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Confidence is needed

IN 2018, the number of new businesses registered in the UK grew by six per cent compared to the year before. This growth, revealed by the Office for National Statistics (ONS), flies in the face of negative Brexit rhetoric just a few weeks before we are due to leave.

In response to this, the Enterprise Investment Scheme Association has released an in-depth analysis of the correlation between Brexit sentiment and regional new business founding rates.

According to the ONS, business investment from Q1 2016 to Q3 2018 only grew by 1.5 per cent with an average amount of investment per quarter of £47.2m. This is versus a GDP growth in the same period of 4.14 per cent.

Confidence and new business sentiment has long been key to growth and this data seems to reinforce this view, with a general trend of lower business founding rates in those areas who were more likely to vote Remain in the EU referendum in 2016. The uncertainty created by the result in those areas looks to have affected the confidence of entrepreneurs as we near the official leave date of 29 March. Conversely, the top five regions with the highest amount of new business growth all voted leave in 2016. Across the country, the new business growth rate was six per cent.

The key to this, moving forward, will be increasing investor confidence and encouraging investment on these new businesses. There was a reduction in investment from 2018 Q1-Q3 in small business despite the rise in the number of new businesses being formed. Addressing this will be one of the best ways to capitalise on this new business growth, and will have a big part to play in the success of the sector post-Brexit.

Mark Brownridge, Director General of the Enterprise Investment Scheme Association, said: “The voting trends linked to the research show broadly that those areas that voted Leave in the 2016 EU referendum have confidence in the new business environment, but this does not seem to be reflected in the investment trends across the same period. With new business growth picking back up across 2018 to six per cent across the country, there is positivity across the country regarding post-Brexit business activity. This confidence is what we need to nurture as investors moving into such an uncertain period.

“What the investor community needs to do now is mirror this new business confidence and offer support for growing SMEs to help the UK’s buoyant entrepreneurial economy now and after the UK leaves the European Union. With SMEs accounting for 98 per cent of the UK’s private sector and employing 60 per cent of the nation’s workforce, supporting this new business growth may well be a crucial part of Britain’s economic success after Brexit.”

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