Small businesses and EU membership

"Small businesses support EU membership."

European Movement UK, 28 September 2015

"Small firms split over European Union referendum vote"

BBC News, 17 September 2015

While these claims look like they contradict each other, both use evidence from the Federation of Small Businesses (FSB) to back up their points.

The most recent FSB evidence suggests slightly more of its members support staying in the EU, but by a fairly close margin with a further one in ten undecided.

Another recent survey, conducted by Business for Britain, found more of them saying that EU organisations are a hindrance rather than a help, which is similar to what the FSB also found.

Neither of the surveys is fully weighted to represent the make-up of small businesses nationwide. We're not aware of any that are.

Small businesses make up the vast majority of private sector businesses in the UK.

FSB said last year that small businesses supported EU membership

To evidence its claim, European Movement UK said that "the Federation of Small Businesses argued in 2014 that the EU is good for business, and 20% of its members trade overseas".

It was referring to the launch of the FSB's European election manifesto, when the FSB commented that "the EU is good for business but needs more flexibility for the future".

As for what it meant by flexibility, among its three 'key asks' for candidates at that election was to "ensure regulation is proportionate and not a burden".

The FSB said in 2013 that 21% of its members export.

FSB members were split in a recent survey

Earlier this month, the FSB published a survey of its members, which found slightly more in favour of staying in than leaving. This survey was behind the BBC's headline that small businesses were split over the vote.

Respondents were asked the yes/no question "should the UK remain a member of the European Union?". 47% said yes, 41% said no and 11% were undecided.

Fewer think that EU membership helps their business

Interestingly, the FSB survey also found that the level of support for EU membership among small business owners is higher than the proportion that thinks it's beneficial for their business (35%, versus 41% who say it doesn't help them).

The campaign group Business for Britain recently commissioned its own survey of the same sized businesses as members of FSB. It also found more thinking that the EU didn't help their own business, although by a far wider margin.

A larger proportion reported that the European Union institutions "hindered" businesses like theirs than the proportion that reported that it "helped" businesses like theirs (41% compared to 20%). A further 39% said it would depend or they didn't know.

This is a slightly different question to the one asked by FSB, as it asks about EU institutions rather than EU membership more broadly.

Respondents weren't explicitly asked whether they would vote to remain or leave the EU—so there's not a comparable question to the FSB survey.

Surveys not necessarily representative of the weighting of small business opinion nationwide

Whether or not a small company relies on trade with the EU has a significant influence on its owner's feelings about the EU. Respondents to the FSB survey were more likely to vote 'yes' to stay in the EU if they relied on exports to the EU.

17% of respondents said they relied on EU exports. We're not aware of figures that show how this compares to the proportion of all small businesses that rely on EU exports.

The whole survey was designed to reflect opinion of FSB members rather than being necessarily representative of all small businesses across the UK. Participants were also 'self-selected': nearly 130,000 FSB members were invited to take part in the survey and over 6,000 chose to take part.

We don't know how these were distributed between business size and type or industry area—the results were only weighted by region to reflect the known profile of FSB membership. So we don't know exactly how representative this survey is of small businesses across the UK.

The Business for Britain survey was conducted by fewer respondents (600 business leaders) but was designed to get a "cross-section" of opinion across different sizes of small business, giving equal weighting to each size category.

This means that it doesn't reflect the actual breakdown of different-sized businesses across the UK. But it was weighted by region to ensure the locations were representative of UK small businesses, and it attempted to match the proportion of small businesses in each industry sector.

So it may give us a better idea of the diversity of opinion among small businesses, but it wouldn't reflect the weight of the opinion of sole traders, for example, who make up three quarters of small businesses.

Both surveys are useful and interesting in their own way, but neither gives a definitive, representative answer to the question of what small business owners think about EU membership.

What constitutes a small business?

Members of the FSB have between 0-249 employees—so this is the size of company we mean when we talk about "small businesses" in this article.

There are differing definitions of what constitutes a small business. The official statistics count them as those with 0-49 employees. FSB "small business" members (the same size of companies included in the Business for Britain survey) would in the statistics count as small and medium sized businesses. "Micro businesses" is also sometimes used to refer to businesses with less than 10 employees.

Update 9 October 2015

After feedback from a reader, we added the last section of the article to explain the varying definitions of small businesses.