Labour leader pledges to back the next generation of British entrepreneurs, as new analysis shows the rate of business start-ups falling in every English region

• New analysis shows the rate of business start-ups has fallen in every region in England since 2016, down 11 per cent nationally
• If the rate of business starts had been maintained, there would have been 46,000 more businesses started in 2019
• Labour is pledging to back the next generation of British entrepreneurs, with the creation of 100,000 new businesses across the UK in the first term of a Labour government

Labour Leader Keir Starmer is today pledging to back the next generation of British entrepreneurs, as new research shows the rate of new business creation has fallen in every English region since 2016. The Labour leader is pledging that in the first term of a Labour government, 100,000 UK start-ups would be created directly by government support, across all English regions.

Labour’s analysis shows that the rate of new business creation across England has fallen by 11% since 2016, with every region revealing a downward turn. If the birth rate had been maintained, there would by an estimated 46,000 more businesses started in 2019, which based on the average number of people employed by start-ups, would have provided over 100,000 more jobs.

Labour's plans would create double the number of businesses the existing scheme is delivering. The Government’s flagship Start Up Loans currently has only supported the creation of around 9,500 companies per year. Labour will boost Start Up Loans with a five-year funding guarantee, funding 20,000 new businesses a year over the next five years.

The Party highlight the regional disparity of the current funding, with nearly one quarter going to London. Labour would require a minimum amount of funding to be lent in each region, focusing on businesses with high-growth potential.

Keir Starmer, Leader of the Labour Party, said:

“The drop in business birth rates is in no way symptomatic of a drop in ideas, drive, creativity, or commitment from British entrepreneurs. But under this Conservative government, the next generation of business founders are being let down.

“Business growth is the engine of our economy and it is only by backing aspiring founders that we can create jobs and rebuild a secure economy. Labour backs business and will provide start-up loans to create 100,000 new businesses across the UK over the next parliament.”

Ed Miliband MP, Labour’s Shadow Business Secretary, added:

“To rebuild our economy, we need to harness the dynamism and creativity of our nation’s entrepreneurs. They need strategic and targeted investment, allocated based on the strengths and drive of potential business founders, not the favours or promises of former business contacts.

“These business founders and small businesses across the country should be at the heart of our economic recovery, yet too many are being held back because of the unfair distribution of funding to help them start up and scale up.

“There are hardworking and innovative business founders being left out in the cold by the Conservatives. With Labour, they will get the backing they need to succeed.”

Ends

Editor’s Notes

1. Business birth rate is an official statistic compiled by the European Union that looks at the number of new business births as a proportion of the total number of active businesses. Estimates of birth rate for the UK use data on births and total active enterprises compiled by the ONS as part of its regular business demography data release. ONS, Business demography in the UK, December 2020, https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/businessdemographyreferencetable

1. Analysis compares the rate of business births in 2016 and 2019 in all nine English regions.

1. Eurostat data shows that new enterprises in the UK had an average of 2.35 employees between 2015 and 2018, the latest available data. 45,000 new businesses employing would employ over 100,000 people. Eurostat, business demography by class size, accesses April 2021. https://ec.europa.eu/eurostat/databrowser/view/BD_9BD_SZ_CL_R2__custom_793425/default/table?lang=en

2. Labour would increase support available for start-ups and to help create 100,000 new businesses over the next five years with a focus on recalibrating existing regional disparity. To reach that goal Labour would:

• Boost the Start Up Loans Scheme: The Government’s flagship Start Up Loans currently has only supported the creation of around 9,500 companies per year, and Ministers have only provided funding for the Start Up Loans company to support entrepreneurs until next year. Labour will boost Start Up Loans with a five-year funding guarantee, funding 20,000 new businesses a year over the next five years. This would require additional funding of £1bn across the five years, but as these are loans that money would be paid back with interest.
• Earmark funding for particular regions and nations. Nearly £1 in every £4 has gone to London over the lifetime of the scheme, with only £1 in £20 going to the North East. Labour would call on the government to better target the scheme to promote growth outside of London and the South East by earmarking a minimum amount of funding to be lent in each region. We would focus on businesses with high-growth potential, and those in areas outside London and the South- East, to help boost local economies and create high-quality jobs across the country.
• Ensure links with other schemes Given the large increase in individuals engaging with or accessing some kind of personal or business support scheme run by government, there is a clear opportunity to ensure the option of a Start-Up Loan is properly signposted to these people. This could be raising awareness of the scheme via Job Centres, Local Enterprise Partnerships, Growth Hubs and local chambers of commerce, as well as asking employers to provide information to furloughed staff.
• Support alternative models of business ownership: Labour’s proposals would help spread small businesses which are rooted in their local communities by design. We would encourage applicants to consider registering as social enterprises, co-operatives, employee-owned businesses, as well as establishing a preference for joint ventures, as evidence suggests that these are more successful and durable in the long run.
• Support individuals with low-incomes or no savings. Individuals would be able to access the New Entrepreneurs Allowance, so individuals have the support, income, and time to start a new business whatever their present circumstances.