns. An
example of this would be an El Niño affecting the
offices/post.cfm
weather in coastal Peru. The El Niño sets limits
on the probable evolution of weather patterns that (†) “La Niña is characterized by unusually cold
random effects can produce. A La Niña would set ocean temperatures in the Equatorial Pacific,
different limits. (†) compared to El Niño, which is characterized
by unusually warm ocean temperatures in the
Another example is found in the familiar contrast Equatorial Pacific.“
between summer and winter. The march of the
seasons is due to changes in the geographical Pacific Marine Environmental Laboratory,
patterns of energy absorbed and radiated away by Seattle, What is La Niña?,
the Earth system. Likewise, projections of future http://www.pmel.noaa.gov/tao/elnino/la-nina-
climate are shaped by fundamental changes in story.html
heat energy in the Earth system, in particular the
increasing intensity of the greenhouse effect that
traps heat near Earth’s surface, determined by the
amount of carbon dioxide and other greenhouse
gases in the atmosphere. Projecting changes in
climate due to changes in greenhouse gases 50
years from now is a very different and much more
easily solved problem than forecasting weather
patterns just weeks from now. To put it another
way, long-term variations brought about by
changes in the composition of the atmosphere are
much more predictable than individual weather

events. As an example, while we cannot predict
the outcome of a single coin toss or roll of the
dice, we can predict the statistical behaviour of a
large number of such trials.
While many factors continue to influence

climate, scientists have determined that human
activities have become a dominant force, and are
responsible for most of the warming observed
over the past 50 years. Human-caused climate
change has resulted primarily from changes in the
amounts of greenhouse gases in the atmosphere,
but also from changes in small particles

Joint science academies’ statement:
Global response to climate change
Climate change is real potentially cost-effective technological options that could
There will always be uncertainty in understanding a system contribute to stabilising greenhouse gas concentrations.
as complex as the world’s climate. However there is now These are at various stages of research and development.
strong evidence that significant global warming is However barriers to their broad deployment still need to be
overcome.
occurring1. The evidence comes from direct measurements
of rising surface air temperatures and subsurface ocean
Carbon dioxide can remain in the atmosphere for many
temperatures and from phenomena such as increases in
decades. Even with possible lowered emission rates we will
average global sea levels, retreating glaciers, and changes
be experiencing the impacts of climate change throughout
to many physical and biological systems. It is likely that
most of the warming in recent decades can be attributed the 21st century and beyond. Failure to implement
significant reductions in net greenhouse gas emissions
to human activities (IPCC 2001)2. This warming has already
now, will make the job much harder in the future.
led to changes in the Earth's climate.
The existence of greenhouse gases in the atmosphere is Prepare for the consequences of
vital to life on Earth – in their absence average climate change
temperatures would be about 30 centigrade degrees lower Major parts of the climate system respond slowly to
than they are today. But human activities are now causing changes in greenhouse gas concentrations. Even if
atmospheric concentrations of greenhouse gases – greenhouse gas emissions were stabilised instantly at
including carbon dioxide, methane, tropospheric ozone, today’s levels, the climate would still continue to change as
and nitrous oxide – to rise well above pre-industrial levels. it adapts to the increased emission of recent decades.
Carbon dioxide levels have increased from 280 ppm in Further changes in climate are therefore unavoidable.
1750 to over 375 ppm today – higher than any previous Nations must prepare for them.
levels that can be reliably measured (i.e. in the last 420,000
years). Increasing greenhouse gases are causing The projected changes in climate will have both beneficial
temperatures to rise; the Earth’s surface warmed by and adverse effects at the regional level, for example on
approximately 0.6 centigrade degrees over the twentieth water resources, agriculture, natural ecosystems and
century. The Intergovernmental Panel on Climate Change human health. The larger and faster the changes in
(IPCC) projected that the average global surface climate, the more likely it is that adverse effects will
temperatures will continue to increase to between 1.4 dominate. Increasing temperatures are likely to increase the
centigrade degrees and 5.8 centigrade degrees above 1990 frequency and severity of weather events such as heat
levels, by 2100. waves and heavy rainfall. Increasing temperatures could
lead to large-scale effects such as melting of large ice
Reduce the causes of climate change sheets (with major impacts on low-lying regions
The scientific understanding of climate change is now throughout the world). The IPCC estimates that the
sufficiently clear to justify nations taking prompt action. It combined effects of ice melting and sea water expansion
is vital that all nations identify cost-effective steps that they from ocean warming are projected to cause the global
can take now, to contribute to substantial and long-term mean sea-level to rise by between 0.1 and 0.9 metres
reduction in net global greenhouse gas emissions. between 1990 and 2100. In Bangladesh alone, a 0.5 metre
sea-level rise would place about 6 million people at risk
Action taken now to reduce significantly the build-up of from flooding.
greenhouse gases in the atmosphere will lessen the
magnitude and rate of climate change. As the United Developing nations that lack the infrastructure or resources
Nations Framework Convention on Climate Change to respond to the impacts of climate change will be
(UNFCCC) recognises, a lack of full scientific certainty particularly affected. It is clear that many of the world’s
about some aspects of climate change is not a reason for poorest people are likely to suffer the most from climate
delaying an immediate response that will, at a reasonable change. Long-term global efforts to create a more healthy,
cost, prevent dangerous anthropogenic interference with prosperous and sustainable world may be severely hindered
the climate system. by changes in the climate.
As nations and economies develop over the next 25 years, The task of devising and implementing strategies to adapt
world primary energy demand is estimated to increase by to the consequences of climate change will require
almost 60%. Fossil fuels, which are responsible for the worldwide collaborative inputs from a wide range of
majority of carbon dioxide emissions produced by human experts, including physical and natural scientists, engineers,
activities, provide valuable resources for many nations and are social scientists, medical scientists, those in the humanities,
projected to provide 85% of this demand (IEA 2004)3. business leaders and economists.
Minimising the amount of this carbon dioxide reaching the
atmosphere presents a huge challenge. There are many
Conclusion
We urge all nations, in the line with the UNFCCC · Launch an international study5 to explore scientifically-
principles4, to take prompt action to reduce the causes of informed targets for atmospheric greenhouse gas
climate change, adapt to its impacts and ensure that the concentrations, and their associated emissions scenarios,
issue is included in all relevant national and international that will enable nations to avoid impacts deemed
strategies. As national science academies, we commit to unacceptable.
working with governments to help develop and implement · Identify cost-effective steps that can be taken now to
the national and international response to the challenge of contribute to substantial and long-term reduction in net
climate change. global greenhouse gas emissions. Recognise that delayed
action will increase the risk of adverse environmental
G8 nations have been responsible for much of the past effects and will likely incur a greater cost.
greenhouse gas emissions. As parties to the UNFCCC, G8
nations are committed to showing leadership in addressing · Work with developing nations to build a scientific and
climate change and assisting developing nations to meet technological capacity best suited to their circumstances,
the challenges of adaptation and mitigation. enabling them to develop innovative solutions to mitigate
and adapt to the adverse effects of climate change, while
We call on world leaders, including those meeting at the explicitly recognising their legitimate development rights.
Gleneagles G8 Summit in July 2005, to: · Show leadership in developing and deploying clean
energy technologies and approaches to energy efficiency,
· Acknowledge that the threat of climate change is clear and share this knowledge with all other nations.
and increasing.
· Mobilise the science and technology community to
enhance research and development efforts, which can
better inform climate change decisions.
Notes and references

