2016 breaks business formation records

The latest Companies House data, as analysed by the Centre for Entrepreneurs (CFE), shows that business formation reached another record high in 2016 – with a total of 657,790 new businesses started. This builds on previous records of 608,110 in 2015 and 581,173 in 2014.

“This is cause for celebration, not least because of the uncertainty generated in the run-up to and immediate aftermath of the June referendum” said Matt Smith, director of the Centre for Entrepreneurs.

The figures show the continued dominance of the UK’s major cities in generating the country’s entrepreneurial dynamism. The combined authorities of London lead with 205,325 businesses registered last year, followed by Birmingham (17,473), Manchester (9,416), Glasgow (7,845) and Leeds (7,645). Edinburgh, Bristol, Liverpool and Brighton also rank among the top 20.

While several non-metropolitan areas – such as Wiltshire, Cheshire East, Warrington and Central Bedfordshire – have seen large numbers of business formations, the Centre’s analysis suggests that rather than representing a rise in local entrepreneurial activity, a rise in contractor accounting firms incorporating self-employed contractors from across the UK has had a distortionary effect in these areas.

This insight is possible for the first time as a result of the Centre’s novel analysis of high-density postcodes – addresses that had hundreds if not thousands of new business registrations in 2016. The Centre has identified the likely source behind the 250 most-used postcodes, in which over 134,000 new businesses were registered last year.

While businesses registered in homes, offices and local accountancy firms across the UK constitute the vast majority of the total (an estimated 550,000), the Centre’s analysis shows that over 50,000 founders have made use of company formation agents or virtual offices in major cities.

“The half million new businesses registered in homes and offices across the UK show that entrepreneurship continues to reach all corners of the country”, says Smith. “At the same time, the ease of registration and prestigious addresses on offer have drawn many entrepreneurs to use company formation agents or virtual offices, with London attracting the lion’s share. However, Glasgow’s surprising increase to out-rank Edinburgh – due to many entrepreneurs choosing to use a virtual office in the city centre – represents a wider trend where companies seem to be registering in their nearest major city rather than defaulting to a capital city address.”

The Centre’s analysis also suggests that around 50,000 new businesses have been formed by contractor accounting firms – providing payroll solutions to professional contractors.

Maximilian Yoshioka, lead researcher at the Centre for Entrepreneurs comments: “This highlights the ongoing shift in the labour market towards self-employment, and reinforces the importance of ongoing government and parliamentary reviews that are examining modern employment practices and the growth of the so-called ‘gig economy’.”

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An interactive map showing the total startups for each local authority can be viewed at: http://startupbritain.org/startup-tracker/ This map can be embedded into other sites.

Download the full data.

Media contact
Maximilian Yoshioka
Lead researcher, Centre for Entrepreneurs
Tel: +44 (0)20 7148 5460
maximilian@centreforentrepreneurs.org

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