The number of new start-ups in the UK 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.
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 fell by nearly 42,000, representing a decline of 12.9% on the previous year for the UK as a whole (from 325,900 to 284,000).
But in some parts of the country the fall was much sharper. In Northern Ireland as a whole the figure was 15% lower than in 2017, the biggest drop among the UK nations. 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.
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 in 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.
“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.”