UK hails record number of start-ups but they are struggling to scale

New research reveals that while Britain is positively brimming with entrepreneurs, many are not reaching the heights of their overseas counterparts

UK hails record number of start-ups but they are struggling to scale

SMEs are often hailed as the lifeblood of the UK economy – and no wonder considering they make up 99% of the UK’s 5.2 million businesses. As a result, when we receive news that more new businesses are being launched in the UK than ever, it is difficult to greet it with anything other than positivity.

However, it seems things could be even rosier for the country’s start-up scene, if research from Barclays and the Business Growth Fund is anything to go by. According to their latest Entrepreneurs Index, the number of start-ups in the UK rose by 3.7% in the second half of 2014 – the second highest increase since the Index was first published in 2012. It means that the total number of active companies in Blighty now stands at a breezy 3.14 million. The Index also revealed that the number of 18-64 year olds starting their own business was up by an impressive 8.6%.

However, the story is slightly different when one takes the performance of our start-ups into account. The Index found that the number of businesses reaching revenues between £2.5m and £100m fell to 21%, a 2.2% drop from the same period the previous year. So while the number of start-ups and entrepreneurs may be growing, their actual growth doesn’t quite stack up.

Why is this?

Well, there is something revealing in the fact that the number of VAT-registered businesses in Britain dropped to 39.5%, down from 41.3% the previous year. While not clear whether this is due to difficult trading conditions or a decision to stay below the £81,000 VAT registration threshold, it certainly paints a slightly murkier picture than the one presented by the headline figures.

Stats on business investment do offer some solace – the landscape appears in rude health, with a 6% rise in the number of company sales generating at least £200,000. But the overwhelming sense is that there is still a long way to go before Britain can truly count itself as an entrepreneurial superpower.

“Going from start-up to scale-up takes a combination of targeted policy effort, supporting the management of these businesses and also improving access to growth financing,” said Stephen Walton, chief executive of the British Growth Fund.

With the general election looming, it will be interesting to see what the next government does to help propel our start-ups to new heights.

Jade Saunders
Jade Saunders

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