This essay comprises of three different sections. The first section will concentrate on the definition of a small firm in the UK. It will then move on to the determinants for the growth of a small firm and finally, it will focus on the problems faced by small firms and the policies that have been designed to overcome these problems.
There has been no explicit definition for the term small firm. In order to aid the general understanding of a small firm, the Bolton Committee of 1971 derived two different definitions. The first definition is termed as the economical definition. This relates to firms being small if they meet three criteria. They must have a reasonably small share of their market place, they should be managed by the owner or co-owners of the firm in an informal manner and not through the normal formality that involves a management structure; and they should be independent and not configuring as a part of a large enterprise (Storey, 1994). The second definition is the statistical definition. This comprises of the number of employees in the firm. “Definitions from the Bolton Report of 1971 are regarded by many to be of dubious value to a sector that has changed in complexion, composition, contribution and structure over 32 years” (Beaver, G & Prince, C., 2004). This is one of the criticisms that has been pointed out after the definition was obtained from the Bolton Committee. It has been argued that there is no single definition of a small firm and the Bolton Committee’s definition did not help the issue that committees and researchers face in giving a small firm a definition. In order to aid the problems that were created as a result of the definition derived from the Bolton Committee, small and medium enterprise (SME) was established to cla ...