London defies expectations and leads rest of UK for entrepreneurial spirit

Titles that covered this story include The Independent, 14 June 2010.

  • Capital creates most net new businesses
  • Swansea bottom of list
  • Four of bottom five towns and cities are coastal

London has defied expectations and leads the rest of the UK for new business creation by being the top city for new business start-ups.  It formed a net total of 24 new businesses per 10,000 people in the year to January 1 2009, reveals our recent res.

This puts London at the top of the list of the UK’s 50 largest towns and cities for net number of new businesses created, significantly higher than the UK average of eight net new businesses per 10,000 people.

In comparison Swansea is bottom of the top 50, actually losing three more businesses than it created per 10,000 people in the year to January 1 2009.

Laurence Sacker, Partner in the Corporate Finance team at our London office comments: “Whilst London is known as the powerhouse of the economy as it hosts so many global banks and multi-nationals, these figures show that is is also the national hotbed for entrepreneurs.”

“The expectation was that with the credit crunch coming from the collapse of the financial and professional services sector – London’s heart – the capital’s ability to create new businesses would be severely impacted.”

“It comes as quite a surprise therefore to see it at the top of the list.”

“London’s dominance also comes against a backdrop of years of heavy investment, subsidies and transfers to the regions.”

“Of course, new businesses by definition are likely to be quite small and will not necessarily make up for the loss of jobs and revenue suffered when bigger companies fold.  Nevertheless, these statistics hold the clues on how well the UK’s towns and cities are positioned to recover from the recession.”

According to our experts the prevalence of ‘white-collar’ industries in London may actually explain why more new businesses are being created in the capital than elsewhere in the UK.

Laurence comments: “Because a greater proportion of the workforce in London is skilled and in the professional and financial services sector, they are likely to be highly educated and more motivated.  It is also likely they will have levels of savings and equity in property that is higher than the UK average, which gives them the capital to start a new business.”

“This means they are ideally placed to start their own business ventures, should they either decide to go it alone or lose their job.”

“In addition, the costs of starting a business in some parts of the professional and financial services sector can be low, as they don’t really need any machinery or specialised premises.”

“In contrast, towns and cities more dependent on what has been a declining manufacturing sector usually means people have low incomes, which diminishes their ability to invest in new business ventures.”

Coastal regions struggling to generate new enterprises

Our research also reveals that on the ranking list of net new businesses created in the UK’s top 50 towns and cities, four of the bottom five positions are held by coastal towns.

Blackpool, Southend on Sea, Sunderland and Swansea all saw more businesses closed than were newly created and many seaside towns have persistently faced high levels of unemployment following the collapse of their traditional maritime industries.

Laurence comments: “With swathes of the workforce unemployed in these coastal areas, the size of the talent pool that actually has the experience and the financial backing to create a new business venture will naturally be somewhat reduced.”

“Often the people in those towns with the most talent and the most in demand skills will have left over the last twenty years, creating a downward spiral.”

We have recently launched a free business plan review service for entrepreneurs and small companies looking to attract investment, which is available across the UK.

Laurence explains: “One of the universal reasons why new business ideas fail to get off the ground is a lack of proper, structured and swift feedback on their business plans.”

“The crux of this service is exactly that – to refine business plans and give them the best chance of raising the funds they need.”

Further guidance on developing a business our support services can be found on our website at www.uhy-uk.com/pages/home/business-support-services, and business plans should be sent to businessplans@uhy-uk.com.