The South West has the highest Business Start-Up Survival Rate

The first few years are critical for any start-up. TNT’s ‘Roaring Regions’ index has identified the South West as among the most favourable locations for new start-ups. It offers a competitive start-up survival rate of 91.6% after a single year. But it’s on the longer term that things look even rosier: 45.8% of start-ups in the region are still operational after five years, which puts it at the very top of the leader-board. This compares extremely favourably with London, where the survival rate after five years is a mere 39.3%.

While you might think of this area of the country as having a particular sort of economy, the fact is that niche businesses make up just a tiny proportion of the economy in the South West, with Retail and Wholesale being the top sector by turnover, followed by manufacturing and professional services.

So, what factors contribute to this success story? There are several worth considering.

Of the regions under scrutiny, the South West is among the largest, at 23,837km2. It is beaten into second place only by Scotland, which covers more than 77,000km2. Now, when you consider this, it becomes clear that the lines which divide the different parts of the UK are drawn arbitrarily, and their relative landmasses doesn’t matter much. The same can be said of population: there are more than twice as many people living in the South West compared with the North East. And that isn’t important, either.

What is important is the proportion of those people who are economically active, and thus able to draw upon disposable income. In the South West, these people account for 2,913,000 out of 5,599,735, or 64.3%.

This is fairly representative of the country, with the only exception being London, where 68.8% are economically active.

Getting Connected

One area where the South West has some catching up to do is in digital connectivity. A 2018 report by Ofcom rated the region as the worst connected in the country, with just 31% having access to an ultrafast (that’s more than 100mbs) connection. When it comes to 4G connection, things are a little better, with 98% coverage. However, when you consider that many areas of the country, including London and the Midlands, benefit from 100% coverage, this looks a great deal like underperformance. This is especially so given that 5G has begun to be rolled out, and an entirely new infrastructure race is underway.

This lack of connectivity may offer a partial explanation for the region’s impressive start-up survival. Poor connectivity means fewer high-risk tech businesses being launched here. This theory is lent support by the fact that the opposite pattern emerges in London. Thus, bolstering the broadband infrastructure in this part of the country may mean sacrificing a bit of the survival rate – but it will certainly mean more opportunities for new businesses to take the risk.