1 This statement concentrates on climate change associated with global warming. We use the UNFCCC definition of climate change, which is ‘a change
of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to
natural climate variability observed over comparable time periods’.
2 IPCC (2001). Third Assessment Report. We recognise the international scientific consensus of the Intergovernmental Panel on Climate Change (IPCC).
3 IEA (2004). World Energy Outlook 4. Although long-term projections of future world energy demand and supply are highly uncertain, the World
Energy Outlook produced by the International Energy Agency (IEA) is a useful source of information about possible future energy scenarios.
4 With special emphasis on the first principle of the UNFCCC, which states: ‘The Parties should protect the climate system for the benefit of present and
future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective
capabilities. Accordingly, the developed country Parties should take the lead in combating climate change and the adverse effects thereof’.
5 Recognising and building on the IPCC’s ongoing work on emission scenarios.
Academia Brasiliera de Ciências Royal Society of Canada, Chinese Academy of Sciences,

Brazil Canada China
Academié des Sciences, Deutsche Akademie der Naturforscher Indian National Science Academy,
France Leopoldina, Germany India
Accademia dei Lincei, Science Council of Japan, Russian Academy of Sciences,

Italy Japan Russia

Royal Society, National Academy of Sciences,
United Kingdom United States of America ��
Fig 30 - Variations Of The Earth’s Surface Temperature For:
Source: IPCC (2001)

Fig 31 - Climate Change Attribution
Source: Global Warming Art (2007)
“This figure, based on Meehl et al. (2004), shows changes (both stratospheric and tropospheric),
the ability with which a global climate model (the and volcanic emissions (including natural
DOE PCM) is able to reconstruct the historical sulfates). The time history and radiative forcing
temperature record and the degree to which effectiveness for each of these factors was
the associated temperature changes can be specified in advance and was not adjusted to
decomposed into various forcing factors. The top specifically match the temperature record”,
part of the figure compares a five year average
of global temperature measurements (Jones Source: Global Warming Art (2007), Climate
and Moberg 2001) to the Meehl et al. results Change Attribution, 4 April, http://www.
incorporating the effects of five predetermined
globalwarmingart.com/wiki/Image:Climate_
forcing factors: greenhouse gases, man-made

sulfate emissions, solar variability, ozone
Change_Attribution.png

Fig 32 - Mean Global Surface Warming For Various Scenarios
1900-2100 (Relative to 1980-1999)
+5.0 ºC
A2
A1B
B1
+4.0
Constant Composition Commitment
20th Century
+3.0
+2.0
+1.0
0.0
-1.0
1900 2000 2100

Source: IPCC, 2007a (Figure 10.4)
“Multi-model means of surface warming (relative similar improvement rates apply to all energy
to 1980–1999) for the scenarios A2, A1B and supply and end use technologies).
B1, shown as continuations of the 20th-century
simulation... Lines show the multi-model means, A2. The A2 storyline and scenario family
shading denotes the ±1 standard deviation range describes a very heterogeneous world. The
of individual model annual means”, underlying theme is self-reliance and preservation
of local identities. Fertility patterns across
regions converge very slowly, which results in
The Emission Scenarios Of The IPCC Special continuously increasing population. Economic
Report On Emission Scenarios (SRES) development is primarily regionally oriented and
per capita economic growth and technological
A1. The A1 storyline and scenario family change more fragmented and slower than other
describes a future world of very rapid economic storylines.
growth, global population that peaks in mid-
century and declines thereafter, and the B1. The B1 storyline and scenario family
rapid introduction of new and more efficient describes a convergent world with the same
technologies. Major underlying themes are global population, that peaks in mid-century and
convergence among regions, capacity building declines thereafter, as in the A1 storyline, but with
and increased cultural and social interactions, rapid change in economic structures toward a
with a substantial reduction in regional differences service and information economy, with reductions
in per capita income. The A1 scenario family in material intensity and the introduction of
develops into three groups that describe clean and resource-efficient technologies. The
alternative directions of technological change in emphasis is on global solutions to economic,
the energy system. social and environmental sustainability, including
improved equity, but without additional climate
The three A1 groups are distinguished by their initiatives.
technological emphasis: fossil-intensive (A1FI),
non-fossil energy sources (A1T) or a balance B2. The B2 storyline and scenario family
across all sources (A1B) (where balanced describes a world in which the emphasis is
is defined as not relying too heavily on one on local solutions to economic, social and
particular energy source, on the assumption that environmental sustainability. It is a world with

Fig 33 - Recent Trends, Assessment Of Human Influence On The Trend
And Projections For Extreme Weather Events For Which There Is
An Observed Late-20th Century Trend
Phenomenona and Likelihood that trend Likelihood of a human Likelihood of future

direction of trend occurred in late 20th contribution to observed trends based on
century (typically post trend projections for 21st
1960) century using SRES
scenarios
Warmer and fewer cold Very likely Likely Virtually certain
days and nights over
most land areas
Warmer and more Very likely Likely (nights) Virtually certain
frequent hot days and
nights over most land
areas
Warm spells/heat Likely More likely than not Very likely
waves. Frequency
increases over most
land areas
Heavy precipitation Likely More likely than not Very likely
events. Frequency
(or proportion of total
rainfall from heavy falls)
increases over most
areas
Area affected by Likely in many regions More likely than not Likely
droughts increases since 1970s
Intense tropical cyclone Likely in some regions More likely than not Likely
activity increases since 1970
Increased incidence of Likely More likely than not Likely

extreme high sea level
(excludes tsunamis)
Source: IPCC, Summary for Policymakers Table SPM.2, 2007a
continuously increasing global population, at A note regarding the above table:

a rate lower than A2, intermediate levels of
economic development, and less rapid and more Virtually certain > 99% probability of occurrence
diverse technological change than in the B1 and Extremely likely > 95%
A1 storylines. While the scenario is also oriented Very likely > 90%
towards environmental protection and social Likely > 66%
equity, it focuses on local and regional levels. More likely than not > 50%
Unlikely < 33%

An illustrative scenario was chosen for each of the Very unlikely < 10%
six scenario groups A1B, A1FI, A1T, A2, B1 and Extremely unlikely < 5%
B2. All should be considered equally sound.
The SRES scenarios do not include additional

climate initiatives, which means that no
scenarios are included that explicitly assume
implementation of the United Nations Framework
Convention on Climate Change or the emissions
targets of the Kyoto Protocol.
Source: IPCC, Summary for Policymakers, 2007a

Fig 34 - UK Carbon Dioxide Emissions By Source 1990-2005
(Million Tonnes Of CO2 p.a.)
700
600
500
400
300
Other
200 Residential
Other industries
Energy industries
100
Road transport
0
1990 1995 2000 2005
Excludes emissions/removals from land use change and forestry (LUCF), Source: DEFRA/AEA, 2007
Fig 35 - UK Emissions Of Greenhouse Gases 1990-2006

(Million Tonnes Of CO2 Equivalent p.a.)
800
700
600
500
400
300
Basket of greenhouse gases (CO2 equiv)

200
Kyoto target by 2008-2012 (CO2 equiv) *
100 Carbon Dioxide

Domestic carbon dioxide target by 2010
0
1990 1995 2000 2005 2010 2015
2006 Provisional, * Kyoto target is to reduce by 12.5% from base year by 2008-2012; Source: DEFRA/AEA, 2007

