Britain hits 5-year high for opportunities
Report finds strong momentum leading up to Brexit referendum, but sounds note of caution over growth prospects.
- Number of early stage entrepreneurs fell 4 percentage points over the last year
- Proportion of UK high-growth companies showed marginal growth by 0.7% in 2016
- Access to talent and growth funding are key Brexit concerns for entrepreneurs
New research reveals that Britain enjoyed a five-year high in opportunities for entrepreneurs leading up to the EU Referendum. However, a lack of new scale-up businesses and current market uncertainty risk the UK under-performing, and could now harm growth, according to the Barclays Entrepreneurs Index.
Strong environment for entrepreneurs
Overall, Barclays’ Index of UK entrepreneurial performance is at an all-time high – up by 10% since 2011 and showing strong progress and recovery after a decline in 2014.
The eighth edition of the Entrepreneurs Index brings together environmental measures, such as access to finance and talent, along with entrepreneurial outcomes, such as growth and exit activity, in order to assess the strength of the UK’s entrepreneurial environment.
While data for the second half of 2016 is yet to be published, the UK’s environmental enablers for entrepreneurs are up 13% in five years and more encouragingly, 4% higher in 2015. This shift was driven by greater access to finance and skills, and also gradual improvements in regulation and research and innovation, all of which created optimal conditions for enterprise in the UK.
Start-up activity falls
The Entrepreneurs Index recorded a 4% rise in the number of active companies from December 2015 to June 2016 (345,000 new incorporations). The number of total early- stage entrepreneurs – those from working age population who are entrepreneurs – fell by almost 4% up the end of 2015, showing the UK is producing fewer businesses with ambitions to scale up.
Increase in exit activity and deals, but a drop in IPOs The Index reveals business exits grew, with a 19% rise in the number of M&As (see glossary for definitions) of companies less than five years old, and a record high number of deals from December 2015 to June 2016, up 32.8%.
This jump was led by the UK services sector, which was responsible for the highest proportion of deals in the UK in the year to June 2016, accounting for 22.5% of all deals taking place, followed by financial services (10.2%), industrial products and services (7%) and computer software (6.5%). However, a sharp fall in IPO activity of enterprises under five years old by 36%, indicates that there could be a lack of confidence in companies to expand, along with increasing market volatility.
From start-up to scale up: a mixed picture across the UK There was a slight rise in the percentage of high-growth companies within the UK’s SME population, growing by 0.7%, and this demonstrates moderate recovery when compared to the dramatic fall of 20.8% seen last year. One positive indicator is a rise in the number of companies receiving expansion investment from venture capitalists, which increased by 6%.
The picture across the country for high growth companies is varied: every region in England experienced growth, with the West Midlands (+2.7%) and Yorkshire and the Humber (+1.5%) producing the most scale-ups, however Scotland (-2.9%) and Wales (-2.2%) fell. The construction sector created the most high-growth companies (+4.6%), followed by business services (+1.3%), agriculture (+1%), retail (+1%) and customer services (+1%) which were all above the UK average.
Akshaya Bhargava, Chief Executive, Wealth, Entrepreneurs and Business Banking at Barclays said: “Uncertainty is part of everyday life for entrepreneurs, and those that succeed navigate unchartered waters and adapt to find opportunities to thrive. This year’s Entrepreneurs Index shows that before the EU Referendum on 23 June, regulations and conditions for entrepreneurs had improved, making it easier to start a business and contributed to a rise in M&A.
“Until the outcome is fully known, it’s vital that we do everything in our power to deliver a strong environment to sustain UK entrepreneurial growth. In order to make great strides and close the scale-up gap, nothing must stand in the way of entrepreneurs’ access to talent, skills and the UK’s ability to attract inward investment. That is why we are focussed on providing specialist support and funding for high-growth companies in order to generate tomorrow’s world beaters, that will in turn drive economic growth and job creation.”
The Entrepreneurs Index is a regular series which has tracked the entrepreneurial lifecycle since 2011. For the first time, the Index includes a range of new and historical data, to provide an in-depth analysis from 2011 to 2016.
About the Barclays Entrepreneurs Index
Since its first edition in June 2012, the Barclays Entrepreneurs Index has provided an overview of the UK entrepreneurial life cycle. As a business, Barclays is experienced and committed to helping entrepreneurs and high growth companies every step of the way.
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