‘Brexit is good for business’ - at least if you’re in a leave-voting area, it seems
PUBLISHED: 18:02 05 February 2019 | UPDATED: 19:26 05 February 2019
In 2018, the number of new businesses registered in the UK grew by 6% compared to 2016, the year that Britain voted to leave the EU.
This growth “flies in the face of negative Brexit rhetoric” just two months before we are due to leave the EU, according to The Enterprise Investment Scheme Association, which has released its own in-depth analysis of the correlation between Brexit sentiment and regional entrepreneurial attitudes.
The association claims that three of the five regions with the largest leave vote majority have a faster rate of new business growth than the national average (Boston 13.1%, Castle Point 10.5% and Thurrock 14.7%), while in areas that voted remain, the rate at which businesses are forming has slowed down.
In 2016 Norwich voted remain and since then, new business founding rate is down by 2.4%.
In 2016 Cambridge voted to remain by a large majority and since then, new business founding rate is down 11.8%.
However, the trend does not apply to Ipswich. Voters picked to leave the EU by 58.3% in Ipswich, but it has also seen a decline in the number of new businesses being founded since the referendum, by 8.6%.
The association goes on to claim that the top five regions with the highest new business growth from 2016 to 2018 all voted leave in the EU referendum, with at least a 12% majority.
Of the highest ‘remain’ voting regions in the UK, only East Renfrewshire (8.9%) grew at a faster rate than the national average. Glasgow, who voted remain with a 33% majority, the new business rate fell by 18.5% from 2016
Confidence and new business sentiment has long been key to growth, and this data showing general trend of lower business founding rates in those areas who were more likely to vote remain in the EU referendum in 2016 reinforces this view.
The uncertainty created by the result in those areas looks to have affected the confidence of entrepreneurs as the UK nears the official leave date of 29th March 2019.
Conversely, the top five regions with the highest amount of new business growth all voted leave in 2016. Across the country, the new business growth rate was 6%.
Luke Davis, chief executive of private investment house IW Capital, claims that the report demonstrates how the “ongoing media furore” surrounding Brexit does not represent entrepreneurial attitudes on the ground across the country.
“The UK continues to be a hot bed of new business ideas and ambitious forward thinkers,” he said. “The fantastic range of SMEs looking to grow and scale as we approach 29th March is testament to Britain’s attitude to starting businesses and forging our own paths, as people and as a country as a whole.
“Building Brexit resilience has been a keen topic of discussion for the investment community, and these new business attitudes display a robust and ambitious private sector, destined for success in or out of the European Union. Progressive business leaders will look to other opportunities to scale internationally beyond the EU, so now is an exciting time both for the UK’s entrepreneurial economy and entrepreneurs.”
According to the ONS, business investment from the first quarter of 2016 to the third quarter of 2018 only grew by 1.5% with an average amount of investment per quarter of £47.2 million, versus a GDP growth in the same period of 4.14%.
Mark Brownridge, director general of the Enterprise Investment Scheme Association, claims this data shows “a worrying trend” for business investment.
“As we near the crucial Brexit crunch point, investment needs to reflect what is evidently, buoyant entrepreneurial sentiment across the country,” he said. “The voting trends linked to this research show broadly that those who voted leave in the 2016 EU referendum have confidence in the new business environment, but this does not seem to be reflected in the investment trends across the same period. With new business growth picking back up across 2018 to 6% across the country since 2016, there is positivity across the country regarding post-Brexit business activity. This confidence is what we need to nurture as investors moving into such an uncertain period.
“What the investor community needs to do now is mirror this new business confidence and offer financial momentum to manifest overwhelming confidence.”