Fig 36 - Relative Contribution To Global Warming Over
The Next 100 Years Of Current Emissions Of Greenhouse Gases
Others
3%
Nitrous Oxide
10%
Methane
24%
Carbon Dioxide
63%
Global Warming Potentials (GWP) For Selected Gases

From The IPCC Third Assessment Report
GAS GWP
CO2 - Carbon Dioxide 1

CH4 - Methane 23
N2O - Nitrous Oxide 296
HFC-23 - Fluoroform 12000
HFC-134a - Tetrafluoroethane 1300
CF4 - Tetrafluoromethane 5700
SF6 - Sulphur Hexafluoride 22200
Source: DEFRA, 2006
“In addition to the human induced emissions are also greenhouse gases but are being phased
of carbon dioxide, methane and nitrous oxide, out under the Montréal Protocol.
industrial activities have generated other
greenhouse gases, namely hydrofluorocarbons, [2] GWP is defined as the warming influence
perfluorocarbons and sulphur hexafluoride [1]. of a gas over a set time period relative to that
Each greenhouse gas has a different capacity to of carbon dioxide. The GWP values used for
cause global warming, depending on its radiative calculating national greenhouse gas emissions
properties, its molecular weight and its residence totals are from IPCC’s Second Assessment
time in the atmosphere. Global warming potential Report and differ slightly from the values shown ...
(GWP) [2] is a convenient index that can be used [above]”
to assess the relative global warming effect of

the emissions of different gases over a set time Source: DEFRA, 2006
period – usually taken to be one hundred years
– relative to the emission of an equal mass of
CO2. The following table [above] summarises
the GWPs for the main greenhouse gases. The
overall effect of emissions on the climate system
can be found by multiplying the emissions by the
relevant GWP.
[1] The UNFCCC and the Kyoto Protocol are

concerned with greenhouse gases not covered
by the Montreal Protocol. Chlorofluorocarbons
(CFCs) and hydrochlorofluorocarbons (HCFCs)

Kyoto Protocol: An Outline Of The US Bush announced a U.S. policy for climate change
Position As Signatory that will rely on domestic, voluntary actions to
reduce the “greenhouse gas intensity” (ratio
“Negotiations on the Kyoto Protocol to the United of emissions to economic output) of the U.S.
Nations Framework Convention on Climate economy by 18% over the next 10 years.
Change (UNFCCC) were completed December
11, 1997, committing the industrialized nations to Following the ratification of the Kyoto Protocol
specified, legally binding reductions in emissions by Russia in November 2004, it entered into
of six “greenhouse gases.” force on February 16, 2005, obligating the 35
developed nations that had ratified it to meet
This treaty would commit the United States, if it their commitments to reduce their greenhouse
were to ratify the Protocol, to a target of reducing gas emissions by the amounts specified in the
greenhouse gases by 7% below 1990 levels Protocol over the period 2008 to 2012. A total
during a “commitment period” between 2008-2012 of 141 nations, including developing countries,
... [due to carbon ‘sink’ storage considerations, had ratified the Protocol when it entered into
the actual reduction was estimated to be lower force. In order to enter into force, the Protocol
than 7%] had to be ratified by developed (Annex I) nations
representing 55% of the level of their emissions
The United States signed the Protocol on in 1990. Only those countries that have ratified
November 12, 1998. However, the Clinton the Protocol are bound by its terms; therefore,
Administration did not submit the Protocol to the although the United States had signed the
Senate for advice and consent, acknowledging Protocol, it is not bound by its terms, since it has
that one condition outlined by S.Res. 98, passed not ratified it.”
in mid-1997 – meaningful participation by
developing countries in binding commitments Source: Fletcher (Global Climate Change: The
limiting greenhouse gases – had not been met. In Kyoto Protocol, CRS Report for Congress,
late March 2001, the Bush Administration rejected 2005)
the Kyoto Protocol... In February, 2002, President

Future Flood Risk Assessment one of rising investments in preventative action.
Regarding Developed Countries Among the examples:
Extract from UN Human Development The Netherlands. As a densely populated,

low-lying country with more than one-quarter of
Report 2007-08
its land area below sea level, the Netherlands
faces acute climate change risks. The risks are
Adaptation in the developed world
contained through a vast network of canals,
pumps and dykes. The dykes are constructed
Mounting public concern has been one factor
to withstand weather events that might happen
shaping the adaptation agenda. In many
only once in every 10,000 years. It is not only the
developed countries there is a widespread
sea that poses threats. The River Rhine, which
perception that climate change is adding to
forms a large delta with the Maas, is a constant
weather-related risks. The 2003 European
flood threat. With sea levels rising, more intense
heatwave, the 2004 Japanese typhoon season,
storms occurring, and climate models predicting
Hurricane Katrina and the devastation of New
that precipitation could increase by 25 percent,
Orleans, and episodes of drought, flooding and
adaptation planning in the Netherlands is viewed
extreme temperature across the developed world
as a matter of national security. Dutch water
have been among the headline events fuelling
policy recognizes that current infrastructure may
public concern. Uncertainty over the future
be insufficient to deal with increased water levels
direction of climate change has done little to
in rivers and rising sea levels. In 2000 the national
deter public calls for more proactive government
policy document - Room for the River - set out a
responses.
detailed framework for adaptation. The framework
includes more stringent planning controls on
The insurance industry has been a powerful
human settlements, Catchment Area Strategies
force for change. Insurance provides an
implemented by regional authorities to develop
important mechanism through which markets
flood-retention areas, and a budget of US$3
signal changes in risk. By pricing risk, markets
billion for investment to protect against flooding.
provide incentives for individuals, companies
The policy aims at protecting the Netherlands
and governments to undertake risk reduction
from discharges from the River Rhine of up to
measures, including adaptation. In both Europe
18,000m3/s from 2015 - around 50 percent above
and the United States, the insurance industry has
the highest recorded level to date.
shown growing concern over the implications of
climate change for risk-related losses. Projections
United Kingdom. The United Kingdom Climate
pointing to the increased frequency of extreme
Impacts Programme (UKCIP) has drawn up
flood and storm events are one source of that
detailed region-by-region and sectoral studies
concern. In several countries, the insurance
looking at adaptation challenges. Management
industry has emerged as a forceful advocate of
strategies for flooding are being developed in the
increased public investment in ‘climate-proofing’
light of risk assessments of rising sea levels and
infrastructure to limit private losses. For example,
increased rainfall. Forecasted changes in climate,
the Association of British Insurers is calling for
storms and rainfall patterns are expected to lead
a 50 percent increase in national flood defence
to an increased risk of flooding. In contrast to the
spending by 2011.
Netherlands, Britain’s flood defence systems are
designed to cope with the biggest floods expected
... Many developed countries have conducted
every 100–200 years. With sea levels rising and
detailed studies on climate change impacts.
more storms and rain in prospect, flood defence
Several are moving towards the implementation of
strategies are under revision. Estimates by the
adaptation strategies. In Europe, countries such
insurance industry suggest that the number
as France, Germany and the United Kingdom
of homes at risk of flooding could rise from 2

have created national institutional structures for
million in 2004 to 3.5 million over the long term if
adaptation planning. The European Commission
flood defence infrastructure is not strengthened.
has urged member states to integrate adaptation
Only around one-half of the national flood
into infrastructure programmes and for a
defence infrastructure is in good condition. The
good reason. With a lifetime of 80-100 years,
Environment Agency, a government body, has
infrastructure such as bridges, ports and
called for at least US$8 billion [£4 billion] to
motorways have to take into account future
be spent strengthening the Thames Barrier - a
climate change conditions. Sectors such as
mechanized flood defence structure that protects
agriculture and forestry will have to deal with far
London. Current spending on flood management
earlier impacts, as will the public at large.
and coastal erosion is around US$1.2 billion
[£600 million] annually. Major floods in 2007 led
The scale of defensive climate change adaptation
to renewed calls for increased spending.
efforts in rich countries is not widely appreciated.
While the record varies, the overall picture is

