National and Regional Start Up Success

Findings from the Barclays and BGF Entrepreneurs Index show the national entrepreneurial scene is looking strong for the UK, and the promise is reflected within South East businesses also – but will this start up strength prevail into further growth?

The UK’s entrepreneurial appetite continues to strengthen. The Barclays and BGF Entrepreneurs Index, a bi-annual series tracking the UK entrepreneurial lifecycle, aims to provide a barometer of entrepreneurial activity in the UK across sectors and regions; to understand the barriers to growth facing today’s entrepreneurial companies; and to assess the extent to which the country’s entrepreneurs are now realising wealth through their businesses. The latest findings deliver good news, not only to the UK as a whole, but to the South East in particular.

The number of active companies in the UK has increased hugely since June 2012, and appears to be accelerating rapidly in growth: between December 2014 and June 2015, the number of active companies grew by 3.86%, from 3,139,630 to 3,260,879 – the biggest percentage increase since the biannual index series began.

There was a record 5.4 million private sector businesses in the UK at the start of 2015, according to the latest data released by the Department for Business Innovation Skills, reflecting an increase of 146,000 since 2014, of which 35,000 are creating employment. Nationwide, the number of company dissolutions was also lower than in the previous six months – the first time this has happened since the index began – reversing a three-year trend.

The factors underlying this growth are numerous and varied, guided by economic, social and cultural drivers. But where the UK once lagged behind other developed economies on metrics, such as the number of people starting new businesses each year, it is certainly moving up the league tables. In the 2015 Global Entrepreneurship Index, the UK is ranked as the most entrepreneurial country in Europe, and fourth in the world, compared to 14th position in 2012. In addition, the OECD highlights the UK and Australia as having shown a particularly strong uptick – as compared to its other member countries – in new business creation since the height of the financial crisis in 2008.

Private sector SMEs – those with up to 249 employees – collectively represent the engine for growth in the UK economy. At the start of 2015, their combined turnover was £1.8 trillion, accounting for 47% of all private sector turnover in the UK, with the remaining 53% coming from large businesses with 250 or more employees. SMEs account for three fifths of the employment in the UK private sector.

Good news for the South East too! The number of new businesses starting up in the South East specifically grew by 7% in the year to March 2015 to reach a total of 377,000, according to the Index.

The boom in the number of businesses echoed what was found on a national level, with a healthy start-up scene, finding that the South East saw 256 deals resulting in wealth creation of £200,000 or more over the 12 months to the end of June 2015, an increase of 19% on the same period previously.

Robin Reynolds, Regional Director of Barclays Wealth and Investment Management in the South East comments on the report findings: “A large part of the South East’s success is down to the fact it is polycentric – there is not just one centre of activity and prosperity driving economic growth, but many. This is reflected in the impressive performance from the region in the latest Index, with the number of new businesses rising by 7% – testament to what a great place the region is to do business.”

However, the report showed that while the region’s start-up and wealth creation activity has maintained positive momentum, the proportion of high-growth companies stood at just 19.9% in the year to December 2014: down 1.3% on the previous year. The catch: too few of these businesses are generating high growth. To put this another way, while UK entrepreneurs are successfully getting their ventures off the ground and delivering commercial viability, they are struggling to scale up their businesses at speed – nationally and regionally. Higher volumes of start-ups are important, but what is also needed is an ecosystem of entrepreneurship where success breeds success.

Robin added: “There is clearly an opportunity to replicate the success of the start-up scene at the scale-up stage, to enable a greater proportion of South East 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 the South East’s high-growth businesses and their founders throughout their entrepreneurial life-cycle − from start up to IPO.”

Marion Bernard, Regional Director, London & South East, BGF also commented: “As long-term equity investors in growing UK companies, we are excited by the size and dynamics of the addressable market in the South East. It is very promising to see that the region has seen such a positive rise in the number of entrepreneurs starting up their own companies and I’m hoping their confidence will encourage other business leaders to pursue their own entrepreneurial ambitions. These figures match the ambition that we experience regularly as we meet growth-oriented business owners in the South East to explore the ways in which BGF can provide capital and support to achieve their near and long term goals.”

Provided by Barclays Bank PLC