UK enterprise thrives as start-ups soar and failures fall for first time
UK start-ups are demonstrating the greatest survival rates in three years, according to the Barclays and BGF Entrepreneurs Index, a bi-annual series tracking the UK entrepreneurial lifecycle. The Index, which began tracking entrepreneurial trends in 2012, has found the number of active companies in the UK increased to 3,260,879 in June 2015, up from 3,139,630 in December 2014. This rise of 3.86% is the biggest uplift since the Index began tracking this data.
In a further sign of the UK’s healthy start-up scene, the report found that between December 2014 and June 2015, the number of company dissolutions was lower than in the previous six months – the first time this has happened since the Index began – reversing a three-year trend. There were 170,359 dissolutions, compared to 193,699 between June and December 2014.
Dena Brumpton, head of wealth management, UK at Barclays, said:
“The dip in the number of companies that are dissolving is testament to the growth in business confidence we have seen in recent years, allowing UK businesses not just to start up, but to succeed.
“These results are particularly encouraging as the business landscape in the UK is changing, with a relatively small number of small and medium sized enterprises (SME) delivering a significant impact on economic growth, employment and wealth creation. Since 2012, the appetite for creating new businesses has grown exponentially, due to a number of factors – from an improving economy to the rise of entrepreneurs over the age of 50 – the UK’s start-up scene is thriving.”
Slight uplift in business exits
The research also indicated a healthy investment scene, with the number of deals resulting in wealth creation of at least £200,000 rising by 5% in the 12 months to June 2015, to 1,541. This continued the upward trend seen since 2012, although there was a slight drop compared to the same period in the previous year, when the number of deals rose by 8.6%.
Service-led businesses driving growth in deals
The services sector was responsible for by far the highest proportion of deals in the UK in the year to June 2015, at 21%. Following this were the financial services (8.3%), computer software (7.2%), and industrial products and services (7.2%) sectors.
From start-up to scale-up: the high growth conundrum
While the UK start-up and exit scenes remain buoyant, the latest findings show that in a continuation of the trend noted in the last Entrepreneurs Index, the proportion of high-growth companies fell in the year to December 2014. The number of companies within revenue bands of £2.5m and £100m stood at 20.8% in the year to December 2014, down from 21.5% in the previous year. There were some exceptions to this trend however, with the construction, retail and property sectors seeing the proportion of high-growth companies rise for the third consecutive year, driven by the strong wider growth of these sectors.
Although London, the South East and East Anglia continued to dominate in the deal space, accounting for over half of the 1,541 deals in the year to June 2015, it is Wales and the South West who are leading the way on high-growth businesses. Despite the overall downward trend in the proportion of high-growth companies, almost a quarter (23.5%) of companies in the South West were high-growth as at December 2014, compared to 20.6% in March 2014; as were 23.4% of companies in Wales, compared to 21.6% in March 2014.
Stephen Welton, chief executive, BGF (Business Growth Fund), said:
“The fact that the first half of 2015 has seen the UK’s biggest rise in the number of active companies since the Entrepreneurs Index began in June 2012, and also the first decrease in the number of these businesses failing is extremely positive.
“It is testament to nation-wide efforts to support entrepreneurial activity in recent years, and to the focus on longer-term sustainable growth. We need to continue to invest in ambitious British businesses in order to contribute to the health and robustness of the UK economy.”
Dena Brumpton added:
“The report shows that there is an opportunity to replicate the success of the start-up scene at the scale-up stage, to enable a greater proportion of UK businesses to achieve high growth ambitions. The industry needs to do more to support this segment which is why we are leading the way by offering a unique proposition for high-growth firms, providing access to a range of innovative funding, services and networks for the most ambitious businesses driving economic growth.
“Barclays is committed to supporting high-growth businesses and their founders throughout their entrepreneurial life-cycle − from start up to IPO. We are passionate about helping the wealth and employment creators of the future.”