Japan. Concern over adaptation in Japan was production may increase, albeit with southern
heightened in 2004 when the country was hit states lagging behind and the Great Plains facing
by 10 tropical cyclones. This was more than in more droughts as production centres move north.
any other year over the previous century. Total Northern Europe also stands to gain from longer
losses amounted to US$14 billion, of which and warmer growing seasons, creating scope
roughly one-half was covered by insurance. for improved competitiveness in a range of fruit
Rising temperatures and rising sea levels are and vegetables. Displacement of imports from
also increasing risk: average sea levels are rising developing countries therefore remains a threat to
at 4–8mm a year. While Japan has one of the human development in some product areas...
world’s most highly developed flood defence
infrastructures, ports and harbours are seen as Source: Watkins, 2007
sites of great vulnerability. More intensive tropical
storm activity could lead to large-scale economic Watkins, Kevin (2007), Human Development
disruption. Plans developed by the Japanese Report 2007-08 Fighting climate change:
Government to provide more effective defences in Human solidarity in a divided world, United
the face of a 21st Century sea level rise of 1 metre Nations Development Programme
estimate costs at US$93 billion.
Germany. Large areas of Germany face

increased risk of flooding with climate change.
Research in the Neckar catchment area in Baden-
Württemberg and Bavaria predicts an increase of
40–50 percent in small and medium-sized flood
events by the 2050s, with a 15 percent increase
in ‘hundred year’ floods. The Baden-Württemberg
Ministry for Environment estimates the additional
cost of long-term flood defence infrastructure at
US$685 million. Following large-scale flooding
in 2002 and 2003, Germany adopted a Flood
Control Articles Act which integrates climate
change assessment into national planning,
imposing strict requirements on the designation of
flood areas and human settlements.
... These examples demonstrate that

policymakers in rich countries do not see climate
change uncertainty as a cause for delaying
adaptation. Public investments today are seen
as an insurance against future costs. In the
United Kingdom, government agencies estimate
that every US$1 spent on flood defences saves
around US$5 in flood damage. The returns on
early adaptation investments are likely to increase
over time as climate change impacts strengthen.
Estimates by the European Commission suggest
that the damage caused by rising sea levels in
2020 will be up to four times higher than damage
incurred if preventative measures are taken. By
the 2080s, they could be over eight times higher.

Further, the costs of such defence measures are
only a fraction of the damages they avoid.
Not all adaptation is defensive. In the short term

at least, climate change is likely to create winners
as well as losers - and most of the winners
will be in rich countries. Agriculture provides
an illustration. While small-scale farmers in
developing countries stand to lose under climate
change, the medium-term impacts could create
opportunities in much of the developed world.
In the United States, national climate change
projections show that near-term agricultural food

APPENDIX: PEAK OIL & SUSTAINABILITY
Fig 37 - Crude oil prices 1861-2006 (US Dollars/Barrel)
$110
$ money of the day
$100
$ 2006
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Source: BP, Statistical Review of World Energy, 2007
Fig 38 - World Primary Energy Demand To 2030

(Million Tonnes Of Oil Equivalent)
7,000
6,000
APPENDIX: Peak Oil & Sustainability
5,000 Oil
4,000 Natural
Gas
3,000
Coal
2,000
Other
Renewables
1,000 Nuclear Power

Hydro Power
0
1970 1980 1990 2000 2010 2020 2030
Source: Birol, IEA World Energy Outlook, 2006

Fig 39 - Global Energy Reserves: Coal, Oil & Gas, 2005
(Billion Tonnes Of Oil Equivalent)
Former
Soviet Union
N. America 107/17/53 Key:
123/8/7 Coal / Oil / Gas
Europe
26/2/5 Middle
East
0/101/65
Asia Pacific
163/5/13
Africa
34/15/13
South and Central
America
9/15/6
Source: BERR, 2007d (citing BP Statistical Review of World Energy, 2006)
Fig 40 - Forecast UK Oil Demand By Type Of Use, 2005-2020

(Million Tonnes Of Oil Equivalent)
80
Agriculture Domestic
70 Services
Industry
60

50
40
Transport
30
20
10
0
2005 2010 2015 2020
Source: BERR, 2007d

United Nations ‘Agenda 21’ 1993 25. Children and youth in sustainable
Chapter Headings development
26. Recognizing and strengthening the role of
1. Preamble indigenous people and their communities
27. Strengthening the role of non-governmental
Section I. Social And Economic Dimensions organizations: partners for sustainable
development
2. International cooperation to accelerate 28. Local authorities’ initiatives in support of
sustainable development in developing Agenda
countries and related domestic policies 29. Strengthening the role of workers and their
3. Combating poverty trade unions
4. Changing consumption patterns 30. Strengthening the role of business and
5. Demographic dynamics and sustainability industry
6. Protecting and promoting human health 31. Scientific and technological community
conditions 32. Strengthening the role of farmers
7. Promoting sustainable human settlement
development Section IV. Means Of Implementation
8. Integrating environment and development in
decision-making 33. Financial resources and mechanisms
34. Transfer of environmentally sound technology,
Section II. Conservation And Management Of cooperation and capacity-building
Resources For Development 35. Science for sustainable development
36. Promoting education, public awareness and
9. Protection of the atmosphere training
10. Integrated approach to the planning and 37. National mechanisms and international
management of land resources cooperation for capacity-building in developing
11. Combating deforestation countries
12. Managing fragile ecosystems: combating 38. International institutional arrangements
desertification and drought 39. International legal instruments and
13. Managing fragile ecosystems: sustainable mechanisms
mountain development 40. Information for decision-making
14. Promoting sustainable agriculture and rural
development Source: United Nations Division for Sustainable
15. Conservation of biological diversity Development (1993), Agenda 21: Earth Summit
16. Environmentally sound management of - The United Nations Programme of Action
biotechnology from Rio, April (downloaded 6 Jan 2008;
17. Protection of the oceans, all kinds of seas,
web version: http://www.un.org/esa/sustdev/
including enclosed and semi-enclosed seas,
and coastal areas and the protection, rational documents/agenda21/english/agenda21toc.
use and development of their living resources htm)
18. Protection of the quality and supply of
freshwater resources: application of integrated
approaches to the development, management
and use of water resources

19. Environmentally sound management of toxic
chemicals, including prevention of illegal
international traffic in toxic and dangerous
products
20. Environmentally sound management of
hazardous wastes, in hazardous wastes
21. Environmentally sound management of solid
wastes and sewage-related issues
22. Safe and environmentally sound management
of radioactive wastes
Section III. Strengthening The Role Of Major

Groups
23. Preamble
24. Global action for women towards sustainable
and equitable development

