Frank Holmes of Gambit crunches the numbers on business start-ups

A recent article in the Sunday Times which focused on UK company start ups in 2015 attracted our interest because Wales was not mentioned.

Looking back over the last three years, it is clear that since 2011/12 the rest of the UK and Wales have experienced year on year growth in the number of new businesses being created.

According to Companies House, over 600,000 businesses were registered in 2015.

London alone was responsible for 33% or 196,000 new ventures whilst the next top 10 cities in the rankings accounted for 11% of new ventures and the balance of 56% included the Welsh starters.

Given that there has been year on year growth in the number of start ups since 2012 this would appear to be more of a trend than a blip.

Five years ago we also surveyed data from the Office for National Statistics on company births and deaths. Corporate UK in 2009 experienced a record level of over 279,000 business closures equating to 11.9% of all companies ceasing to trade.

Putting this in perspective, the lowest death rate experienced previously was 9.4% thereby indicating that the Great Recession was not a sole factor in these companies’ demise but a notable contributor to business cessation.

Wales’ company births and deaths profile in 2009 through to 2011 mirrored the rest of the UK and eventually emerged in 2011/12 from a three year grave when new company registrations actually exceeded closures.

Drilling down in to the 2015 data, Birmingham ranked 2nd and accounted for 14,152 new enterprises whilst Wales pipped the Midlands city with 14,547, up 22% from 2014 (11,345).

However, on start ups per capita, Wales was encouragingly better at one company per 210 population versus 261 for Birmingham.

Within the top 10 ranking cities for corporate births, Manchester and Leeds ranked 3rd and 4th respectively, whilst Scotland boasted Edinburgh and Glasgow in 5th and 6th places with an average of 6,700 new enterprises each.

Cardiff and Wales

Cardiff led Wales with 2,800 births and ranked 23rd overall in 2015, which was positive compared to the UK city average of 1,700 start ups.

In comparison, Birmingham generated 13 start ups per 1,000 people, whilst Cardiff produced eight.

The research on Wales indicates that the manufacturing industry, across numerous sectors, still represents around 50% of corporate turnover whilst financial services continued to spawn over 200 new businesses in 2014 and 2015.

Interestingly, the Welsh agricultural sector in 2015 generated £2bn revenues which coincidentally was nearly the same as leading financial services company, Admiral Group plc, on its own.

Entrepreneurial spark

So what is underpinning the UK wide trend and are we anticipating a new entrepreneurial era?

The answer probably lies in the combination of a number of factors, not least the resurrection from a deep recession which is driving previously employed citizens into self-employment, an option also being embraced by the younger, new to work generation of twenty somethings.

IT competency and fluency in “on line” strategies is enabling new businesses speedier access to market channels. The entry barriers are low for many enterprising individuals and higher education has promoted commercialisation of technology and business awareness.

To a younger generation seemingly adopting self-employment and entrepreneurialism as a real career choice.

Previous difficulties in accessing capital, other than through friends and family, are being relieved by alternative finance sources including peer-to-peer lending, crowd funding and trade invoice finance whilst certain forward thinking public sector authorities are supporting early stage companies and entrepreneurs with advisory support services, incubation centres and access to overseas trade prospects.

Curiously, the aspirations of the entrepreneurial school leavers and graduates seem to be aimed at other priorities, a real shift when compared to their parents who were more full time employment focused, career oriented and challenged with buying a house and securing its mortgage.

This traditional domestic objective is no longer widely affordable for many and so the ambition is aligned to a contemporary unencumbered lifestyle.

Wales’ economy will only prosper if it is able to sustain and expand its private sector at all levels and in particular encourage SMEs to aspire to grow into larger businesses. Statistically, young companies are vulnerable and historically survival rates are low but those that do are vital to replenish the market.

Finance Wales

Birmingham is leading the way for the regions and has Finance Birmingham to assist.

We have Finance Wales, an institution without which the Principality and SME community would have been worse off during the Great Recession.

However, it is time to for this government owned finance house to reposition itself away for competing against other more cost effective debt providers and extend its offering to access a broader portfolio of funding solutions, engage by mentoring early stage companies with investor readiness initiatives and enable established SMEs to grow or through its capital resources invest in these businesses to transition them to the next generation of management owners.

We are living in unstable and disruptive times but if this entrepreneurial trend is to become deeper rooted in our culture then let’s encourage its longevity and promote sustainable growth at all levels, starting with introducing innovation in to the school curriculum, adopting leading edge financial and technology solutions, providing quality mentoring by real business people and eradicating the stigma of failure for those willing to have a go.

This article researched by Marina Nocera and Alicia Carayol Sanchez, students at Cardiff Metropolitan University

 

To read the full article click here

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