UK start-ups beat rest of Europe for job creation
– Over 550,000 people employed in UK businesses launched in just one year
– UK start-up scene creating twice as many jobs as Germany’s
– Start-ups benefit from new National Insurance allowances but could be threatened by massive increase to minimum wage
Start-up businesses in the UK create more jobs than those in any other major European economy, according to research by Rousseau Associates, the business consultancy specialising in SMEs and owner-managed businesses.
Rousseau Associates says that in 2012, well over half a million (553,761) people were employed by businesses launched in the UK that year. In total, 242,400 start-ups were created.
This compares to 398,521 employees in start-ups in France, and just 346,556 in Germany.
Rousseau Associates points out that a comparison of the number of new jobs created by start-ups per head of population emphasises the ambition and scope of new businesses in the UK, with UK start ups creating more than twice as many new jobs per head of population than those in Germany:
– UK start ups created 876 new jobs per 100,000
– Germany start-ups created 424 jobs per 100,000
– French start-ups created 627 new jobs per 100,000
Michael Heath, business development director, Rousseau Associates, said: “These figures are really encouraging for UK plc. They show that the current wave of start-ups in the UK is very much more than one-man-bands starting up in response to job losses during the recession. They are aiming for much more than simply to replace a lost wage.
“Our start-ups are being driven by ambitious risk-taking entrepreneurs. The levels of job creation are indicators that many start-ups have a clear strategic vision and the goal of developing into successful businesses of some size.”
Start-ups benefit from new National Insurance allowances but could be threatened by massive increase to minimum wage
Rousseau Associates adds that the National Insurance Employment Allowance, introduced last year to enable employers to reduce their NI bills by up to£2,000 per year, has been a particular boon for start-ups, by reducing the cost of taking on a first employee. The new NI exemption for under 21s which came into force this April will also help start-ups to create more jobs.
However, it warns that pressure to massively increase the Minimum Wage could act as a brake on start-ups and smaller businesses’ ability to create more jobs. The minimum wage is currently set at £6.50 per hour, while the so-called ‘living wage’ backed by campaigners is 20% higher outside London at £7.85, and 41% higher in London at £9.15.
The value of the minimum wage has become an election issue. The Green Party manifesto calls for an increase in the minimum wage to £10.00 per hour, 54% higher than the current rate, while the Labour party has said it would increase it by 23% over the next five years, to hit £8.00 an hour by 2020.
Michael said: “Bigger businesses with wider margins might be able to swallow the costs of increases to the minimum wage, but smaller businesses and start-ups tend have to operate on tight margins in order to gain a foothold in the market.
“Of course it is important that work is rewarding, but small businesses are often well-placed to offer other benefits that some employees see as a trade-off for lower pay.
“For example they can often be more flexible about working arrangements because the business owner knows and trusts each worker individually. They can offer great learning and career development opportunities because a smaller team has to provide all the same functions as a much larger company.
“They are also significant providers of casual, part-time or short-term employment for those just starting out or returning to work, and also for those who are looking to supplement income from other activities.
“Small businesses would be disproportionately affected by any major increase to the minimum wage. If they were forced into laying off staff, both the economy and many thousands of individual employees would suffer.”
