Innovation Diary: Three ways in which Britain’s entrepreneurial revolution is continuing to unfold
BY PLEDGING to cut red tape, open up more government contracts to small companies, and use state R&D budgets to encourage innovation, politicians of all stripes spent last week promoting the entrepreneurial economy. But are they keeping pace? With creative destruction and technological change intensifying, it would be easy to forgive any of us for missing what’s truly happening.
Over the long term, the evidence is mounting that the UK has gone through a cultural revolution worthy of chairman Mao. In 1983, for example, one in 20 university students enrolled in business-related courses. In 2013, it was about one in seven. But what of more recent developments? Here are three that caught my eye this week:
LONDON’S STARTUP BOOM
StartUp Britain has tracked the number of new companies formed in Britain since 2011, and 2013 saw a record 526,446 startups launched. Most interesting, however, is the geographical distribution. The figures are unaudited, so should be treated as indicative. But StartUp Britain appears to have uncovered sizeable regional discrepancies. Greater London postcodes saw 136,939 businesses registered. The next down the list – Birmingham – had only 16,281.
The monitor is based on data from Companies House, and logs new business registrations. The headline figure, therefore, doesn’t account for liquidations or firms that have fallen off the register. But research by UHY Hacker Young last year appears to confirm London’s overwhelming entrepreneurial enthusiasm. It found that 15,720 new businesses were set up in EC1V (the Silicon Roundabout postcode) alone in the year to March 2013. Only three of the top 20 areas for new business generation were outside London.
YOUTH AND GROWTH
But who is creating jobs? Last week, Liam Collins and Louise Marston at Nesta analysed whether small companies (as widely claimed) really are Britain’s employment engine. First, just 7 per cent of businesses were responsible for half of the jobs created between 2000 and 2007. Most of these growth firms were small but, then again, most (90 per cent) of all companies are small. Their analysis suggests that it’s age rather than size that is a more useful measure. Younger businesses are consistently more likely to be high growth than older ones. But given that so many young companies fail, they suggest the secret to success lies in whether they are “innovative”.
FINTECH INNOVATION
For a sign of London’s success in an innovative sector, we can turn to The FinTech 50 report, which lists 50 high potential financial technology firms. Writing in the report, Silicon Valley Bank’s Alex McCracken notes that, of the $11bn invested in fintech worldwide in 2012, around $3bn came to the UK. This is significant because, while half the level of investment in US fintech, the UK’s population is just one fifth the size of the US’s. And $3bn was ten times the investment in fintech in the EU more broadly. From mobile commerce, to peer-to-peer lending, to challenger banks, McCracken says London is punching above its weight.
Tom Welsh is business features editor at City PM @TWWelsh