Local Enterprise Partnership research reveals start-up failures highest in Britain’s big cities

But city businesses that survive have strongest growth

Start-ups in the UK’s big cities are the most likely to fail in the early stages, but those that do survive have stronger rates of growth than anywhere else in the country, according to a new study.

Commissioned by the Enterprise Research Centre (ERC), a body dedicated to studying the factors affecting small and medium-sized business growth in the UK, the LEP Growth Dashboard report undertook detailed analysis of all 39 Local Enterprise Partnership (LEP) areas across England to examine patterns of start-up growth between 2009 and 2012.

Examining metrics including proportion of fast-growing firms in the business population, net job creation ratios and 3-year survival rates of start-ups, the report found that whilst growth and the proportion of high growth start-ups was more prevalent in major cities, the same areas also had the highest failure rates for new businesses.

Four of Britain’s major cities came bottom of the table for start-ups that survive three years:

Area % of start-ups that survive three years
London 59.7
Greater Birmingham and Solihull 58.0
Greater Manchester 57.8
Liverpool City Region 53.3

 

Despite this, the research also found that three of the same cities had the highest rate of start-ups which successfully reached £1m turnover in three years:

Area % of start-ups that reach £1m turnover in three years
Black Country 5.7
London 5.2
Greater Manchester 5.1
Liverpool City Region 5.0

 

In terms of net job creation between 2011 and 2012, the following areas topped the table:

Area Net job creation ratio: 2011-12
Derby, Derbyshire, Nottingham and Nottinghamshire 6.0
London 5.5
Cheshire and Warrington 5.4
Buckinghamshire Thames Valley 5.0

 

The study found that London and the South East had the highest proportion of fast-growing firms in the business population. Areas that topped the table:

Area % of fast-growing firms in the business population: 2009-12
London 17.4
Oxfordshire 15.7
Thames Valley Berkshire 14.3
Leicester and Leicestershire 14.3

 

Overall, the study results showed that no one LEP significantly outperformed any of the others, with start-up growth relatively steady across the country.

All businesses surveyed in the study were also asked to cite what they considered to be their main obstacles to growth. Businesses in 26 out of 39 LEP areas cited strategy and management as their main barrier to growth, whilst just three LEP areas gave finance as their main barrier.

Professor Mark Hart, deputy director at the ERC, commented on the study: “What the findings show is a complex LEP geography which provides a challenge to some of the preconceptiosn held about ‘hotspots’ of growth across England while confirming others.

“London occupies one of the top two positions for all the metrics except survival rates for start-ups where it lies in the bottom four.”

Stephen Peacock, director of operations at small business growth programme GrowthAccelerator, added: “These findings support our own research which shows that rapid business growth can come from anywhere, regardless of sector or location.

“The success of high growth businesses is largely down to the people that drive them forwards, who have a clear ambition for growth and a plan to achieve it.”

Comments

(will not be published)