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Business Management

Sean Farrington (UK) - As the UK Economy Shrinks it's Time to Look for Growth

Though the economic outlook remains far from positive, as recent reports on the UK economy clearly show, there has been considerable debate about what the future holds for businesses in the UK. Using publicly-available data from Companies House we have created Discovering UK Growth, a web-based app which takes users on an interactive journey through UK business history since 1988. The app allows users to explore and compare information against a range of variables such as fuel prices, interest and exchange rates, and GDP data sourced from the Office for National Statistics and the Treasury.

Here are just a few of the most interesting trends and facts that the app has uncovered. First, let us take a look at the political influence on business creation. The app tells us the Coalition Government has presided over the creation of more than 370,000 net new businesses (i.e. the number of companies wound down subtracted from the number of new companies incorporated) since taking office in May 2010. This is in stark comparison to the net 47,800 companies founded in the last two years of the Labour Government. The app also indicates that the appointment of a new Prime Minister leads to a fall in business creation of just less than 20% in the months following the change.

Now, let us take a look at the highs and lows of business creation, month by month. The UK's best-ever month for business creation since 1988 was in March 2007, roughly three months before the financial crisis hit the UK, when a net 45,000 new firms opened for business. At the other end of the scale, business creation dipped deeply into negative territory in April 2009-at the same time as the G20 demonstrations in London and the outbreak of swine flu.

Companies House endeavours to capture the market sector for each new business it registers, enabling us to explore the past quarter century of UK business history, industry by industry (it should be noted that a significant proportion of new businesses - almost half - decline to give a market sector). Looking at trends in the data that are available, the app uncovered, perhaps unsurprisingly, property development, architecture, and civil engineering were top performing sectors in both the 1980s and 1990s. In the 2000s, technology- and knowledge-intensive industries such as IT, management consultancy and software development came to the fore, and in the 2010s this trend has accelerated. This conclusion perhaps validates much Government policy over the past ten years, but also raises significant questions over the ability of our education system to meet the needs of tomorrow's employers.

Discovering UK Growth also maps out business creation regionally. Here, some genuinely surprising trends come to light. For example, the data indicates that Dungannon, Northern Ireland, is in fact the best place-outside the tax havens-to form a new business: boasting a business creation to dissolution ratio of 72%. To put this into perspective, the City of London has a ratio of success to failure ratio of just 30.6%. Looking to set up in the City? Think again, perhaps.

Finally, let us look at the impact of taxation on business creation. While increases in fuel duty are widely bemoaned in the business community, the app actually shows they in fact have very little effect on business creation. The same can be also said for changes in corporation tax.

Discovering UK Growth will help those reporting on, informing, and ultimately affected by government policy develop fresh perspectives on our recent economic history and, hopefully, also spot business opportunities to help boost the UK economy for a more positive report next time round.

By Sean Farrington, UK MD& RVP Northern Europe, QlikTech

 

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