Business and enterprise

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"Enterprise is the lifeblood of our community - creating employment and prosperity, boosting productivity and building sustainable communities" ¹

The SME sector has grown rapidly in Britain since the 1970s, but despite this growth levels of entrepreneurial activity, as measured by the Global Entrepreneurship Monitor, are roughly comparable with the European average and less than half the rate in the US. There are also significant variations across the country; according to a recent government consultation if the highest rates of business activity in the UK were matched in deprived areas there would be an extra 160,000 businesses. ²

Since the publication of "Enterprise Britain - a modern approach to Enterprise" the government has introduced several related strategies aimed at creating an 'Enterprise Culture'. These range from changes to the school curriculum to access to finance and a new small business rate relief. Two of the most recent policies aim to tackle enterprise problems at a local level. The first is the Business Rates Incentive Scheme, whereby local authorities that foster local economic growth will keep more of their business rates as a reward, and the second is the Local Enterprise Growth Initiative which aims to tackle low enterprise in deprived areas. The case study of Ashfield in Nottinghamshire examines Enterprise in a deprived area and the challenges faced.

In order to assess performance at a local level the Local Futures Group has developed a composite enterprise index that combines the new business formation rate, the overall change in the stock of businesses over the last 10 years and business survival rates. The map shows the geography of this measure of enterprise across Britain and reveals a slightly different perspective on the North-South divide. From the map it seems that the farther you move away from London the more Enterprise diminishes. This dynamic does not reveal itself solely when looking North from London however, as Norfolk in the East of England and Somerset and Devon & Cornwall in the South West exhibit similar enterprise characteristics to parts of Wales, the North West and the North East.

The chart shows that there are areas that perform above the national average in every region. In the West Midlands, Warwickshire and Tamworth perform well, along with Warrington and Salford in the North West and Edinburgh and West Lothian in Scotland. The chart shows the distribution of districts along with the best and worst performer for each region (the size of the marker denotes the economic scale of the districts economy). This chart again illustrates that London and the South East dominate overall but there are high performing areas in every region of Britain.

The top 10 districts for Enterprise are dominated by London boroughs although Milton Keynes in the South East and Tamworth in the West Midlands also make it into the top ten. At the other end of the table Wales, Scotland, the North West and the North East figure much more.

Core Cities

Cities are the economic drivers of a nation's economy, but there is concern that England's "Core Cities" do not punch their weight economically when compared with similar cities in Europe. The case study of Liverpool and Newcastle looks at how out core cities are performing. If the Core Cities could bring their performance up the standards of equivalent European Cities the gains to the national economy would be enormous. However, of the eight cities in the group (Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield) only Bristol and Liverpool score over the national average for Enterprise (over 100). In order for Britain to make serious gains in enterprise, to challenge our international competitors our cities must become centers of enterprise in their own right.

Case Study - Ashfield

Ashfield in Nottinghamshire is a deprived area eligible for LEGI because of its Neighbourhood Renewal Fund status. The spider chart shows the score for each indicator converted to a national percentile rank, so where the line for Ashfield is closer to the edge of chart the higher the score nationally. The national average (median) is represented by the by the '50' line. The chart in this case shows for Ashfield high formation rates good long-term growth in business stock and an overall good enterprise performance. Where Ashfield performs below average is in self-employment and business survival rates. Low self-employment suggests that much of the business growth is not "home-grown". In order for this growth to benefit all residents entrepreneurship must be encouraged in the local resident population. The district's LSP plans to make this a major focal point in their forthcoming Community Strategy.

Case Study - Core Cities - Best performer (Liverpool) and worst performer (Newcastle)

Liverpool outperforms Newcastle on a range of key enterprise indicators. Its new business formation rate is one of the highest in the country ranking Liverpool in the top 10 per cent nationally, while Newcastle's is more modest. However, the greatest difference is in survival rates where Liverpool performs far better. So not only are more businesses starting up in Liverpool they are surviving longer as well. Despite this good recent performance Liverpool illustrates the problem of underperforming core cities as its long-term business growth (from 1994 to 2004) is still below the national average.

Footnotes

1) Enterprise Britain: a modern approach to meeting the enterprise challenge (HM Treasury, Small Business Service - Nov 2002)
2) Enterprise and Opportunity in deprived areas - a consultation on proposals for a Local Enterprise Growth Initiative - March 2005 (Foreword)

Further information

For further information contact the Local Futures Group on 020 74407375 or visit www.localknowledge.co.uk