Small Business and the Informal Economy: Evidence from the UK

International Journal of Entrepreneurial Behaviour & Research, Vol. 13 No. 6, 2007, pp. 349-366

18 Pages Posted: 27 Dec 2015

See all articles by Colin Williams

Colin Williams

University of Sheffield - School of Management

Date Written: 2007

Abstract

Purpose – The magnitude of the informal economy has been estimated using either indirect measurement methods that employ proxy indicators or small-scale household surveys. This paper seeks to provide an analysis of the findings of the first direct survey in an advanced market economy of national business opinion on its magnitude and impacts.

Design/methodology/approach – This paper analyses the findings of a UK survey of business opinion on the prevalence of the informal economy in their sector and its impacts on their businesses, namely the Small Business Service’s (SBS) 2004/05 Small Business Survey of 7,505 small businesses.

Findings – The finding is that 14 per cent of UK small businesses view themselves as negatively affected by the informal economy, with businesses estimating on average that 8 per cent of trade in their sector is conducted on an off-the-books basis. The sectors most affected by the informal economy are land transport, construction, the motor vehicle trade, and hotels and restaurants, with fledgling enterprises and businesses in peripheral regions most affected.

Research limitations/implications – This survey records only business perceptions of the size of the informal economy in their sector rather than directly collecting data on the amount of informal work that businesses conduct.

Practical implications – This paper demonstrates that it is wholly feasible to conduct business surveys on the size and impacts of the informal economy and recommends modifications to the SBS survey method to improve data collection.

Originality/value – This paper reports the findings of the first survey in an advanced economy of national business opinion on the size and impacts of the informal economy.

Keywords: Informal sector, entrepreneurship, household work practices, livelihoods, economic development, England

JEL Classification: H26, J46, J48, K34, K42, O17, P2, P3

Suggested Citation

Williams, Colin, Small Business and the Informal Economy: Evidence from the UK (2007). International Journal of Entrepreneurial Behaviour & Research, Vol. 13 No. 6, 2007, pp. 349-366, Available at SSRN: https://ssrn.com/abstract=2708353

Colin Williams (Contact Author)

University of Sheffield - School of Management ( email )

15 Conduit Road
Sheffield, S10 1FL
United Kingdom

HOME PAGE: http://https://www.sheffield.ac.uk/management/staff/williams/index

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