Innovation …. nation?

We often hear politicians and local businesspeople talk about the pull of London, about how it attracts the rest of the nation’s innovators, and about how there is a requirement to kick start business creation in other parts of the country.

It was always obvious, I suppose, that London would have the greatest number of start-ups; it is, after all, the most affluent area of the UK, and houses the most people. But how does London compare when that business creation activity is normalized according to the size of the local population? Just how strong is the gravitational pull of the UK’s capital city? Well….pretty strong. The following chart shows the number of new businesses established as a measure of the population living in each of the UK’s major regions.

New registered businesses per 000 population, 2013

Original source data: UK government, ONS

At over 9.9 business start-ups per 1000 people London generates more new registered businesses (as opposed to unregistered one person operations) than any other part of the UK, by far. More than three and a half times as many as the lowest region (Northern Ireland at 2.7 per 000 people), and over 70% more than its closest rival, the south east (5.8). The chart also demonstrates quite clearly that proximity to London helps to foster business creation, with the other parts of the south and south east performing well.

Live fast, die young

Interestingly, London also has the highest death rate of businesses in UK, this time measured as a proportion of all active businesses within the region. According to the latest governmental statistics, all regions of the UK had a death rate of between 9% and 11% - not nearly such a wide range as for business births. The regions with the lowest enterprise death rates were Wales, Northern Ireland and the South West, but London came out on top with a business death rate of 10.64% in 2013.

Business deaths per 000 active businesses, 2013

Original source data: UK government, ONS

There could be a few reasons for this….perhaps companies formed in London are more likely to be acquired; perhaps more companies are created there that should never get established in the first place (a lower risk threshold for investors?), or maybe higher local costs might make survival more difficult. The statistics don’t support more detailed analysis. But whatever the reason, London’s enterprise population is still growing faster than anywhere else.