APPENDIX: SMALL BUSINESS Parliamentary Office of Science
THREATS & OPPORTUNITIES and Technology (POST, 2004)
Climate Change And Business,
Increasingly more material is being published POSTnote Number 213, January
which elaborates on the impact of climate
change and sustainability issues on businesses SHELL SPRINGBOARD (2005)
in general and also on smaller businesses. Small business attitudes to the
Examples include: opportunity of climate change, October
Carbon Trust (2006) Sustain (Alliance for better food and

Carbon footprints in the supply chain: farming, 2007): Eat well and save the
The next step for business, CTC616, planet !: A guide for consumers on how
November to eat greener healthier and more ethical
food
Crichton, David (2006)
Climate Change And Its Effects On Small Warren, Jolin (2007)
Businesses In The UK, Axa Insurance, The Railways Mean Business: Attracting
August Business Travellers from Air to Rail,
TRANSform Scotland, November
DEFRA (Department for Environment, Food
and Rural Affairs, 2007c)
Sustainable development indicators in
your pocket
Energy Star (2007)

Putting Energy Into Profits (Small
Business Online Guide), U.S.
Environmental Protection Agency,
September
Envirowise (2002)
Engaging SMEs in environmental
APPENDIX: Small Business Threats & Opportunities

improvement: a best practice guide for
business support organisations, March
FEDERATION OF SMALL BUSINESSES

(FSB, 2002)
The Climate Change Levy - Another cost
for small businesses, July
GARNETT, TARA (2006)

Fruit And Vegetables & UK Greenhouse
Gas Emissions: Exploring The
Relationship, University Of Surrey, 22nd
September
IPPR (Institute for Public Policy Research,

2007)
80% Challenge: Delivering a low-carbon
UK, Joint IPPR, WWF-UK & RSPB,
November
National Consumer Council (2006)

I will if you will: Towards sustainable
consumption, May

Fig 41 - Proportion Of Smaller Firms Taking Action In 2007
To Reduce Their Environmental Impacts
Reduction of non-essential journeys 33%
Vehicles - Use of more energy efficient models 28%
Technology - Greater use of videoconferencing, etc. 26%
No action taken to reduce environmental impact 25%
Vehicles - Reduced usage 24%
Market - Focused on a smaller, more localised market/s 18%
Public transport - Increased use 14%
Business - Downsized 11%
Flying - Decreased 11%
Fuel - Using greener alternative/s 11%
Product/service focus - Changed 9%
Business - Relocated 5%
Vehicles - Changed to hybrid 4%
0% 5% 10% 15% 20% 25% 30% 35%
Source: Lloyds TSB/SERTeam, Small Enterprise Research Report (n=101), 2007


Big Green Business. Are you on the companies such as Ecotricity and the Phone
organic-gravy train? Coop.
Federation of Small Businesses
So why you ask, should I bother? Greening your
“Do you source locally? Is this Fairtrade or business as well as helping to protect future
Organic? Are you an ethical business? These are generations will also help you improve your
questions that people are asking more and more competitiveness and secure a following from the
often at their local shops or when using a local local community.
business.
Being green does not have to be expensive either,
The public are starting to care about which over recent years the government has poured
business they use. Public opinion is shifting as money into services to help businesses green
people realise where they choose to shop and their organisation.
which businesses they support can have an
impact on our community, our planet, our lives Most businesses spend a significant amount on
and the lives of our children. energy bills and they are often paying for energy
that needn’t have been used in the first place!
As drastic as this sounds it is true, a local shop Through appropriate technologies, insulation
for example that decides to try to source its and internal awareness raising many green
fresh produce as locally as possible is helping businesses now save money on their energy
to limit the vast amounts of Carbon Dioxide bills. This is an easy first step to developing your
(CO2) that we emit. The further a product travels sustainability. The Carbon Trust estimates that
and the more processed it is, the more CO2 it many businesses could save 10% just with simple
is responsible for. And it is that CO2 which is housekeeping changes.
causing climate change.
Action for Sustainable Living are a Manchester
Shopping locally also helps to support the local based charity providing free sustainable living
economy rather than sending local money to the advice and support in local communities.
bank accounts of international shareholders. The They provide tailor-made presentations and
New Economics Foundation found that money workshops around sustainable living and can
spent at local businesses was approximately 5 help businesses develop and implement an
times better for the local economy. Environmental Policy.
Being a green business is making more business Source: FSB 2007, http://www.fsb.org.uk/
sense than ever! There are many ways in which

a business can green themselves from saving
energy and recycling to switching to ethical utility

Opportunities for Innovation: ideas and access to market-beating invention
The business opportunities for SMEs in and research which will bring their vision to
tackling the causes of climate change fruition.
Conclusions for SMEs
Shell & Vivid Economics, 2006
l The greatest opportunities for all businesses,

including SMEs, lie in the compliance market.
The UK has a compliance market worth £3.5
billion per year in 2010 and expanding rapidly.
This part of the market is likely to be nearly ten
times larger than the voluntary market in 2010.
l The main compliance opportunities in the UK

are in meeting tighter building standards, the
supply of biofuels for road vehicles and the
generation of renewable electricity.
l To anticipate the future shape of compliance

markets in the UK and Europe, SMEs can
monitor developments in other countries,
particularly California, which has a track
record of setting trends in environmental policy
and has an economy and technology sector
large enough to influence world markets. They
can also consider the global trends which
commentators such as the World Business
Council on Sustainable Development have
summarised, with major changes expected in
power generation, industry and manufacturing,
mobility, buildings and consumer behaviour.
l The size of market opportunities is determined
by the level of political will to tackle climate
change. This is uncertain, and hence
an awareness of policy trends is of vital

importance in understanding future market
opportunities. SMEs can take comfort from the
fact that policies will need to strengthen and
broaden in scope over time, if climate change
targets are to be met.
l Those SMEs that bring innovation to

the market are of strategic importance
and can expect to receive more financial
encouragement from government and
financiers. SMEs with climate change related
products already receive support in various
ways from government and they have been
attracting more attention from private investors
in recent years. As markets expand and
the value of SMEs’ innovations grow, and
awareness of their role increases, then the
level of support may rise making it easier for
new SMEs to launch themselves.
l Of all these new entrants, those which will be

remembered in the future for the high value
they created are most likely to be those that
exhibit the typical strengths of innovative
SMEs – the motivation to bring forward radical

Seven Population Segments aware of climate change and other environmental
issues but this has not entered into their current
A Basic Model For Exploring decision making processes.
Public Environmental Attitudes,
Values and Beliefs Source: DEFRA / Policy Studies Institute
(2007), A Synthesis Review of the Public
Greens Understanding Research Projects, November
(p.3)
Greens (GR) are driven by their belief that
environmental issues are critical. They are well-
educated on green issues, positively connected
to arguments and do not see environmentally
friendly people as eccentric.
Consumers with a Conscience
Consumers with a Conscience (CWC) want

to be seen to be green. They are motivated by
environmental concerns and seeking to avoid guilt
about environmental damage. They are focused
on consumption and making positive choices.
Wastage Focused
Wastage Focused (WF) are driven by a desire

to avoid waste of any kind. They have good
knowledge about wastage and local pollution,
although they lack awareness of other behaviours.
Interestingly, this group see themselves as
ethically separated from GR.
Currently Constrained
Currently Constrained (CC) want to be green, they

just do not think there is much that they can do in

their current circumstances. They have a focus on
balance, pragmatism and realism.
Basic Contributors
Basic Contributors (BC) are sceptical about the

need for behaviour change. They tend to think
about their behaviour relative to that of others
and are driven by a desire to conform with
social norms. They have a low knowledge of
environmental issues and behaviours
Long Term Restricted
Long Term Restricted (LTR) have a number of

serious life priorities to address before they can
begin to consciously consider their impact on
the environment. Their everyday behaviours
are often of low impact for reasons other than
environmental.
Disinterested
Disinterested display no interest or motivation

to change their current behaviours to make their
lifestyle more pro-environmental. They may be

