What does the general start up scene look like?

The UK’s start up scene is booming and fast becoming one of the most influential in the world. With the likes of The Drum and Startup.co.uk, it’s easy to claim London as the new Silicon Valley. All eyes are turning to the UK start up scene, but how do these broad claims actually match up with fact?

2013’s budget changed the game for the UK’s start up scene. The Government revealed measures to boost UK start ups and small businesses: promising hefty cash injections, and a new ‘Business Bank’ to provide long term support. Following these announcements, 2014 became a record-breaking year for start up formations, with “a company being born every minute”. Many business commentators jumped on these figures as direct evidence that the Government’s plans were working, highlighting the UK’s start up figures peak in October 2014.  But our latest statistics go beyond the headlines, charting a marked fall in formations in 2015. Between April 2014-August 2015, we recorded the formation of 39,578 new companies—a large proportion of these were created in 2015.

Formation figures alone however paint a negative picture of the UK’s current start up scene. From afar it seems that the amount of companies starting up is on the decline. Looking at other statistics, such as liquidation rates, location of start ups, and the types of industries which most were starting up in, can fill in the gaps and give us a more true view of what the start up scene looks like right now. With these tools, we can not only gain more detailed insight, but also look forward to what the start up scene might become in the future.

Has the start up scene peaked too early?

2014 began as a year of opportunity. The Government’s focus on funding start ups inspired reluctant business brains to finally take the leap and start their own business. Our statistics show a marked rise in formation rates from April onwards, reaching their highest in October, where figures almost hit 3000. But after this peak, formation rates declined, settling at around 2000 new formations a month.

It only takes a quick look at the surrounding media to work out why figures started to fall. By October, focus was turning away from the success of start ups to those who were failing. Many rushed into starting up in wake of the Government’s latest changes, with perhaps little planning or gauging of the groundwork needed to set up a successful business: by the end of the year they were starting to fall by the wayside. Bleak figures, from the likes of the Telegraph, warned against the short-lived nature of start up businesses, reporting that half of UK start ups fail within five years. The offputting and unstable reality of the start up scene was starting to set in, and the rose-tinted outlook perhaps fed by ideas attached to Government  funding was beginning to fade.

Is it bleak?

Well, no. Yes, we saw a significant decline in formation rates (around 1000 less per month), but what we can see is UK’s start up scene becoming more stable. The amount of start ups being dissolved or undergoing liquidation reduced in 2015, and start up figures became a lot more settled between January and August 2015. Despite levelling out, formation rates remained consistently high, and survival rates were improving.

2015 has given us the likes of Deliveroo, Hassle, and Just Park: start ups which have been well thought through and answer to customer needs. Rather than short-lived businesses, we are now seeing a more considered approach from those joining the start up scene. With more realistic considerations of what it takes to succeed, and fail  from left, right, and centre, the idea of taking on your own business is no longer considered so lightly.

Despite London being the central hub of start up activity (home of 3,986 formations), the start up scene is decentralising. As London becomes ever more expensive to work, live, and survive in, start ups are locating themselves in thriving cities not only surrounding the capital, but also further afield. Lancashire, Middlesex, and Essex are fast becoming top hot spots for budding entrepreneurs who don’t want to take on the big city. London’s powerhouse status is somewhat shifting, with the BBC moving to Manchester, George Osbourne handing more power to major cities, and the likes of Bristol undergoing huge developments in technology.  Now, the aspects which once drew start up businesses to London, are being matched, and sometimes bettered in cheaper locations.

The types of start ups that are being formed also gives us an idea of the growth rate of different industries. Management consultancies and tech-based companies are amongst the frontrunners in the UK start up scene. Business commentators are recognizing the UK as one of the leading locations for tech start ups, with east London’s ‘Silicon Roundabout’ being the third largest tech start up cluster, after San Francisco and New York. The UK, and London in particular, has established itself as a key influencer in the future of the tech world.

What does this mean for the future of start ups?

As it stands, the UK’s general start up scene looks prosperous and strong. For those looking to start their own business, the prospects are most certainly looking good. Despite the start up scene being fiercely competitive, it is a creative, fast paced, and very exciting one to be a part of. Start ups are increasingly moving away from London as a central hub of power, and are bringing new business to different parts of the UK: improving the business landscape of the whole of the UK. Those wanting to start a business are now presented with an increased number of opportunities, niches, and regional tastes to capitalise on, and base their new businesses around.

The UK’s start up scene is no longer an unstable construct. Right now, the start up scene is one of strength and, despite some commentator’s claims, is standing the test of time. The 2000 new businesses being created each month are solidifying Britain’s position of influence on a global scale. Start ups are going beyond the start up phase: firmly establishing the UK’s future as a business, economic, and technological leader.

Tempted to join the start up scene? We can help you find out which types of businesses are being formed most, or give some advice on starting up over at our help centre