Where are people starting new businesses?

Business start-up rate, 2012
The recent Cities Outlook 2014 from Centre for Cities used a number of variables to support the view that “London makes a large and growing contribution to the UK economy.” One of the variables used was the number of new businesses per 10,000 residents in each of the major UK cities. These figures are based on publicly available ONS data on business demography and population, which are used to create the above map showing the ‘business start-up rate’ for each local authority area in the UK. Click here to download the data

The map supports the Centre for Cities’ central contention that London and the surrounding areas are the focus of economic activity in the UK. Of the top ten local authorities by start-up rate, all but one are in London (the exception being Waverley in Surrey, one of London’s near neighbours).

The map reflects the intuitive view that urban areas support more economic activity than rural areas. The local authorities with the highest rates are clustered in the South East, around Birmingham and in the ‘central belt’ from Liverpool to Leeds. Aberdeenshire and the City of Aberdeen also have high start-up rates (47 and 57), signalling the intensity of the oil driven economy in that region.

A note on sources

The measure of new businesses used here includes only registered businesses. Many small businesses have a turnover below the VAT threshold of £77,000 a year and are therefore not registered. This means that these data do not capture much of the ‘churn’ in the business population – business births and deaths tend to happen more frequently among very small enterprises than among larger business – and so they should be considered only a partial picture of business activity.

Another important feature of the start-up rate is that it makes use of the resident population of local authorities. People living in one area may choose to locate their business somewhere else. This has the consequence of boosting the start-up rate in places with many businesses (hence a large workplace population), but where a small number of people live. The most striking example is the City of London, which has a start-up rate of 2,500, but only 7,600 residents.

Authors: Chris Rhodes and Feargal McGuinness