Scotland has managed to withstand a sharp decline in the number of start-up businesses in the last five years.

The findings of a Bank of Scotland study reveal that 3% fewer new businesses were started in Scotland in November 2016 compared to November 2011, while the UK figure dropped by 19%. (See table 1)

Regionally, the data from BankSearch shows that Wales has seen the largest decline in new start-ups, falling by over a quarter (26%).

England has also been hit hard, declining by a fifth (20%). As this is where the greatest volume of new start businesses are launched, this equates to nearly 100,000 fewer new businesses created in 2016 compared to 2011.

The fall in numbers came in spite of numerous schemes to encourage new businesses, including the Start-Up Britain tour led by the Duke of York.

Jo Harris, managing director of retail business banking at Bank of Scotland, said: “The New Year is a time when people aim to make a fresh start.

“There’s no bigger or braver change you can make than starting your own business. The recent downward trend we’ve seen in new business start-ups is likely to be a response to the uncertain economic environment.

“However there are significant opportunities if you have the determination and drive.“

Scotland

In contrast to England and Wales, the view in Scotland is much more encouraging, with almost half (14 of 32) of Scottish regions seeing growth in the number of start-up businesses over the last five years.

This follows additional research from Bank of Scotland’s ‘How Scotland Lives’ study which showed that more than one-in-nine Scots anticipate starting a company on their own or with a partner, the equivalent to 12% of the Scottish adult population of 4,459,590*. (See table 2)

The biggest success story is the Orkney Islands which leapt by more than a third (42%) from just 83 in 2011 to 118 in 2016. In December it was rated the best place to live in Scotland for its low unemployment rates, among other things, for the fourth year running (Bank of Scotland Quality of Life survey), the group of islands appears to be fostering an entrepreneurial spirit.

The Highlands also saw an increase of 15% from 1,180 new start-ups in 2011, rising to 1,354 in 2016. Aberdeenshire and Midlothian have both seen improvements of 10%, and Moray has increased by a little over 8% over the last five years. 

Glasgow City ranked 15^th, , declining by just over 1% in 2016 compared to 2011, with a total of 28,163 new businesses launched over that period, compared to the City of Edinburgh, which ranked 21^st decreasing by almost 7% – a total of 24,134 start-ups during the same period.

The worst affected areas in Scotland can be captured in the bottom five regions which all saw reductions in the number of new businesses launched in 2016 compared to five years ago.

South Ayrshire, Dumfries & Galloway and Argyll & Bute all declined by over a fifth with 23%, 22% and 20% fewer businesses respectively launched in 2016 compared to five years ago. East Ayrshire reduced by just under 18%, and North Ayrshire fell by 17% making these the five worst affected regions in Scotland.

Confidence survey

The survey coincides with research showing Scottish smaller business confidence fell again at the end of 2016, marking 18 months of sliding private sector sentiment.

The latest Federation of Small Businesses Confidence Index shows that, UK wide, slightly more firms expect conditions to improve than deteriorate.  

Andy Willox, FSB’s Scottish policy convenor, said: “A confidence gap has opened up between firms in Scotland and elsewhere in the UK. This was clear before the referendum on the EU, but widened as 2016 wore on.”

Problems with recruiting skilled staff and low consumer demand were highlighted as key barriers to growth.

It contrasted with a UK wide survey on Monday showingB business confidence is at its highest for 15 months on the back of an upbeat outlook for the UK economy and fuelled by rising export opportunities.

Accountancy firm BDO’s Optimism Index, which indicates how companies expect their order books to develop, suggests that businesses remain resilient following the EU referendum result, the declining value of sterling and volatility in the global economy. 

Other research this week showed more than two-thirds (70%) of small businesses in Scotland have developed basic digital skills, compared to the UK average of 62%.

Bank of Scotland start-up tables: