11 April 2011
• Four of bottom five towns and cities for business creation are seaside
• Just two major cities created more businesses than they lost
• UK sees net loss of 43,155 businesses in 2009
• London slips from top to 24th in just one year
Seaside towns saw the highest rate of business closures in the UK during the recession reveals our latest research.
The research, which ranks the Top 50 towns and cities by their ability to create new businesses, found that four of the five lowest ranking areas were seaside towns – Poole (50th out of 50), Southend-on-Sea (49th), Preston (48th), and Blackpool (47th). (See league table below)
Even major seaside towns such as Bournemouth (45th out of 50) and Southampton (44th), both previously seen as hotbeds of business creation, fared poorly with Bournemouth losing a net 260 businesses, while Southampton lost a net 265.
Coastal town Poole (50th) fared the worst, swinging from a creation of six businesses per 10,000 people in 2008, to losing almost 24 businesses per 10,000 population in 2009.
Our specialists explain that seaside towns lack the economic diversity of larger cities and are still too reliant on tourism.
Marc Waterman, partner in our London office, comments: “Seaside towns have never recovered from the collapse of their traditional maritime and tourist industries. Whilst these towns have tried to diversify their economies from reliance on a dwindling tourist spend that diversification has been a mixed success.”
“For example, where they have won financial services jobs those have often been in back office work that is seen as adding little value.”
Marc gives the case of Barclays huge payment processing centre in Poole that has seen successive waves of redundancies as those jobs have been offshored or removed through the use of IT.
According to our specialists, the reliance of seaside towns on consumer spending caused huge difficulties as consumers cut back as the recession took hold.
Marc Waterman explains: “Despite the hopeful idea of the “staycation” the British tourist industry did not do well from the recession.”
“Any bounce from the staycation was wiped out by the cancellation of business conferences, exhibitions and seminars that seaside towns would normally do very well from. Businesses, like consumers, reigned in discretionary spending during the recession and those seaside towns who relied on their business suffered.”
Other research has highlighted the high levels of personal insolvency that UK seaside towns have suffered from - showing the underlying fragility of those economies and the low levels of accumulated wealth in those towns.
Only two major towns created more businesses than they lost
Oxford and Aberdeen were the only major cities to create more businesses than they lost in 2009 according to our research. Aberdeen led the UK in business creation, producing 50 more businesses than it lost, while Oxford created a net 15 new businesses.
Our research also revealed that the UK swung from a net creation of eight businesses per 10,000 people in 2008 to a net loss of seven businesses per 10,000 population in 2009.
The number of businesses closing outstripped that of new businesses being created, resulting in a net loss of 43,155 businesses in 2009 (latest data available). This compares to a net creation of 46,260 businesses in 2008.
Marc Waterman, comments: “These figures reveal the true extent of the damage caused by the recession to the UK economy.”
Our specialists say that a large number of business closures during the recession were start-ups and other small enterprises.
Marc Waterman explains: “Smaller businesses in particular had a torrid time with banks reluctant to lend to businesses with few assets. Banks are still reluctant to reassess the level of risk associated with lending to start-ups, making it very difficult for new businesses to access funding.”
“Those who were able to access finance were doing so despite some incredibly stringent conditions. In some cases company directors were required to provide personal guarantees, such as their homes and cars, as part of the loan agreement.”
“With 99% of the British economy made up of SMEs, it is imperative that the Government ensures that small businesses receive the funding and support they require to avoid the economy falling back into recession.”
There is a risk that the scrapping of the regional development agencies (RDAs), which help with the development and efficiency of local businesses, could make things worse.
London hit hard by financial sector slowdown
London, the UK’s number one City for new business creation in 2008, tumbled down the league table this year as a result of the slowdown in the financial sector. Our research revealed that London lost six businesses per 10,000 people in 2009, losing 4,525 more businesses than it created.
Marc Waterman explains: “The capital’s ability to create new businesses was severely impacted during the recession. As well as the funding implications, the cost of starting a new business in London is considerably higher than in other parts of the country.”
Top 50 towns and cities in UK by new business creation
|Rank||Towns and Cities||Net new businesses |
|Net new businesses per 10,000 pop |
|Net new businesses |
|Net new businesses per 10,000 pop
|Average Top 50||24,465||10.2||-14,570||-6.1|