Top 25 UK cities to start a business in 2022

Startups.co.uk is proud to unveil our latest Startups Cities Index, an annual ranking of the top cities in the UK – outside of London – for starting a business.

The most exhaustive research project of its kind, the index looks at a grand total of 42 research categories covering everything from digital infrastructure to high street funding, and with this information determines the best overall city for startups to thrive in.

Last year, a record number of new businesses were registered on Companies House. In fact, nearly 80 new businesses were started every hour in the first half of the year.

So where are the top UK cities, outside of London, that are empowering new business success?

This year, Sheffield has been revealed as our ultimate winner, thanks to the city’s strong performance across many of our research areas. The industrial powerhouse impressed us with its low cost of living, large working population and fantastic transport links.

But there are plenty of other cities that are also helping to nurture new business talent in exciting ways.

Our expert team analysed key data across five major categories:

• Business support
• Infrastructure
• Talent
• Wellbeing
• Business activity

Read on to see the winners of each category, and find out how well your city performed.

Top 25 cities to start a business in 2022 overall

Our second-place city is Glasgow, thanks to an outstanding overall score. Known for its industrial prowess, creativity and unique charm, this city has a lot to be proud of.

The host of COP26 came top of the list for infrastructure, and also ranked highly for cost of living.

Liverpool, Leeds and Bristol make up the rest of the top five. These three student cities both achieved high marks for talent, with a combined total of over 94,000 students in higher education between them.

Cities in England, Scotland and Wales all topped the board, with a range of regions represented across the whole of the UK.

Edinburgh put in a particularly good show – the Scottish capital won the talent category by an impressive margin. More than six in 10 of its workers are highly skilled, the highest number out of all 25 cities.

As for Wales, Cardiff came in at number six. Alongside Swansea, it came out strong in Business Support. On average, we found that both cities charge less than £16 per sq ft for average commercial rent, making them two of the cheapest locations for business premises.

Northern Ireland, meanwhile, was also well represented, as Belfast ranked number one for cost of living. This is highly significant given the current inflation crisis that, as we reported earlier this year, is the top concern for 71% of UK SMEs.

Belfast has the second-lowest average property cost at £145,337, as well as the cheapest average weekly cost of childcare at £187.

Smaller cities perform poorly for business support

Smaller cities, such as Cambridge, York and Oxford, performed poorly in terms of commercial rent – all three ranked in the bottom five for average rent cost.

In fact, Oxford’s average rent cost of £41.02 per sq ft is more than three times as much as that of first-place Swansea. This is likely because smaller cities with limited available premises have more demand for space, which sends costs skyrocketing for startups.

Northern Ireland is best for business rates

Another crucial aspect of business support comes in the form of business rates. While these are rates that you’ll have to pay, the money is often used by local councils to provide funding and support to entrepreneurs – which means that the cheapest cities aren’t always the best.

We examined business rate estimates for all of the top 25 cities to find the median, which came out to £2,536 per city.

Belfast came the closest to this amount with an average annual rate of £2,426. It’s our top UK city for business rates, as here you’ll strike a good balance between the money you’ll pay and the support you’ll get.

The city with the lowest average business rate is Manchester at £400 per organisation. The most expensive city is Coventry – organisations near the so-called Motor City will pay a massive £11,500 per year in business rates.

West Midlands prove best for investment

Our specialist research team also looked at the average amount of funding received per UK region.

For this category, we used exclusive data from our own Startups 100 index, an annual ranking of the 100 most disruptive and innovative UK small firms.

We found that the average amount of funding received by businesses in the West Midlands is just over £2 million – an astonishing number, and over half a million GBP more than runner-up north-west England.

Surprisingly, the south-east region’s proximity to London did not equal greater investment.

On average, businesses in cities like Southampton and Brighton received just £583,339 per organisation.

Positive growth across the UK

Data from the Centre for Cities high street spend tracker recently revealed that the UK’s regional towns and cities are showing faster growth and COVID recovery compared to London.

Indeed, the results were encouraging when we examined the business mortality rate of each of our top 25 cities.

This category looked at the number of new businesses registered in 2021, and how their growth compared to 2020.

There was only one UK city in our top 25 that didn’t host more new businesses in 2021 compared to 2020 – indicative of a positive movement in the COVID-19 economic recovery effort.

At the top of the list was Swansea, demonstrating a huge new business growth of +27% – over 6% more than runner-up Southampton. This is despite Swansea coming just 18th in number of small businesses.

Swansea also came first for high street recovery, as its footfall and spending both increased overall in 2021. This could indicate that lower rent costs are more likely to encourage new business growth.

The home of the world-famous Fringe festival ranked number one for percentage of highly-skilled workers, with 65.4% of its population having an NVQ4 qualification or above – that beats runners-up Oxford and Cambridge by more than 3% each.

Edinburgh also has the third-lowest number of unemployed people and came fifth-highest for number of students.

Brighton and Cambridge most attractive cities for job seekers

Despite having the second-largest number of students, Birmingham ranked 21st for highly skilled workers.

Just 37.3% of its population have an NVQ4 qualification or above, indicating that the city might have an issue with graduate retention.

In comparison, Brighton and Cambridge had two of the lowest numbers of students but both scored highly for percentage of highly skilled workers.

This suggests that these are two of the most attractive cities for job seekers or new graduates.

