. Might Artificial Intelligence (AI) actually boost new businesses? France and the US think so, encouraged by signs in the data they collect on the growth of micro-enterprises of fewer than ten workers and solopreneurs operating in their own. This is not yet showing up in the less helpful UK data. But the trend in other nations points to opportunity for the Scottish economy; AI is a tool that can allow young enterprises to accomplish much more without the risks of a big workforce.
Regulation, employment law and accounting requirements are all a challenge for early stage businesses. Overheads for early stage entrepreneurs are growing. In less than two years, micro-entities will lose a filing exemption that currently avoids the cost of income statement reporting. Digital reporting adds to the complexity. But now AI can handle the drafting, admin, customer replies and scheduling that used to force a growing one-person business to make its first hire.
A single skilled person, with the right tools, can now run a larger and more capable operation than was possible even two years ago. This can also support the formation of craft and consulting activities that are always intended just to be solo operations. AI now bundles up online agents that replace employees and take a load off the solopreneur. It might be just one individual, but customer service feels a more comprehensive experience.
There is potential for business guidance and emotional support too - AI can act as a kind of thinking partner, filling the gap left by not having colleagues to bounce ideas off. This comes naturally to Generation Z, who have grown up in the digital world and tend to trust online advice. Older generations might push back at the idea of AI mentoring, but many young people already consult on their life decisions in this way. Going it alone and starting a new venture is tough; with AI coaching, every decision need not rest on one person.
In 2008, France created a simple registration and tax regime specifically for solo entrepreneurs; lowering the practical barrier to starting up and giving the state a proper count of who was doing it. New business registrations in France have grown roughly 80 per cent since 2017, with similar surges recorded in Finland and Australia. In each case it is solo founders rather than conventional employer businesses driving the increase. The UK has neither the simplified route nor the visibility that comes with it, leaving policy relying on estimates.
The UK has no clear, dedicated route for registering as a solo business as France does with its simplified micro-entrepreneur scheme, or the way the US effectively tracks new firms through tax filing numbers. Companies House data leaves out sole traders and the self-employed altogether. Official statistics typically only count self-employed people once they cross the threshold for VAT or for paying tax through payroll - a bar that many small or part-time solo ventures never reach.
The UK government relies instead on its labour force survey. But that looks unreliable : its effective sample size and response rates have fallen since the pandemic and the figures have since been downgraded to “official statistics in development”. The weakness of the statistics is recognised but the issues have not yet been fixed. In summary, a meaningful and probably growing slice of the Scottish economy is operating largely out of sight. Effective policy cannot be developed without a full understanding of the activity.
Although official statistics do not capture solo and micro-business activity well, some of the firms providing payments and other services to new enterprises are seeing growth. This is possibly the best window into what is happening, giving real-time data. One supplier notes that new business sign-ups on their platform have roughly doubled in the UK over two years, closely tracking a similar surge in the United States and France.
New technology has previously driven small business creation, with the internet making many solo business models easier to execute. Payments and delivery services, for example, have developed to meet the needs of small enterprises – no longer need a young business be at the mercy of inflexible suppliers like banks and the post office. Social media supports marketing and can give public presence to new or remote enterprises.
AI could boost this growth. Part of the reason businesses historically tended to be built by teams was that a single individual rarely possesses all the skills needed. AI and AI-based software can fill many of the gaps that founders have. Research suggests a trend towards lower headcount in “AI-native” companies that are building now without legacy. While there is public concern about workforce shrinkage in large enterprises, micro-entities might grow.
Self-employment still accounts for only around one in ten jobs in Scotland, a lower share than in many comparable countries, which suggests there may be room for the trend to grow further. The pattern also has a social dimension worth noting: much of the earlier rise was driven by women and by older workers moving into self-employment, which points to this being as much about flexibility and changing working lives.
However, this potential needs to be nurtured by government. There is a risk of a much noisier business environment. AI can support new enterprise but equally there is the possibility that it fosters a wave of fraudulent activity, creating mistrust of small online business. Without support, in the form of real-time verification, some micro-entities may find it difficult to demonstrate authenticity and build trust. There will be a role for new methods of accreditation.
AI will inevitably deliver some negatives for society and the economy – any positive opportunity it affords should be welcomed. Scottish data should be collected on solo and micro-business activity to allow supportive policies to be developed. Support for these emerging enterprises can be tailored to Scotland’s economy and communities