Further Sources Of Information (WWW): l Climate Outreach and Information
Climate Change, Peak Oil And Network - COIN Guide to Online Carbon
Sustainability Calculators
http://coinet.org.uk/
The following references are offered as an aid
to readers interested in seeking information to l Danish Wind Industry Association
supplement that in Chapter 11. The coverage http://www.windpower.org/
is not intended to be definitive, and inclusion
here should not imply either agreement or l DEFRA
disagreement with the views expressed via Department for Environment, Food and
these sources. Rural Affairs
http://www.defra.gov.uk/
N.B. Some pages may contain links to other
WWW pages offering related material. Tip: l Ecological Budget UK
the World Wide Web is in a state of constant http://www.wwflearning.org.uk/ecological-
change. So if problems arise with a link, then budget/
edit the link back to the ‘home page’ – e.g.,
truncate http://www.bized.ac.uk/fme/xyz.htm
l Energy Beyond Oil Project
back to http://www.bized.ac.uk/ – and search
http://www.fraw.org.uk/ebo/index.shtml
for a similar topic starting from there.
l Energy Saving Trust - Transport &
travel plans: Develop a travel plan
l BBC Weather Centre: Climate Change
http://www.energysavingtrust.org.uk/fleet/
http://www.bbc.co.uk/climate/
l Environment Agency
l Biffaward - Landfill Communities Fund
http://www.environment-agency.gov.uk/
http://www.biffaward.org/
l Environmental Transport Association
l British Wind Energy Association
http://www.eta.co.uk/
http://www.bwea.com/
l Envirowise
l Carbon Limited (RSA: Personal Carbon

Practical environmental advice for
trading)
business
http://www.rsacarbonlimited.org/
http://www.envirowise.gov.uk/
l Carbon Control (RSA)
l European Climate Change Programme
http://www.carboncontrol.org.uk/
http://ec.europa.eu/environment/climat/
eccp.htm
l Carbon Trade Watch
http://www.carbontradewatch.org/
l European Wind Energy Association
http://www.ewea.org/
l Carbon Trust Footprint Microsite
http://www.carbon-label.co.uk/
l Global Footprint Network
http://www.footprintnetwork.org/
l Centre for Alternative Technology
http://www.cat.org.uk/
l GreenBiz.com
Daily News on Green Business, Business
l Centre for Integrated Sustainability and Climate Change and Sustainable
Analysis/ISA UK Research & Business Practices (US)
Consulting http://www.greenbiz.com/
http://www.isa-research.co.uk/
l Green Tourism (Scotland)
l Climate Change Projects Office (BERR http://www.greentourism.org.uk/
& DEFRA)
http://www.berr.gov.uk/sectors/ccpo/

l International Atomic Energy Agency l United Nations Framework Convention
http://www.iaea.org/ on Climate Change (Kyoto Protocol)
http://unfccc.int/2860.php
l International Institute for Sustainable
Development l United Nations Division for
http://www.iisd.ca/ Sustainable Development (Agenda 21)
http://www.un.org/esa/sustdev/index.html
l Micropower Council
Home-based or small-scale energy l World Energy Council
generation http://www.worldenergy.org/
http://www.micropower.co.uk/
l National Energy Foundation

http://www.nef.org.uk/
l OECD Nuclear Energy Agency

http://www.nea.fr/html/welcome.html
l Office of Climate Change (UK)

http://www.occ.gov.uk/
l Parliamentary Office of Science and

Technology
“POST is the UK Parliament’s in-house
source of independent, balanced and
accessible analysis of public policy issues
related to science and technology.”
http://www.parliament.uk/parliamentary_
offices/post.cfm
l Scotland’s Global Footprint

http://www.scotlandsfootprint.org/
l Stockholm Environment Institute

http://www.sei.se/
l Sustain
The alliance for better food and farming
http://www.sustainweb.org/
l Sustainable Development Commission

UK (SDC)
http://www.sd-commission.org.uk/
l The Tomorrow Project

GLIMPSES database of emerging trends
http://www.tomorrowproject.net/
l UK Climate Change Programme

(Action in the UK)
http://www.defra.gov.uk/environment/
climatechange/uk/ukccp/index.htm

Lloyds (Bank) TSB/SBRT 2001/02 (Vol.9)
Small Business Management Report 1 Marketing & Sales
ISSN 0968-6444 2 The Human Side of Enterprise
3 Health Issues
1993 (Vol.1) 4 Premises
No.1 Surviving The Recession
2 Using Your Time 2002 (Vol.10)
3 Management Style 1 Networking in Business
4 Financial Management 2 The Euro
1994 (Vol.2)
1 Purchasing Lloyds TSB/Research Team
2 Quality Standards & BS 5750 Small Business Management Report
3 Management Succession ISSN 1478-7679
4 Customers & Competitors
3 Crime Against Small Firms
1995 (Vol.3)
1 Information Technology
2 Holidays Lloyds TSB/SERTeam
3 Company Vehicles Small Enterprise Research Report
4 Pricing Policies ISSN 1742-9773 No.2 (Vol.1) onwards
1996 (Vol.4) 2003-04 (Vol.1)

1 Training 1 Small Firms and Politics
2 A Day in the Life 2 Pensions
3 Financial Management 3 Work-Life Balance
4 Tax Compliance
2004-05 (Vol.2)
1997/8 (Vol.5) 1 Education & Enterprise
1 ‘Europe’ & Small Businesses 2 Made in Britain
2 Employee Recruitment 3 Management & Gender Differences
3 Information Technology
4 Business Support Agencies 2006 (Vol.3)

1 Local or Global ?
1998/9 (Vol.6) 2 Managing IT
1 Entrepreneurship 3 Networking in Business
2 Work & Stress
3 Employment Strategies 2006-07 (Vol.4)
4 Small Firms & The Environment 1 Owner-Manager Flexible Working
2 The Ageing Workforce
1999/2000 (Vol.7) 3 Travel & Transportation
1 The Impact of Holidays
2 Late Payment 2008 (Vol.5)
3 Management Development 1 London 2012 Olympic & Paralympic
4 Exit Routes Games
2000/01 (Vol.8)
1 E-commerce
2 Sources of Finance
3 Transport & Government
4 Government & Regulations

