Showcasing the Best of Welsh Business

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Start-ups and the Welsh Economy

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Last month saw another successful Wales Start-Up Awards where, yet again, an incredible group of new Welsh businesses demonstrated their passion, pride and creativity in creating wealth and prosperity across all parts of the nation.

Given the record number of entries and the seemingly growing appreciation of entrepreneurship within the Welsh economy, it is easy to think that there has been a renaissance in the growth of start-ups in Wales over the last few years.

However, a closer examination of statistics measuring the number of business births compiled by the Welsh Government suggest a more nuanced picture of the state of Welsh entrepreneurship.

The good news is that with 12,015 business starts in 2016, there are more new firms being created now than since the current statistics began in 2002.

But if we place in the context of the growth in start-ups across the rest of the UK since the end of the recession, then it shows that Wales has not performed as well as the majority of the other regions of the UK.

For example, the number of new businesses in Wales since 2010 has grown by 61 per cent as compared to 76 per cent for the UK as a whole. Only one English region – the South East of England – and the other two devolved nations of Scotland and Northern Ireland have worse growth rates for new businesses between 2010 and 2016.

Indeed, the Welsh share of the start-up population in the UK has decreased from a high point of 4.1 per cent in 2003 to 2.9 per cent in 2016, demonstrating a widening gap between Wales and the UK in entrepreneurial activity over the last decade.

Not surprisingly, there are enormous variations within the Welsh economy itself in terms of start-up activity between 2010 and 2016.

The most successful county during this period has been Merthyr Tydfil, which has experienced a growth in new businesses of 168 per cent. This contrasts starkly with the performance of Anglesey, the worst performing county with a growth rate of only 8 per cent (or 15 net new businesses over a period of seven years).

And seven of the best performing counties, including the cities of Cardiff and Newport, are to be found in the Cardiff Capital region with a start-up growth rate of 75 per cent since 2010.

In contrast, the other economic regions have performed worse than the Welsh average since 2010 namely Swansea Bay (51 per cent), North Wales (42 per cent) and Mid Wales (31 per cent).

Given that various research studies have shown that new firms create almost all of the net new jobs in any economy, this presents a particular challenge for those who are currently managing the two city deals in Wales and those planning the two growth deals in North and Mid Wales.

None of the strategies across the four regions have yet to develop any specific strategies towards increasing entrepreneurial activity over the next two decades, relying instead on a ‘trickle down’ approach from larger projects which have been earmarked for funding.

This begs the question whether successful start-up locations such as the Cardiff Capital region should continue to build on their successes to date or should the other three regions now focus some of their strategic thinking on how to create an entrepreneurial ecosystem that nurtures and supports greater start-up activity across their areas?

Certainly, in the post Brexit world that we are facing, having a more entrepreneurial economy across all parts of Wales is surely a no-brainer and given where we are, politicians and policymakers need to focus their efforts urgently on closing the entrepreneurial gap between Wales and the rest of the UK and, as a result, reap the benefits of prosperity and employment that comes with it.