Business development · 31 May 2017

Labour constituencies produce most new businesses following two-year surge

Tech investment
Just ten constituencies saw a decline in the number of operating companies

A fuse lit after the 2015 general election saw 417,309 new businesses register at Companies House within just two years.

The volume of new founders over the last parliamentary term added 11 per cent to the total number of operating private companies in Britain, a figure reaching just over four million.

Record-keeping software firm Inform Direct analysed Companies House data to demonstrate how each constituency performed in terms of new businesses, survival rates and net difference in volume over the two years.

Finishing with the highest number of new ventures was Keir Starmer’s Holborn and St. Pancras constituency in London. The prolific home of Labour’s shadow Brexit secretary produced a net increase of 18,965 new businesses – adding a third onto its total prior to the 2015 election.

Other London Labour constituencies kept up, particularly in Hackney South and Shoreditch – which registered 3,1193 companies.

Outside of the capital, Labour’s smaller, regional constituencies also performed well. Oldham West and Royton saw a net increase in companies of 45.5 per cent thanks to strong new business registrations.

Despite adding 1,716 companies to its ranks throughout the two-year period, Conservative constituency Spelthorne reduced its net total of firms by -17.7 per cent. In 2017, the North Surrey seat set up a number of initiatives to promote business growth in the area.

However, in the Conservative-held South West Wiltshire, the previous general election appeared a significant catalyst for company formations. The constituency saw 9,077 new ventures – a positive shift of 231.2 per cent – after local entrepreneurs responded well to the area’s small business schemes.

Overall, Labour pulled away with an average net increase of 758 new firms per constituency. The Conservatives following with 609 and the Liberal Democrats third with 317 companies.

“These figures show that over the two years of the last Parliament, we saw healthy growth in the formation of new businesses which demonstrates a favourable environment for companies to thrive,” said Inform Direct operations director John Korchak.

In fact, just ten out of 650 constituencies saw the total number of companies decrease. Islington South and Finsbury, the London home of shadow foreign secretary Emily Thornberry, suffered most. The seat finished the parliamentary term with just 63 per cent of its businesses still operating, losing 1,101 firms in two years.

The entrepreneurship shown in Labour’s heartlands was noticed Korchak, who explained the significance behind the trend.

“It is interesting that the highest growth was in Labour constituencies – a complete reverse of the previous parliament,” he pointed out.

For the two-year period, the UK scored an average business survival rate of 79 per cent. A further look at the data suggested the presence of a party leader could boost the fortunes of newly-formed companies.

Theresa May’s constituency of Maidenhead had a survival rate almost six per cent better than the average, while Tim Farron’s Westmorland and Lonsdale produced a rate of 88.4 per cent. The prime minister recently praised her local business community’s contribution to the economy, which also stands to benefit significantly from Heathrow expansion and national rail developments.

Disappointingly for Labour leader Jeremy Corbyn, business survival in his Islington North constituency scored beneath his rivals at 77.7 per cent.

To find out more about the what the conditions have been like for a fledgling company founded since 2015, Business Advice spoke to Charlie Johnson, founder and CEO of graduate job platform BrighterBox.

Looking back at his company’s early days, Johnson highlighted the favourable economic conditions in 2015.

“With enough unknowns to deal with as it is, the last thing a business owner wants is uncertainty.

“Given the slow and steady economic recovery up to 2015, conditions were fairly good for starting up – interest rates were low, access to funding seemed straightforward and, significantly for us, companies were hiring faster than any rate in recent years,” he said.

Johnson also pointed out the pro-business consensus among the major parties in the last parliament created a positive environment for new firms.

“Knowing that both major parties pledged to support small businesses reduced some of the unknowns and simplified the playing field.”

Looking at how well the state managed to keep up with the recent surge in entrepreneurship, Johnson experienced a relatively smooth ride with HMRC.

He added: “Our registration was delayed slightly due to a backlog in applications but this was dealt with and processed relatively quickly.”

Spencer Turner started his own company in 2015 and within two years struck up a business partnership with Dragons’ Den’s Peter Jones

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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