Scots start-ups slide as entrepreneurs ‘hold their breath’ ahead of Brexit hit

The number of new Scottish start-ups slumped last year, prompting researchers to voice concerns over job creation due to Brexit uncertainty.

ERC pointed to the uncertainty around Brexit, and warned of an ongoing lack of clarity blunting expansion plans in more established Scottish firms. Picture: Jane Barlow/PA Wire

Findings from the Enterprise Research Centre (ERC) show a 10.9 per cent slowdown in new firm creation in Scotland in 2018, the most recent period for which data is available, while established businesses scaled back their growth ambitions.

Its Local Growth Dashboard report, which uses figures from the Office for National Statistics, found 16,001 new firms were registered north of the Border, nearly 2,000 fewer than in 2017.

This mirrored a decline across the UK, which saw an overall drop of 12.9 per cent to 284,000 new firms.

South-west Scotland, including Greater Glasgow, experienced the most dramatic fall of all the Scottish regions at 13.6 per cent.

ERC said the slowdown reflected the uncertainty around Brexit, and warned of an ongoing lack of clarity blunting expansion plans in more established firms.

It cautioned over a subsequent decline in job creation, with small and medium-sized enterprises (SMEs) accounting for 99 per cent of all firms in the UK.

Among scale-ups, just 1.6 per cent of Scottish firms managed to grow their turnover to £1 million or more in the three years to 2018, against a UK-wide average of 2 per cent.

Mark Hart, ERC deputy director and professor of small business and entrepreneurship at Aston Business School, said the data showed “clear warning signs”.

He said: “It’s particularly worrying that we’re seeing an absolute decline in the number of new businesses being started in the wake of the 2016 referendum.

“Budding entrepreneurs are clearly holding their breath waiting for some clarity about the outcome of Brexit, but if the trend continues we’ll see fewer jobs created by dynamic young firms.

“Taken together, it seems hard to avoid the conclusion that Brexit uncertainty is causing the grassroots economy to stutter. This may not yet have fed through to employment numbers, but policymakers need to be aware of the warning signs and create the certainty businesses are craving.”