Brexit uncertainty leads to slump in start-ups, report reveals

ERC Deputy Director Mark Hart

The number of new start-ups across Yorkshire 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 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 the Yorkshire and the Humber region fell by over 3,500, representing a decline of 17.4% on the previous year (from 20,504 to 16,931). Across the UK as a whole, the equivalent figure was almost 42,000, a decline of 12.9% (from 325,900 to 284,000).

The pattern was uneven across Yorkshire and the Humber’s LEP areas. Humber LEP saw the biggest fall of 26.5% (from 3,551 to 2,611), followed closely by Sheffield City Region which saw a drop of 23.5% (from 6,884 to 5,269). Even the best performer – Leeds City Region – saw 14.6% fewer start-ups launched (9,955, down from 11,654 in 2017).

Similar drops were seen in other parts of 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%).

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 the Yorkshire and the Humber.

“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.”