New business creation in Scotland’s regions and industries since 2010

This note considers the change in new business creation (start-ups) since 2010 across regions and industries. It draws on a previous paper looking at start-ups across regions and links to a wider, ongoing study of growth dynamics across Scotland and its regions.

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

The analysis found that in areas outside Scotland’s cities, not also is business density, start-up rates and growth lower, but a larger share of start-up and growth companies are in locally traded sectors and a lower share are in less productive industries. The evidence suggests four stages where there appears to be obstacles to growth: the interest and intrigue in starting a business is weaker in Scotland than elsewhere; there continues to be fewer start-ups in Scotland compared to elsewhere in the UK, and those that do have lower growth ambitions and performance; of businesses that do grow, evidence suggests many reach a growth plateau at around £4-£5m turnover; this creates a ‘bottleneck’ which means Scotland does not produce enough growth businesses and enough businesses sustaining growth. As a result, high-growth business performance has weakened. These factors combine to limit further growth in Scottish Scale-Ups. This is seen in the performance of Scottish-owned Mid-Sized Businesses (MSBs) that are, on average, becoming smaller and seeing their growth being outpaced by foreign-owned counterparts. This sits within Scotland’s context of having fewer businesses per head of population, as well as a trend towards companies in Scotland becoming smaller. 95% of new businesses in Scotland since 2010 have fewer than 10 employees; over 80% of companies in every industry have less than 10 employees; and for three quarters of all industries, this figure is over 90%.

No recommendations were made.