The year 2012 was one of optimism and celebration in the UK. It was the year of the London Olympics and Paralympics and the Queen’s Diamond Jubilee. England’s football team made it to the quarter-finals of Euro 2012 and Andy Murray became the first British man to reach a Wimbledon final for 74 years.
At the same time, this optimism was reflected in the growth of new businesses, as the UK was starting to emerge from the global financial crisis. In 2012, the UK saw the birth of over a quarter of a million new businesses, according to the Office for National Statistics – a figure that would grow annually in the five years that followed.
But how many of these businesses were still trading five years later, and what can that tell us about current market trends?
Technology, Information and Communications reign post-2012
More than 250,000 new businesses were born in 2012, with a real swing towards newer sector companies, which often have a more entrepreneurial edge.
One of the best performing areas across the 2012-2017 period was the Professional, Scientific and Technical sector, which saw over 61,000 businesses launch in 2012 alone. The sector grew year-on-year in the period 2012-17 and has also enjoyed an above-average survival rate throughout the period. After year-1, 93.1% of this sector enterprises were still in existence; an above-average trend that continued through years 2-5. By the end of year 5, 46.9% of Professional, Scientific and Tech companies were still in existence, which is well above the national average of 43.2%.
Businesses dealing in Information and Communication also performed very well across this five-year period, with over 25,000 new businesses starting up in 2012. By the end of year-1 92.8% of businesses within this sector had survived, and after five years, 47% of Information and Communication enterprises were still in business.
The five-year survival rate of enterprises within the Business, Administration and Support Services sector was much lower. Of more than 30,000 businesses within this sector that started up in 2012, just over a third (37.7%) had survived up to five years.
There were considerably fewer births of businesses within the Finance and Insurance sector, with only 4,450 new enterprises registered in 2012. Despite this, at the end of 5 years, 43.1% of these businesses had survived, just shy of the national average.
The pattern for businesses within the Property sector is quite interesting, and shows that surviving the first couple of years is key. By the end of year 1, the sector experienced a large decline, with only 78.6% of companies still in business – the lowest figure of all sectors. This sector was also worst performing after 24 months, with 62.8% of enterprises surviving year 2 – well below the national average 24-month survival rate of 73.9%. However, by the end of year 5, the sector had levelled off with an above-average rate of 44%.
How does London compare?
London is an economy in its own right – and a fairly resilient one at that. The wave of investment following the London 2012 Olympics meant the capital saw a boom in new businesses launching 2012-13.
In 2012, there were over 65,000 new businesses born in London – by far the largest number across the UK. This number has grown year-on-year since 2012 to eventually rise above 102,000 in 2016.
But although London sees the largest number of new enterprises born in comparison to other cities around the UK, the sheer weight of numbers means it also has the lowest percentage survival rate of all areas of the UK, with less than one in four (39.3%) businesses that started up in 2012 still trading by 2017.
Elsewhere across the UK, businesses in the South West performed the best in the five years from 2012. Of the 20,000+ businesses that were started here in 2012, almost 46% had survived by the end of five years – above the national average of 43.2%. Scotland saw almost 44% of businesses still trading after 5 years, with Wales and Northern Ireland 44% and 44.7% respectively.
The geography of London’s business landscape is changing
As new businesses have boomed across the capital since 2012, the London commercial office market has grown geographically, with less central areas growing in demand, as well as more traditional areas continuing to be popular.
Central London locations are perhaps the most traditional for new businesses, and this trend continued, with almost 7,000 new businesses being set up in Westminster in 2012 – of which 35.6% were still surviving 5 years. The City of London saw fewer (1900) start-ups, but enjoyed a slightly better survival rate of 37.9%.
However, it is the newer, less traditional markets that are seeing some of the best success across the capital. East London is enjoying a business boom: Hackney saw the birth of 2140 businesses in 2012, of which 43.5% were still trading after 5 years – much higher than the average across the capital, and nearby borough Camden had 39.5% of 3140 businesses still trading in the same period.
Lambeth saw the second highest number of new businesses launching after Westminster, with 4255 set up in 2012 – though they also saw the lowest survival rate, with only a quarter still active by 2017. Neighbouring Southwark saw 39.8% of almost 2000 businesses still trading after 5 years, and Tower Hamlets 35.9% of 2395.
Post- 2017: DeVono Cresa findings
Our own client data statistics from 2017-19 confirm some of the trends that we have seen over the 2012-17 period. The biggest sector for growth in the capital continues to be the technology sector and the professional sector both of which perform very strongly across the capital, as they do across the UK as a whole.
The Property sector saw the number of new businesses increase from 2012-17, and though it has fluctuated somewhat in London in the last three years, it appears to be growing based on 2019’s data.
The Finance and Insurance sector has seen less demand from 2017-19, which also matches the 2012-17 UK national trends.
Since 2012, there’s been a real growth in creative sector businesses, especially start-ups from technology, media and communications firms. These firms attract younger workers and newer working styles, making them some of the most successful sectors in the UK.
Here at DeVono Cresa we report on the UK and London commercial property markets every quarter. You can find our market insights here.