CBI concerned over north-south divide in new business rates

The Confederation of British Industry is calling on the Government to address regional disparities in new business start-up rates which are affecting jobs and prosperity across the UK.

The employers’ organisation is worried by the startling and growing gap in regional rates of new businesses . London has more firms and companies than
Wales, Scotland and Northern Ireland combined, and is accelerating away.

The call for action is made by Sir Digby Jones, director-general, of the CBI in a speech in Ulster today and is also contained in a new report ‘A More Dynamic Start-up Market’, the second in a series examining the Government’s small business policy.

Small businesses are responsible for half of all UK jobs and wealth and are fundamental to future economic success – but while London has seen a 16% increase in businesses since 1997 in Wales the figure was just 2%.

The South East managed a 15% rise but Scotland recorded only a 5%increase and Northern Ireland 6%.

Disturbingly the regional gap is increasing , 62 adults per 10,000 are starting their own business in London compared to 29 per 10,000 in Wales,
Scotland and N.Ireland. The UK average is 40 per 10,000.

These discrepancies are evident across England too – the North West,
Yorkshire &Humberside, and the North East are all below average in both growth of business numbers since 1997 and start-up rates.

Sir Digby Jones says: “New businesses are the key to creating employment, wealth and long-term prosperity – but there is a growing divide between London, the South East and the rest of the UK.

“The Government has tried to bridge the gap but it has still increased significantly. Eight years ago Wales had around one third of the number of businesses as London – the figure is now around one quarter and on current trends will fall to a fifth by 2020.

“This is clearly unsustainable and the Government must determine what is inhibiting entrepreneurs from building their own business, creating jobs for others and contributing to both their own prosperity and that of their community and the nation.

“The United Kingdom has grown into the fourth largest economy in the world because of our national spirit of enterprise and enterpreneurialism which has seen new businesses continually being started up. But this freshness and innovation has to be sustained, and sustained across the whole country, and our leaders must realise there is a huge problem and urgently address it.”

When it comes to business survival rates over the three years however,
London is the lowest in the country. This could reflect healthy increased competition in London and survival of the fittest firms only.

Northern Ireland’s businesses have the best survival rate over three years –
72.4% compared to the UK average of 66.5 per cent, Wales manages 68%, Scotland 65.3% and London props up the league with 62.8%.

As well as calling for the Small Business Service to address regional disparities, the CBI report makes ten recommendations to encourage a more dynamic start-up market including,the need for a research project focusing on the causes and implications of business churn, the SBS should begin research into entrepreneurial differences in age groups and development of ways to encourage and enable people over 45 to start businesses, and HM Customs & Excise should cut the three weeks it takes to process VAT registrations for new businesses.

Hugh Morgan-Williams, chairman of the CBI’s SME Council, says: “While we applaud the overall increase in business numbers the Government must bite the bullet and investigate the reasons behind regional differences.

“It must focus on really boosting start-up numbers in every region of the UK and remove the barriers that it has imposed which prevent businesses from surviving and then growing.

“By changing focus and emphasis, working more effectively and ensuring a conducive regulatory environment, the Government can create both a dynamic and sustainable start-up market.”