Small businesses also have the potential to be more customer-focused than their larger competitors, often operating in niche markets, identifying new opportunities and satisfying market demands that would otherwise remain unfulfilled. Moreover, small firms have the opportunity to act in a flexible and dynamic way, in reaction to changes in market demand. This does not always happen, of course, but the potential for well-run, innovative small businesses to introduce innovations, thereby extending the variety of market provision, is unquestionable. Examples embody the breadth of economic activity, ranging from the growth of local and ‘slow' food movements, both in the UK and across the Atlantic, to the important role of small enterprises in the dramatic expansion in the UK computer games sector.

It is, therefore, no surprise that governments have become more concerned with the impact of policy upon small businesses, both in so far as this may nurture and encourage development, but also the extent to which regulations may burden and constrain activity. This is a vital debate.

Regulations have the potential to develop new market spaces and stimulate innovation, in such areas as environmental technology, but this depends upon consistent levels of support for new market initiatives – a feature that has too often lagged the introduction of the regulatory constraints. Moreover, government policy can provide the information services and facilitate the development of networks which enable companies to thrive, but red tape can also frustrate new developments unnecessarily and divert too much management time from the efficient operation of their businesses.

Consequently, reaching the correct balance between protecting consumers, the environment and small businesses themselves from unfair competition and unsustainable activities, is both necessary and difficult for public agencies to achieve.

The campaign by the FPB to ‘Think Smallest First' is, therefore, an important contribution to this balance. The more perspectives that government can consider, the greater the understanding of how policies (which are often very well meant) impact upon those in the small business community. The creation of a more focused range of policy interventions would be a good result, both for small businesses and the whole economy.

After all, to slightly paraphrase E F Schumacher, small can indeed be beautiful!

Professor Philip B Whyman BSc(Econ) PhD