Climate Change & Sustainability Bubble Policy – Under the Kyoto Protocol, the
Glossary European Union and its Member States have
agreed to meet a joint target of a an 8 per cent
Abatement – Refers to reducing the degree or reduction in greenhouse gas emissions below
intensity of greenhouse-gas emissions. 1990 levels by 2012. This ‘bubble’ arrangement
allows the EU’s target to be redistributed
Afforestation – Planting of new forests on lands between member states to reflect their national
that historically have not contained forests. circumstances, requirements for economic
growth, and the scope for further emission
Annex I Parties – The industrialized countries reductions. The UK agreed to reduce its
listed in this annex to the Convention which were emissions by 12.5 per cent, which is its legally
committed return their greenhouse-gas emissions binding target under the Kyoto Protocol. Targets
to 1990 levels by the year 2000 as per Article 4.2 for other member states ranged from -21 per cent
(a) and (b). They have also accepted emissions for Germany and Denmark, to -6 per cent for the
targets for the period 2008-12 as per Article 3 Netherlands, +13 per cent for Ireland and +27 per
and Annex B of the Kyoto Protocol. They include cent for Portugal. (DEFRA, 2007)
the 24 original OECD members, the European
Union, and 14 countries with economies in Bunker fuels – A term used to refer to fuels
transition. (Croatia, Liechtenstein, Monaco, and consumed for international marine and air
Slovenia joined Annex 1 at COP-3, and the Czech transport.
Republic and Slovakia replaced Czechoslovakia.)
Carbon market – A popular but misleading term
Annex II Parties – The countries listed in for a trading system through which countries may
Annex II to the Convention which have a special buy or sell units of greenhouse-gas emissions
obligation to provide financial resources and in an effort to meet their national limits on
facilitate technology transfer to developing emissions, either under the Kyoto Protocol or
countries. Annex II Parties include the 24 original under other agreements, such as that among
OECD members plus the European Union. member states of the European Union. The term
comes from the fact that carbon dioxide is the
Anthropogenic greenhouse emissions – predominant greenhouse gas and other gases
Greenhouse-gas emissions resulting from human are measured in units called “carbon-dioxide
activities. equivalents.”
Article 4.1 – An article of the Convention Carbon sequestration – The process of

stipulating general commitments assumed by all removing carbon from the atmosphere and
Parties, developing or developed. depositing it in a reservoir.
Article 4.2 – An article of the Convention stating CFC – Chlorofluorocarbon.

the specific commitments of developed-country
(Annex I) Parties only -- notably that they would CH4 – Methane.
take measures aimed to return greenhouse-gas
emissions to 1990 levels by the year 2000. Clean Development Mechanism (CDM) – A
mechanism under the Kyoto Protocol through
Biomass fuels or biofuels – A fuel produced which developed countries may finance
from dry organic matter or combustible oils greenhouse-gas emission reduction or removal
produced by plants. These fuels are considered projects in developing countries, and receive
renewable as long as the vegetation producing credits for doing so which they may apply towards
them is maintained or replanted, such as meeting mandatory limits on their own emissions.
firewood, alcohol fermented from sugar, and
combustible oils extracted from soy beans. Their Climate Change and Sustainable Energy Act
use in place of fossil fuels cuts greenhouse 2006 (UK) – “... the principal purpose of the Act
is to enhance the UK’s contribution to combating
APPENDIX: Glossary
gas emissions because the plants that are the

fuel sources capture carbon dioxide from the climate change. It is also aimed at alleviating
atmosphere. fuel poverty and securing diverse and long-term
energy supplies for the UK... incorporates a wide
Bonn agreements – Informal term for a political variety of measures covering the role of local
deal reached at COP-6 in Bonn, Germany, in authorities and parish councils, microgeneration,
2001, by which governments agreed on the most energy efficiency, Building Regulations, dynamic
politically controversial issues under the Buenos demand technologies, community energy
Aires Plan of Action. The Bonn agreements paved schemes and renewable heat, and electricity from
the way for the Marrakech Accords later in the renewable sources. It also imposes a number
same year. of reporting requirements on the Government

in relation to greenhouse gas emissions, -- greenhouse gases are hydrofluorocarbons
progress towards our energy efficiency target, (HFCs), perfluorocarbons (PFCs) and sulphur
progress on implementing the microgeneration hexafluoride (SF6).
strategy and steps taken to promote community
energy projects and renewable heat...” (HMSO HFC – Hydrofluorocarbons.
Explanatory Notes, 2006)
“hot air” – Refers to the concern that some
CO2 – Carbon dioxide. governments will be able to meet their targets
for greenhouse-gas emissions under the Kyoto
Countries with Economies in Transition (EIT) Protocol with minimal effort and could then flood
– Those Central and East European countries and the market with emissions credits, reducing the
former republics of the Soviet Union in transition incentive for other countries to cut their own
from state-controlled to market economies. domestic emissions.
CSD – United Nations Commission on ICAO – International Civil Aviation Organization.

Sustainable Development.
IEA – International Energy Agency.
Deforestation – Conversion of forest to non-
forest. IGO – Intergovernmental organization.
Emissions trading – One of the three Kyoto IMO – International Maritime Organization.
mechanisms, by which an Annex I Party may
transfer Kyoto Protocol units to or acquire units ISO – International Standards Organization.
from another Annex I Party. An Annex I Party
must meet specific eligibility requirements to Joint implementation (JI) – A mechanism under
participate in emissions trading. the Kyoto Protocol through which a developed
country can receive ‘emissions reduction units’
European Union (EU) – As a regional economic when it helps to finance projects that reduce
integration organization, the EU is a Party to both net greenhouse-gas emissions in another
the Convention and the Kyoto Protocol. However, developed country (in practice, the recipient
it does not have a separate vote from its member state is likely to be a country with an “economy in
states. Because the EU signed the Convention transition”). An Annex I Party must meet specific
when it was known as the EEC (European eligibility requirements to participate in joint
Economic Community), the EU retains this name implementation.
for all formal Convention-related purposes.
Members are Austria, Belgium, Cyprus, Czech Kyoto Protocol – An international agreement
Republic, Denmark, Estonia, Finland, France, standing on its own, and requiring separate
Germany, Greece, Hungary, Ireland, Italy, Latvia, ratification by governments, but linked to the
Lithuania, Luxembourg, Malta, the Netherlands, UNFCCC. The Kyoto Protocol, among other
Poland, Portugal, Slovakia, Slovenia, Spain, things, sets binding targets for the reduction of
Sweden, and the United Kingdom. greenhouse-gas emissions by industrialized
countries.
Fugitive fuel emissions – Greenhouse-gas
emissions as by-products or waste or loss in the Kyoto mechanisms – Three procedures
process of fuel production, storage, or transport, established under the Kyoto Protocol to increase
such as methane given off during oil and gas the flexibility and reduce the costs of making
drilling and refining, or leakage of natural gas from greenhouse-gas emissions cuts; they are the
pipelines. Clean Development Mechanism, Emissions
Trading and Joint Implementation.
GATT – General Agreement on Tariffs and Trade.
Land use, land-use change, and forestry
Global warming potential (GWP) – An (LULUCF) – A greenhouse gas inventory
APPENDIX: Glossary
index representing the combined effect of the sector that covers emissions and removals of
differing times greenhouse gases remain in the greenhouse gases resulting from direct human-
atmosphere and their relative effectiveness in induced land use, land-use change and forestry
absorbing outgoing infrared radiation. activities.
Greenhouse gases (GHGs) – The atmospheric Leakage – That portion of cuts in greenhouse-
gases responsible for causing global warming gas emissions by developed countries --
and climate change. The major GHGs are carbon countries trying to meet mandatory limits under
dioxide (CO2), methane (CH4) and nitrous the Kyoto Protocol – that may reappear in other
oxide (N20). Less prevalent --but very powerful countries not bound by such limits. For example,

multinational corporations may shift factories from through a Joint Liaison Group, the secretariats of
developed countries to developing countries to the three conventions take steps to coordinate
escape restrictions on emissions. activities to achieve common progress.
Least Developed Countries (LDCs) – The SF6 – Sulphur hexafluoride.

