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Business births, business deaths, and business survival rates analysis
This research provides an overview of trends, taken from Office for National Statistics (ONS) data, of business births, deaths, and survival rates, in Scotland – by local authority, industry and age. It also provides context by placing Scotland’s figures against elsewhere in the UK, to illustrate many of the findings and to help policymakers consider implications. With entrepreneurship back on the agenda as economies look to rebound from the damage of lockdowns, it felt timely to look at the evidence over time regarding new businesses, business deaths, and survival rates across Scotland through a variety of lenses like industry and place and using the rest of the UK (rUK) as a proxy for contextual purposes. The goal of undertaking this analysis, is to ensure any policies developed are not only rooted in this evidence, but to provide some understanding about how the business base changes and has been changing in recent years, so these responses are made with the understanding of the likely time needed for real change to come about.
The method was simply to use data from the ONS release of December 2020: Business Demography. This presents annual data on births, deaths and survivals of businesses in the UK, by geographical area and Standard Industrial Classification 2007: SIC 2007 groups.
The analysis found there to be a broadly consistent series of patterns, trends across time, geography, industry and sub-industry, around survival rates, which highlights that any meaningful, significant and lasting change will take time, and likely span decades rather than one three-year cycle. For example, the general rule of thumb is 1 in 10 business births do not last one year, 3 in 10 do not last two years, and 4 in 10 do not last three years. The rate of survival begins to slow after two and three years respectively. This has implications for places and industries seeking to grow their overall business base as a mechanism through which to increase economic growth. Scotland’s survival rates (vs rUK) are stronger in the first two to three years, but then begins to fall behind rUK. In terms of quartile performance, Scotland’s survival rates hovers just below halfway. Scotland’s 2016 business births (businesses now five years old, for which three years data is available) appear, from survival data, to be strong performers and better than the trended performance amongst Scottish business births. The same can be seen in 2018’s business births, from only one year’s data however. There is varying performance and trends across Scotland’s local authorities. Broadly speaking, rural areas have higher survival percentages from lower number of start ups, whilst the cities and major urban areas have lower percentages surviving, but overall higher number of business births. Cities survival rates are lower (fitting an overall UK trend) but only Edinburgh sees improvement in their relative performance after three years; the other cities remain with low survival rates. Growth in the business base since 2014 has been increasingly driven by growth in Glasgow and Edinburgh. Already with significantly larger business populations before 2014 compared to elsewhere, their share has continued to grow since.
There are no recommendations. The analysis and findings in this report are intended to provide evidence to corroborate or challenge some prevailing thoughts about business births and growth, and the speed at which policy measures can be identified as impactful; to help identify specific challenges, trends and facts to enable colleagues in Strategy Services and Operations to develop targeted, focused policies into specific pinch points and opportunities; and to assist in the managing of expectations for the delivery of meaningful, impactful change through laying out the shape and structure of business demography over time.
Report (12 MB, pdf)
|Theme/Sector||Aerospace, defence and marine, Chemical sciences, Construction, Digital markets and enabling technologies, Entrepreneurship/new firm formation, Energy, Enterprise, Food and drink, Financial and business services, Forest industries, Life Sciences, Sectors, Textiles, Tourism|