New business creation in Scotland since 2010

New business creation is important for providing a larger business base from which to develop more growth as well as more mid-sized businesses (MSBs). Evidence also identifies new firms as the primary creators of new jobs in economies, and in Scotland they have an important role in sustaining jobs both in rural and urban areas. It has been shown that growth and high-growth is achievable anywhere in Scotland but in several areas, particularly rural and remote areas, the small business population is hindering further growth. Creating more MSBs matters because they disproportionately contribute to growth and are more innovative, more likely to export and have higher productivity. This note highlights the change in new business creation in Scotland since 2010. It also compares Scotland to elsewhere in the UK.

The methodology consisted of analysis of ONS (Office for National Statistics) data.

The analysis found that creation of new businesses is not even across Scotland. It is strongest in the Edinburgh and Aberdeen City Regions, and around (but not within) Glasgow City, and weakest in rural and remote areas. The creation of new businesses did increase from 2010 to 2017 in Scotland, but has declined in the last three years; with a rate of decline worse than all UK regions (except South West England). Only Fife and East Lothian saw growth in their new business creation relative to their business base from 2015-17 compared to 2012-14. Scotland’s share of the UK’s new business births fell year on year from 2010-16, and despite an increase in 2017 is 1.0% lower in 2017 than it was in 2010. The data shows that Glasgow City underperforms relative to its business base in new firm creation; ranking in the third quartile in Scotland for percentage growth. Aberdeen City and Aberdeenshire saw significant declines in new business creation since 2015 because of the downturn in oil and gas, although the most dynamic areas for new business creation as a percentage of the business base was greatest in Aberdeen (+17.0%), followed by Edinburgh City (+16.6%) and West Lothian (+16.1%). However, even if Glasgow, Aberdeen and Aberdeenshire all performed to the Scottish average, Scotland would remain in the third quartile across the UK for new business creation. To move into the top quartile would have required an additional +8,059 net businesses created between 2010-17. It is suggested that if the pattern observed since 2010 continues, the disparities in economic performance across and within regions of Scotland are likely to increase. In addition, the opportunities to increase the numbers of high-growth and MSBs will be restricted, with consequences for increasing growth.

No recommendations were made.