Shropshire Star

Business: Saving the start-ups

New figures show that the number of new businesses being launched is in decline – but why is that happening, and what does it mean for us?

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Karen Whitehead, right, says she is still seeing start-ups appearing

Since nobody knows exactly what will happen once Britain finally leaves the EU, it seems many people in the region are feeling hesitant about setting up their own company.

According to new data, the number of new start-ups in the area fell sharply last year, while established firms scaled back their growth, due to Brexit uncertainty.

The Black Country saw a fall in start-ups of 11 per cent on the previous year, from 4,562 to 4,120, while the Marches, which covers Shropshire and Telford and Wrekin, saw a fall of nine per cent, from 2,087 to 1,899.

And the new data from the Enterprise Research Centre’s UK Local Growth Dashboard report shows a similar story across the West Midlands and UK.

The number of new start-ups across the West Midlands fell by over 4,500, representing a decline of 16.1 per cent on the previous year, from 28,176 to 23,628.

Across the UK as a whole, the equivalent figure was almost 42,000, a decline of 12.9 per cent, from 325,900 to 284,000.

It appears the endless state of uncertainty means workers are preferring to stick with more stable forms of employment, waiting to see how Brexit will affect employment rates and the economy as a whole.

Plunge

Even without Brexit, developing a start-up business comes with a host of challenges. These include, but aren't limited to, time management, long-term planning, and funding.

But with Britain remaining lost in a damaging state of limbo, despite months of negotiating and squabbling in the House of Commons, more and more budding entrepreneurs bursting with new and innovative business ideas have not got the confidence to take the plunge and go it alone to launch their new venture.

The Local Growth Dashboard report is an annual publication that looks at a range of metrics charting the growth of small to medium-sized enterprises (SMEs), which account for 99 per cent of all firms in the UK.

ERC researchers said the slowdown in new firm creation reflected the uncertainty around Brexit, and warned that the ongoing lack of clarity was also blunting growth ambitions in more established firms.

But human resources director Niamh Kelly believes there hasn’t been a ‘falling off’ of start ups, more a lack of their ability to grow.

Niamh set up The HR Dept Shropshire last year, offering the full range of HR advice and support to local SMEs on an outsourced, part-time basis.

"There’s no lack of ambition or drive amongst my clients who are start ups; but they struggle to recruit and retain staff," she says.

"There is a well documented perception amongst those candidates from outside Shropshire that it is a backwater and ‘too rural’. This isn’t helped by the lack of transportation and affordable housing beyond the main urban areas.

Risk

"There is a lack of awareness from start ups about the amazing range of advice and support that is out there for companies; from the Marches Growth Hub and the Chamber of Commerce; to the many local networking groups. I’m in my second year of business and have found that other Shropshire businesses are only too willing to give of their time and expertise to assist new business thrive."

Ms Kelly runs her new company from offices in Shrewsbury, having spent the last eight years heading up HR operations within the Universities of Birmingham and of Wolverhampton.

Karen Whitehead, owner of KEW Accountants and Tax Specialists on Stafford Park, Telford, says the survey results were not reflected in the work she was doing with clients across the borough.

“My team at KEW Accountants have not really seen a downturn in new start ups.

“However, there are going to be fewer self employed or limited company sub contractors due to new IR35 legislation.

“But from the new enquiries that we are getting there is a broad range of new entrepreneurs starting up their own businesses which is fantastic.

“Starting up a business can be considered as a risk or a scary time for people but with the right support network from professionals then it can be the best move anyone has ever made,” she adds.

Other key findings for the West Midlands from the UK Local Growth Dashboard report show that firms in the Black Country were the most likely to grow their productivity, by increasing turnover faster than headcount, with 8.5 per cent of businesses doing so. This was slightly higher than the UK average of 8.3 per cent.

Meanwhile, figures also show 61 per cent of 2015 start-ups survived in 2018 in the Marches, while 54 per cent of 2014-start-ups survived to 2018 in the Black Country.

Stutter

Mark Hart, ERC deputy director and professor of small business and entrepreneurship at Aston Business School, says: “The latest Local Growth Dashboard analysis shows some clear warning signs about the health of the private sector economy right across the UK. It’s particularly worrying that we’re seeing an absolute decline in the number of new businesses being started in the wake of the 2016 referendum and this is a trend we’re also observing in the data for the West Midlands.

“Budding entrepreneurs are clearly holding their breath waiting for some clarity about the outcome of Brexit, but if the trend continues we’ll see fewer jobs created by dynamic young firms.

“And while established firms are clearly still growing successfully in many parts of the country, it’s frustrating that productivity growth still seems to elude the vast majority.

“Taken together, it seems hard to avoid the conclusion that Brexit uncertainty is causing the grassroots economy to stutter. This may not yet have fed through to employment numbers, but policymakers need to be aware of the warning signs and create the certainty businesses are craving.”

In England, Wiltshire saw the biggest absolute drop in new businesses – with 45 per cent fewer start-ups established than in 2017.

It is not all gloom, though. Three areas actually saw an increase in start-ups – the north of Northern Ireland, Liverpool and Worcestershire.

Although the current hesitancy to set up a new business is completely understandable, there has been absolutely no evidence to suggest that people should put off setting up a company until after Brexit.

Of course, the prospect of setting up your own business in the midst of such political uncertainty may seem incredibly daunting, but there will always be risks involved when starting a company – no matter when you decide to set things up.