Wales avoids UK-wide start-ups slump – but firm growth subdued
- Wales the only UK nation to avoid a big drop in new start-ups, as numbers hold steady
- But growth of new and existing firms remains among slowest in the country
- ‘Warning signs’ highlight dangers for job creation from ongoing uncertainty around Brexit
Wales was the only UK nation to avoid a significant drop in the numbers of new start-ups being launched last year, but the number of firms managing to grow quickly and productivity remain among the country’s lowest.
The findings have emerged from the Enterprise Research Centre’s UK Local Growth Dashboard report, an annual publication that looks at a range of metrics charting the growth of small to medium-sized enterprises (SMEs), which account for 99% of all firms in the UK.
It found that in 2018 – the most recent period available in the ONS’ Business Structure Database – the number of new start-ups in Wales remained broadly similar to the previous year (falling by 1.2% from 9,670 to 9,555). This contrasted with the situation across the UK as a whole, which saw a slump of almost 42,000, or 12.9% (from 325,900 to 284,000).
The pattern was uneven across the UK: In Northern Ireland as a whole the figure was 15% lower than in 2017. Meanwhile in England, Swindon and Wiltshire saw the biggest absolute drop – with 45% fewer start-ups established. Just three areas saw an increase in start-ups – the North of Northern Ireland (+2.6%), Liverpool (+2.8%) and Worcestershire (+9.2%).
ERC researchers said the slowdown in new firm creation reflected the uncertainty around Brexit, and warned that the ongoing lack of clarity was also blunting growth ambitions in more established firms.
Other key findings for Wales from the UK Local Growth Dashboard report show that:
- A total of 9,555 new firms were started in 2018, while the three-year survival rate for start-ups stood at 54.2%, slightly below the UK average figure of 55.1%. Start-up survival rates since 2015 were generally higher in the South of England and Northern Ireland.
- Among scale-ups, just 1.4% of new Welsh firms managed to grow their turnover to £1million or more within three years between 2015-18. The UK average was 2.0%, with the highest proportion in the North of Nothern Ireland (4.6%).
- For established Welsh firms with a turnover between £1million and £2million, 5.8% managed to grow above the £3million mark over three years. This was below the UK average of 7.4%.
- The proportion of Welsh firms that succeeded in growing their productivity, with turnover increasing faster than headcount, slipped slightly to 7.1% in 2015-18, below the UK average of 8.3%. Northern Ireland saw the highest proportion of firms growing productivity, followed by London, Cambridge and major city-regions in the North of England including Manchester, Leeds and Sheffield.
The ERC is the UK’s leading source of independent research insight on the growth of SMEs.
Mark Hart, ERC Deputy Director and Professor of Small Business and Entrepreneurship at Aston Business School, said:
“The latest Local Growth Dashboard analysis shows some clear warning signs about the health of the private sector economy right across the UK. It’s particularly worrying that we’re seeing an absolute decline in the number of new businesses being started in the wake of the 2016 referendum.
“While Wales seems to have escaped this trend, other metrics suggest fewer Welsh firms are reaching key growth milestones as quickly as other parts of the UK.
“Budding entrepreneurs are clearly holding their breath waiting for some clarity about the outcome of Brexit, but if the trend continues we’ll see fewer jobs created by dynamic young firms.
“And while established firms are clearly still growing successfully in many parts of the country, it’s frustrating that productivity growth still seems to elude the vast majority.
“Taken together, it seems hard to avoid the conclusion that Brexit uncertainty is causing the grassroots economy to stutter. This may not yet have fed through to employment numbers, but policymakers need to be aware of the warning signs and create the certainty businesses are craving.”
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