Business creation rate in Scotland lags behind the UK, figures show

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The number of businesses in Scotland has soared by 46 per cent in the devolution era, but the creation rate still lags behind the UK as a whole, research has found.

There were 338,110 firms based north of the Border in 2018, according to official statistics which exclude non-profit organisations, a jump from 231,525 at the turn of the century. But across the UK there are 2.2 million more businesses than in 2000 - an increase of 63 per cent.

Business growth rate in Scotland lags behind the UK average. Picture: John Devlin

Business growth rate in Scotland lags behind the UK average. Picture: John Devlin

The growth gap has led to the Federation of Small Businesses (FSB), who compiled the figures, to call on Holyrood ministers to "carefully consider" how its policies are impacting on local economies.

Economy secretary Derek Mackay said Scottish Government support for small business has seen Scotland recognised as the fifth most supportive business environment in the world - ahead of all other parts of the UK.

The FSB added that between 2000 and 2018, Scotland’s population increased by 7.4 per cent and the UK’s population increased by 12.8 per cent, which could partially account for the disparity in business growth rates. The group added this gap "underlined the case" for a future immigration system which meets Scotland’s needs.

The figures come just a week after it was revealed Scotland faced a near £1 billion black hole in its tax revenues in the first year after Holyrood took control of sweeping new financial powers. The country had lower economic growth than the rest of the UK, which resulted in a £940 million shortfall in the expected tax take in 2017/18.

READ MORE: Derek Mackay hit by near £1 billion black hole in Scots tax take

“There are 100,000 more Scottish businesses now than when the new Scottish Parliament first met in May 1999," said Andrew McRae, FSB’s policy chairman in Scotland.

“These operators have started up in an environment where a decision made at Holyrood can have as much of an influence on a firm’s success as an announcement during the UK Budget. This means decision-makers in Holyrood have to combine their ambitions for the country with an understanding of how their proposals will work in the real economy.

“While UK-wide business growth figures are disproportionately influenced by London and the South-East, Scotland should aspire to drive up both start-up and business survival rates. Building the vibrant and successful Scotland we all want to see requires a flourishing private sector. But to grow our business community, we need a steady stream of people prepared to set up on their own.”

Mr McRae added: “FSB research shows that migrants boost Scotland’s business start-up rate while immigrant business owners alone deliver a £13billion annual contribution to our economy.

Mr Mackay said: Scottish Government support for small business has seen Scotland recognised as the fifth most supportive business environment in the world - ahead of all other parts of the UK. We have given small businesses greater access to finance through initiatives such as the Scottish Growth Scheme and Building Scotland Fund and we have already announced that we will be setting up a Scottish National Investment Bank.

“Our Small Business Bonus Scheme has also lifted over 100,000 recipients out of rates altogether while a new system for business support in Scotland – including an online portal – is currently being developed which will be user-focussed and help even more businesses access the right support to grow such as through internationalisation and innovation.

“However, it is also clear the UK Government’s one-size-fits-all immigration policy is not working. It is imperative for Scotland to have the powers to develop a tailor made migration policy that enables our businesses, communities and public services to thrive.”