The number of new start-ups across London and the South East fell sharply last year and established firms scaled back their growth ambitions due to Brexit uncertainty, according to new data looking at the health of the grassroots economy.
Just three areas saw an increase in start-ups, with Worcestershire topping the list with an increase of start-ups of 9.2%. The other two start-up growth areas were the North of Northern Ireland (+2.6%) and Liverpool (+2.8%).
Swindon and Wiltshire saw the biggest absolute drop in England – with 45% fewer start-ups established.
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 across London and the South East region fell by nearly 13,500, a decline of 10.9% on the previous year (from 123,550 to 110,102). Across the UK as a whole, the equivalent figure was almost 42,000, a decline of 12.9% (from 325,900 to 284,000).
Despite the fall, London and the South East accounted for 43% of all new start-ups across the UK in 2018, a slight rise on the previous year.
The pattern was uneven across the South East. Buckinghamshire saw the biggest fall of 17.7% (from 3,219 to 2,648), while Greater London saw a drop of 11.5% (from 79.947 to 70,727). Even the best performer – Enterprise M3 LEP, covering Surrey and Hampshire – saw 7.6% fewer start-ups launched (8,066, down from 8,732 in 2017).
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.
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 and this is a trend we’re also observing in the data for London and the South East.
“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.”