Finance · 11 August 2016

Which UK city is most cost-effective for startups?

Newcastle is the most cost-effective UK city for entrepreneurs starting new businesses

Newcastle is the most cost effective location in the UK to start a new business, with startup founders there borrowing just £17,008 on average to get their venture off the ground.

Manchester, on the other hand, has been found to be Britain’s most expensive location to start out, with borrowing costs for new business owners averaging £44,733.

The beneficial startup environment in Newcastle was revealed in new research conducted by LDF. Surveying 850 small business owners, the lender also discovered the average amount needed to start a business in the UK in 2016 was £27,520.

Southampton, Liverpool, Cardiff and Leeds also ranked highly among the list of UK cities offering a cost-effective business environment to entrepreneurs, whereas Glasgow, Norwich and Brighton joined Manchester as some of the costliest startup locations.

Startup borrowing costs in London averaged at £28,742, making the UK capital slightly more expensive for entrepreneurs than Scotland’s capital Edinburgh, where starting a business cost an average of £22,990, or the Northern Irish capital Belfast, where the average was £23,164.

With access to finance still considered one of the biggest challenges faced by entrepreneurs in Britain, the survey also identified the industries which required the most capital to start a business, and which needed the least.

The leisure industry proved most expensive, with leisure startup founders reportedly borrowing initial funds of £79,137 on average. Motoring and manufacturing were also found to be costly industries, while catering business owners needed to borrow £43,608 up front on average.

Entrepreneurs looking to save cash could launch a design business – the average startup cost of a design firm was found to be just £4,425. Marketing and communication, healthcare and finance were also found to be industries in which startups required minimal initial funding.

Regardless of location, accessing traditional sources of finance in Britain is becoming increasingly difficult, especially for small businesses.

Alternative finance, including crowdfunding, continue to be a popular route for amongst many small business owners. Indeed, a recent study from Growthdeck revealed that almost 40 per cent of UK crowdfunding investment opportunities are channelled to micro firms and startups.

Growthdeck CEO Gary Robins told Business Advice last year: “Crowdfunding platforms have become a vital conduit for small business owners to access the funding they need to exploit their growth potential, providing a much-needed boost to the sector.”

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Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.