World’s poorest countries. The criteria currently
used by the Economic and Social Council Sink – Any process, activity or mechanism
(ECOSOC) for designation as an LDC include which removes a greenhouse gas, an aerosol
low income, human resource weakness and or a precursor of a greenhouse gas from the
economic vulnerability. Currently 50 countries atmosphere. Forests and other vegetation are
have been designated by the UN General considered sinks because they remove carbon
Assembly as LDCs. dioxide through photosynthesis.
Mitigation – In the context of climate change, “Spill-over effects” – Reverberations in

a human intervention to reduce the sources developing countries caused by actions taken
or enhance the sinks of greenhouse gases. by developed countries to cut greenhouse-gas
Examples include using fossil fuels more emissions. For example, emissions reductions
efficiently for industrial processes or electricity in developed countries could lower demand
generation, switching to solar energy or wind for oil and thus international oil prices, leading
power, improving the insulation of buildings, and to more use of oil and greater emissions in
expanding forests and other “sinks” to remove developing nations, partially off-setting the
greater amounts of carbon dioxide from the original cuts. Current estimates are that full-
atmosphere. scale implementation of the Kyoto Protocol may
cause 5 to 20 per cent of emissions reductions in
Montreal Protocol – The Montreal Protocol on industrialized countries to “leak” into developing
Substances that Deplete the Ozone Layer, and countries.
international agreement adopted in Montreal in
1987. Sustainable development – Development
that meets the needs of the present without
N20 – Nitrous oxide. compromising the ability of future generations to
meet their own needs.
Non-governmental organizations (NGOs) –
Organizations that are not part of a governmental Technology transfer – A broad set of processes
structure. They include environmental groups, covering the flows of know-how, experience and
research institutions, business groups, and equipment for mitigating and adapting to climate
associations of urban and local governments. change among different stakeholders
Many NGOs attend climate talks as observers.
To be accredited to attend meetings under the UNCTAD – United Nations Conference on Trade
Convention, NGOs must be non-profit. and Development.
OECD – Organisation for Economic Co-operation UNEP – United Nations Environment Programme.
and Development.
UNFCCC – United Nations Framework
OPEC – Organization of Petroleum Exporting Convention on Climate Change.
Countries.
WHO – World Health Organization.
Reservoirs – A component or components of
the climate system where a greenhouse gas or WMO – World Meteorological Organization
a precursor of a greenhouse gas is stored. Trees
are “reservoirs” for carbon dioxide. WTO – World Trade Organization.
Rio Conventions – Three environmental Primary source: UNFCCC, 2007, Glossary

APPENDIX: Glossary
conventions, two of which were adopted at the of climate change acronyms (extracts),
1992 “Earth Summit” in Rio de Janeiro: the downloaded 27 December http://unfccc.int/
United Nations Framework Convention on Climate
essential_background/glossary/items/3666txt.
Change (UNFCCC), and the Convention on
Biodiversity (CBD), while the third, the United
php
Nations Convention to Combat Desertification
(UNCCD), was adopted in 1994. The issues SME Facts & Issues 2008.indd
addressed by the three treaties are related -- in 26-Sep-2008
particular, climate change can have adverse
effects on desertification and biodiversity -- and

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SME Facts & Issues

Professor John Stanworth

Second Edition, October 2008

The UK appears to compare favourably on an international basis when it comes to self-employment

The Lord Randall of Budeaux

SME Facts & Issues, Stanworth & Purdy, 2008 

 SME Facts & Issues, Stanworth & Purdy, 2008

2. Who Are The Self-Employed ?..................................................................................... 5

3. Size Profile Of Firms In The U.K.................................................................................. 7

6. A Regional Perspective: Where Are The Successful Small Businesses ?.................16

7. The Small Firm In The London Economy...................................................................19

8. Small Business Owners, Own Account Self-Employed

10. Great Expectations ?................................................................................................. 32

11. Future Imperfect: A Bumpy Ride From ‘Throwaway’ To ‘Sustainable’....................... 36

© John Stanworth & David Purdy, Second Edition, October 2008

The Small Enterprise Research Team

Accompanied by a Presenter’s CD-ROM (Microsoft Windows™-compatible) which includes

SME Facts & Issues, Stanworth & Purdy, 2008 

SME Facts & Issues, Stanworth & Purdy, 2008 

Source: National Statistics, Labour Force Survey, 2008a

2,500 Female Full-time

1,000 Male Full-time

 SME Facts & Issues, Stanworth & Purdy, 2008

Source: ONS, Labour Force Survey, 2005

SME Facts & Issues, Stanworth & Purdy, 2008 

Source: BERR, 2007a

sector financial turnover. Meager, Kaiser and Dietrich (1992) conducted

 SME Facts & Issues, Stanworth & Purdy, 2008

NUMBER OF BUSINESSES SIZE (number of employees)

4,466,700 73.0% 26.2% 0.6% 0.1%

22,402 15.9% 31.2% 11.7% 41.1%

ALL INDUSTRIES 2,613,907 7.9% 29.2% 14.8% 48.1%

Source: BERR, 2007a

SME Facts & Issues, Stanworth & Purdy, 2008 

Source: DTI Small Firms in Britain, 1996

0% 5% 10% 15% 20% 25% 30% 35%

being self-employed. This was higher if recession than in Germany).

10 SME Facts & Issues, Stanworth & Purdy, 2008

“Dr Mowlam emphasised that the

SME Facts & Issues, Stanworth & Purdy, 2008 11

UK United States Italy Germany

FINANCIAL: VAT & Sales Tax Rates

FINANCIAL: VAT Thresholds

UK United States Italy Germany

FINANCIAL: Statutory Audit Requirements

SAFETY AT WORK ISSUES

UK United States Italy Germany

EMPLOYMENT: Working Time

EMPLOYMENT: Maternity Leave

EMPLOYMENT: Statutory Maternity Pay

EMPLOYMENT: Trade Union And Employee Representation

UK United States Italy Germany

EQUALITY: Equal Pay

EQUALITY: Race Or Sex Discrimination

EQUALITY: Disability Legislation

Fig 6a - Lifespan of Businesses Registered for VAT:

90% Registered 1999

16 SME Facts & Issues, Stanworth & Purdy, 2008

Time since Registered Registered

Sources: DTI 1996; DTI Small Business Service, 2007

Fig 6c - Three-year 'Survival' Rates of VAT-Registered Businesses

SME Facts & Issues, Stanworth & Purdy, 2008 17

Source: DTI Small Business Service, 2007

Percent Still Trading

SME Facts & Issues, Stanworth & Purdy, 2008

SME Facts & Issues, Stanworth & Purdy, 2008

SME Facts & Issues, Stanworth & Purdy, 2008

SME Facts & Issues, Stanworth & Purdy, 2008

SME Facts & Issues, Stanworth & Purdy, 2008

SME Facts & Issues, Stanworth & Purdy, 2008

SME Facts & Issues, Stanworth & Purdy, 2008

SME Facts & Issues, Stanworth & Purdy, 2008