An interesting new study has found that you are far more likely to survive your first year in business if you start up in the UK.
According to business consultancy Rousseau Associates, 93% of UK businesses which launched in 2011 were still trading twelve months later. This is much higher than the European average of 83%, and significantly higher than the 79% and 78% recorded by France and Germany respectively.
In fact, the only country with a higher survival rate is Sweden (95.4%).
The UK has a long tradition of encouraging enterprise, but what accounts for the sharp difference in survival rates between this country and its neighbours?
Why do start-ups thrive in the UK?
Some possible reasons why start-ups are more likely to thrive include:
Less restrictive employment laws – it is easier to hire and fire staff in the UK than it is in most European countries. Although many employers bemoan the amount of red tape they have to deal with, try running a business in France!
Strong economic growth – the UK currently has the strongest growth figures in Europe. Growth breeds confidence among prospective consumers and business owners alike. Clearly a prolonged period of economic growth has a direct correlation with business survival chances.
Ease of starting up – unlike some of our European neighbours, it is incredibly easy to set up a business in the UK. You can become a sole trader immediately, by simply telling HMRC that you are becoming self-employed. You can set up a limited company in a matter of hours for under £20 via Companies House. It really has never been easier to start up.
The impact of Government polices on start-up survival
Some Government initiatives have worked really well, others haven’t. The extended period of R&D tax relief has certainly been widely praised, as has the Annual Investment Allowance (AIA). The smallest firms benefit from having to pay no business rates at all. The recently implemented ‘Employment Allowance’ provides all employers with a reduction in their NI bills by up to £2,000 per year. This was introduced as an incentive to promote taking on new employees.
The authors of the report, Rousseau Associates, point out that some Government initiatives have been complete failures – the Enterprise Finance Guarantee scheme, in particular, has been widely criticised for failing to kickstart investment. The scheme failed to provide significant levels of lending to firms who were unable to secure loans from traditional firms following the recession.
Michael Heath, Business Development Director, of the firm said that Government policies in recent years “have helped to make it less of a risk for start-ups to take on new staff and expand.”
Commenting on the growth in popularity of controversial zero-hours contracts, Heath said that they have often been misunderstood, particularly by the media.
“They enable casual, part-time or short-term employment for those just starting out or returning to work, and it allows employers to have more flexibility over their wage bill and number of employees.”
Clearly, the UK is a naturally entrepreneurial and inventive nation, however these results demonstrate the importance of Government policy on small business survival. Any successful Government needs to focus on making life easier for entrepreneurs – by reducing the amount of red tape they have to deal with, and providing tax incentives to encourage investment.
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