Scotland failing entrepreneur test

Published on Wednesday 23 September 2009 21:21

SCOTLAND'S business start-up rate continues to lag those of the UK and other similar countries despite years of government support and funding, new research revealed yesterday.

The Global Entrepreneurship Monitor Scotland 2008, launched by the Hunter Centre for Entrepreneurship at the University of Strathclyde, shows Scotland continues to suffer from a "less dynamic" entrepreneurial culture, particularly among women, where business start-up rates fell to their lowest level since the research began in 2000.

Jeremy Purvis, finance spokesman for the Scottish Liberal Democrats, said the findings were a "wake-up call" for the Scottish Government, and labelled its economic development framework as a "complete mess" following the transfer of small business development to local authorities. He said finance secretary John Swinney's announcement of cuts to enterprise support revealed in the SNP's draft budget was a "remarkable thing to do in a recession".

"The draft budget last Thursday represented a 30 million cut in enterprise support. It is utter madness to be doing this during a recession," Purvis said.

The number of new businesses starting in Scotland fell 4 per cent in 2008, compared with rising rates of entrepreneurship elsewhere. There was a 2 per cent rise in the UK and a 9 per cent rise in similar countries, despite the onset of the recession.

Researchers cited several factors holding reluctant Scots back from launching new businesses, not least the country's already low level of business ownership. The report found Scotland had the lowest number of adults who knew someone who had started a business in the past two years, which the report's authors believe is a contributing factor for start-up growth in other countries.

The report also found that 58 per cent of new businesses in Scotland started in the home. The report's author, Dr Jonathan Levie of the Hunter Centre, said although home businesses tended to be smaller and less productive than office-based firms, the home often acted as an incubator for growing businesses. "Those that grow will become the billion-dollar babies of the future," Levie said.

However, he said local authority tenancies prohibiting businesses being run from the home unless the authority was notified was an "anomaly" now that business support is managed by local councils.

"There seems to be a mismatch here between this and local authorities encouraging start-up activity where two out of three businesses are starting from home," said Levie.

Sir Tom Hunter, whose grant funded the launch of the Hunter Centre, called for local authorities to "step up" in an impassioned foreword to the report.

"At its heart economic recovery will be delivered by business and small businesses and their growth has never been so important," he wrote. "For that reason, local authorities, now responsible for enterprise service delivery, need to step up to supporting those businesses in their area – we're watching,"

Businesses keen to raise cash for major projects

MORE than 40 per cent of Scottish entrepreneurs will fund major business projects using cash this year, according to research published yesterday.

But despite tougher lending conditions, the study from Deloitte revealed that many entrepreneurs are still heavily reliant on bank funding, with a third citing the banks as their primary source of finance.

A further 12 per cent said they would turn to existing shareholders to fund their businesses, while a similar percentage would seek external investment from private equity, venture capital or business angels.

Jim Boyle, a partner at Deloitte, said: "The survey shows nearly a third of entrepreneurs say banks have reduced their lending facilities – clearly a dramatic change from two years ago. This represents an opportunity for private equity to invest in ambitious entrepreneurs."

Boyle warned that current economic conditions have created an "alarming reliance on working capital" at a time when one-third of Scottish businesses said they are having to monitor their cash position daily.

&#149 Scottish entrepreneurs are more likely than their southern counterparts to close their offices if staff are hit by swine flu, according to a survey by accountancy firm Tenon.

The research also revealed that almost half of small business owners have no contingency plans to deal with a flu outbreak, while 20 per cent said they would close their offices completely if a certain percentage of their staff fell ill.