Michelle Rodger: The appetite for start-ups is out there – we just need to get cooking

By Michelle Rodger
Published on Sunday 18 December 2011 03:59

THERE is a growing sense of frustration amongst the entrepreneurial community about the perceived lack of appetite for start-ups in Scotland.

Just last week a report from the clearing banks said the number of start-ups in Scotland fell by almost 12 per cent in the third quarter of 2011. The number of new business start-ups in the three months to the end of September fell from 3,986 in the second quarter to 3,521.

This figure is well below the 4,038 start-ups recorded in the third quarter of 2010, and suggests a falling trend since the start of the year.

The figures, as they are presented, are disappointing and they contrast starkly with other statistics that show an 18 per cent increase in start-ups year-on-year across the whole of the UK in 2011.

Yet that is not actually the whole story: the report didn’t make as much noise about the net increases in education, recreational, personal and community services and health and social work as it did about the negative numbers. Instead it, and most newspaper coverage about the report, focused on Scottish entrepreneurs shying away from the risk of starting a business.

So how accurate are these figures? The Scottish clearing banks are the big four – Royal Bank of Scotland, Clydesdale Bank, Lloyds TSB and Bank of Scotland – and don’t include major banks such as Santander and HSBC. And the figures don’t include people who are starting up and not opening business bank accounts.

So why is the survey carried out? Simply to paint a picture of the start-up scene, or to influence activity aimed at fostering and facilitating more entrepreneurial activity?

It doesn’t reflect my experience, and it doesn’t reflect that of many business owners in Scotland. It also doesn’t sit with a different report published last week about the resilience of the Scottish economy compared with the rest of the UK.

According to the latest purchasing managers’ index (PMI), produced by Bank of Scotland, Scottish firms continued to grow in November and were actually creating jobs for the first time in four months. This, said the report, demonstrated their “resilience” compared with the rest of Britain.

The report went on to highlight “mild expansion” of activity in the Scottish private sector last month. Recent data from Business Gateway actually suggests an increase in the number of start-ups.

So here’s what I want to know: are we asking the right questions of the right people to provide accurate data? And what should we be doing with this data?

If an employee brought me a set of disappointing figures, I’d be looking for him to bring me a solution at the same time. Yet there is no solution being offered here, just a snapshot of a limited set of data.

What good are statistics that lie dormant, serving only to judge a snapshot in time, with no lasting legacy?

Capturing the number of start-ups is notoriously difficult. Some data captures only VAT-registered businesses, some limited companies and so on.

Iain Scott, a former academic turned entrepreneur turned coach, says there is a huge interest in Scotland in starting a business, not always because people want to but because they have to.

He adds: “But what has happened is that there has been a massive growth in the reporting and talking about entrepreneurship, in the same way as we have lots of food programmes and celebrity chefs but not enough people cooking food.”

To continue the food analogy, it’s not about counting how many pies we haven’t yet baked. Instead it’s about making the most of the ingredients we have, perfecting the recipe and baking more.

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wee-scamp

Sunday, December 18, 2011 at 10:12 AM

Whilst it's always useful to have better data on this topic the real problem remains the lack of availability of risk equity capital so funding start-ups is still extremely difficult.

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Mark Dowe, Dumfries & Galloway

Sunday, December 18, 2011 at 08:17 AM

‘…Yet that is not actually the whole story…’ – It is indicative that bank data produced for start-ups be segmented so as a better and more accurate picture is portrayed. Particularly so, if, as Michelle writes, ‘Simply to paint a picture of the start-up scene, or to influence activity aimed at fostering and facilitating more entrepreneurial activity?’ Do banks have the data but are simply too lazy in widely publishing reports that others could come to depend on? Perhaps they are. Michelle notes: ‘Yet that is not actually the whole story: the report didn’t make as much noise about the net increases in education, recreational, personal and community services and health and social work as it did about the negative numbers.’ Yet, a simple analysis in the last quarter of 2010 would reveal that the east and north east of Scotland saw the biggest quarter rises amid signs of rising confidence in the market: the East of Scotland enterprise region saw the number of new businesses rise from 898 in the last quarter of 2010 to 1,220, while the Aberdeen City and Shire region jumped from 336 to 487. Sector segmentation should also include data for construction, manufacturing, agriculture, hunting and forestry, and real-estate related start-up businesses which traditionally do very well in Scotland. [ ] Factors which do impinge upon quarterly results include bouts of severe weather which can delay some economic activity. Another compounding factor, and one which will invariably add to the mix over the next couple of years, is that many jobs have been lost in the past few years in the financial services sector, with the result that many capable people with entrepreneurial skills have come forward who understand about business and who have had the confidence and drive to add to the culture of business start-ups. If banks are to continue producing economic reports let’s at least have them better informing the recipients of those reports.

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