Want growth? Let small business owners keep more of their money

Three out of four UK small business owners do.

The minimum wage is £12.71 an hour. It is the legal floor. You cannot pay an adult over 21 less in this country. Unless, it turns out, you happen to employ yourself.

Enterprise Nation's latest Small Business Barometer found three in four small traders pay themselves less than £20,000 a year for an average working week of just under 50 hours.

Do the maths and it comes out at roughly £7.75 an hour - barely half the minimum wage for the people considered the backbone of the economy.

Which means, in the UK, you can target a niche, set up a business, shoulder all that responsibility, perhaps do your bit to revive your ailing local high street, and earn less than you would working at a fast-food chain.

No shade to fast-food establishments – I am a huge fan – but one would hope the aspiration and endeavour we as a nation are supposedly so proud of – and indeed depend on – would warrant more reward than a teenager might gain in their first-ever shift.

Small and medium-sized businesses are 99% of all businesses in Britain - 5.7 million of them.

They employ 16.9 million people, six in ten of every private sector job in the country, and they generate £2.8 trillion a year, half of all business turnover in the UK.

This is not a plucky minority we're talking about. It is most of the economy. And the people running it are often earning less per hour than the person they just hired.

£7.75 isn't just a fraction of today's minimum wage – it's below what the minimum wage was in 2017.

Every employee in Britain has had their pay floor raised by nearly 70% since then. Those increases were the right thing to do – but they were funded, in no small part, by the very owners whose own pay never moved.

And the direction of travel is wrong. A year ago, our survey showed two-thirds of owners were under £20,000. Now it is 76%.

Among owners who employ staff, the squeeze is sharper still: 65% are under that line, up from around half last year.

The moment you take on employees – the thing every government begs small businesses to do – your own pay is more likely to fall, not rise.  Why? Because owners are absorbing the pressure personally. They are paying their staff first, their suppliers second, their landlords and HMRC third, and themselves with whatever is left.

That is not bad management. In many cases, it is the opposite: people protect their teams and customers by taking the hit themselves.

But it is not sustainable, and we should stop pretending it is a quirk of entrepreneurial life rather than a warning light on the dashboard of the whole economy.

We at Enterprise Nation will be doing more - our community of 240,000 SMEs demands it.

Which is why this September we are launching the SME Index, a single live picture of the entire UK SME economy. You can't fix a problem if you can't see it - so we're making sure every business will be seen by region, sector, age, and much more.

The UK has long lacked a lens to view its most precious resource - so we made one.

And we will double down on our support too, with our work on Help to Grow: Management helping to mentor founders sitting alongside all new initiatives, including a free, new platform to drive UK SME AI adoption.

But we can't do it alone, and some of this is in the government's interest to fix quickly.

Start with late payments. Two in five small business owners were paid late in the past year – nearly double the rate we saw through 2023 and 2024 – and at any moment £26 billion is sitting in overdue invoices, according to the Small Business Commissioner.

That is £26 billion of working capital being lent, interest-free and involuntarily, by the smallest firms in the country to some of the largest.

The Commercial Payments Bill announced in the King's Speech is welcome, but a Bill is a promise, not a payment. It needs teeth, and it needs speed.

Then there is the Budget in October. When we asked owners what they wanted from the Chancellor, the answer was the same whether they were 18 or over 50: ease the tax burden.

Not subsidy. Not a new scheme with a new logo. Just a recognition that when someone works a 50-hour week and pays themselves half the minimum wage, taking more off them at the margin is not just unfair – it is economically self-defeating.

If we want owners to invest, hire and grow, the first step is to let them pay themselves like the jobs they are actually doing.

Small business owners are not asking to be rescued. They are asking for an environment in which effort is rewarded rather than absorbed: where invoices get paid on time, where taking on staff doesn't mean cutting your own pay, and where the tax system doesn't punish the people carrying the risk.

None of this requires a rescue package. It requires a government that pays attention to the people quietly propping up half the economy and treats their unpaid overtime as a cost worth counting – not a resource to be assumed.

Pay us on time. Let us keep more of what we earn. Do that, and you won't need to find growth. It will already be in the room, waiting to be unleashed.

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Aaron Asadi is CEO of Enterprise Nation, the support network for the UK's 5.7 million small businesses.

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