This is thanks to its proximity to green spaces, as well as its low average cost of weekly childcare (£211.15 per week).

The most expensive city to live in was Cambridge, which charges almost £10 per day more for weekly childcare than Newcastle, and was also the most expensive location for property costs.

Cambridge did score well for its number of hospitality and leisure businesses, suggesting that prospective employees would be more likely to move there for the local amenities than the green space.

Oxford is the UK’s greenest city

Employers and business managers are starting to acknowledge and embrace the importance of wellness at work and the economic benefits of working in a place that is somehow more connected to nature.

Our research shows that Oxford is the greenest city in the UK. On average, a local park or playing field is only 276 metres away wherever you are located in the city, making its rural areas some of the most accessible on our list.

Oxford also has the highest number of parks within a 1000 metre radius, with an average of 8.2 – and an average garden size of over 200m².

In contrast, seaside town Hull had the worst score for nature. Its citizens have to travel over 400 metres on average to find a park or green space.

The city does, however, have the lowest average property cost, with houses averaging less than £125,000.

But infrastructure is now more than just physical structures and facilities. Today’s businesses rely just as much on road networks as they do on mobile phone networks and the internet.

As we reported last year, 54% of businesses are planning to use a hybrid working model by summer 2022.

With this in mind, we also looked at average broadband speeds, as well as 4G and 5G capabilities, to work out the top city for remote working companies.

Topping the list was Liverpool, which has excellent internet speed and is also one of the few cities with 5G capability. Glasgow came in second, while Coventry was third.

Plymouth boasts shortest commute time

One of the biggest benefits of working outside of London is a shorter commute time. Commuters in the capital spend, on average, almost one hour and 20 minutes travelling into work.

We looked at the average travel time into the centre of each city on our list to find the destination with the most time-efficient work route. Plymouth won this round, with locals travelling an average of just 16 minutes to reach the office.

But it was fellow port city Hull that came out on top for affordable transport. Hullensians spend an average of just £8.50 per week travelling to work – that’s £10 less than people in Bristol.

Midlands wins for green infrastructure

Sustainability is another big topic driving the direction of local authority investment.

As the UK works towards its goal of reaching net zero by 2050, councils are looking to find new ways of cutting carbon emissions and reducing waste.

We examined the top 25 cities based on four key metrics: net zero target, recycling rate, carbon footprint, and average carbon emissions to see how they are responding to the issue.

Our overall winner was Norwich, which has had the highest carbon emissions decrease (53%) since 2005. It also had a top 10 finish for recycling rate, and boasts a relatively low carbon footprint for its size.

The city with the worst carbon footprint is estimated to be Manchester, which just pipped Birmingham to take the undesirable title.

Another factor we looked at was a city’s number of electric vehicle charging points.

As increasing numbers of consumers begin driving hybrid or electric vehicles, the question is: which UK city is best placed to accommodate this increase?

The overwhelming winner was Coventry, which we found to have 481 electric vehicle charging points at the end of 2021.

A recent announcement by Coventry City Council even stated that 400 more EV charging stations will be installed in the city by the end of 2023 to help residents feel more confident about making the switch to electric vehicles.

Methodology

Support

• Number of available business premises
• Average business rates
• Average commercial rent costs
• Average amount of funding per region

Business Activity

• Number of existing small businesses per city
• Average high street footfall 
• Average annual growth rate
• High street spend
• Average business mortality rate (calculated using business births and deaths)
  

Talent

• Total working adult population
• Average number of students
• Percentage of unemployed jobseekers
• Percentage of highly skilled workers

Wellbeing

• Cost of living – average house price and average weekly cost of childcare
• Green spaces – average distance to a park, garden size, and number of parks
• Leisure – percentage of employees in retail and hospitality

Infrastructure

• Digital infrastructure – average internet speed, 4G and 5G capability
• Transport – average commute time, average travel card cost, and number of electric charging points
• Green infrastructure – estimated carbon footprint of each city, net zero target, recycling rate and emissions decrease

Why did we not look at London?

Many news outlets often automatically assume that the capital is the best place to launch a new product or service, which can lead to data bias.

In actuality, the latest ONS figures on the UK’s business demography show that, while London has the most startups, it also has the highest death rate (12.1%).

This figure is 2.4% higher than in the Yorkshire and Humber region, where our top city – Sheffield – is located.

Earlier this month, the UK government released its landmark Levelling Up white paper, which promised that regions across the country will receive additional funding to encourage entrepreneurship and level out the playing field.

We want to support the Levelling Up agenda and highlight the amazing developments and opportunities that are happening around the UK and Ireland.

Conclusion

It’s impossible to state categorically that one city is a better guarantor of startup success than another. The lottery that is entrepreneurship means that one firm in a rural setting may prosper, while an urban company may fail.

What this index does show us is that every UK city is different, and empowers new business in unique ways.

Remote-working businesses, for example, will do best in Liverpool, which topped our ranking for digital infrastructure. Offline businesses are more likely to thrive in Swansea, which shows the best high street recovery post-COVID and has the lowest average commercial rent.

So, whether they’re based in England, Scotland, Wales or Northern Ireland, every one of our top 25 cities and communities are providing unique and inventive solutions that can bring value to any startup.

If you’d like to know more about how the Startups Cities Index 2022 was calculated, email us at hello.startups@mvf.com for a full breakdown of the results.