Since the recession of 2009, we have seen as renaissance in entrepreneurship in the UK.
For example, there are now more than 1.2 million self-employed people within the economy and, contrary to popular belief, the growth in those working for themselves has in high value sectors such as professional, scientific and technical activities, education, and information and communications technology.
This is not surprising as detailed analysis shows that a third of those in self-employment are now educated to degree levels, a growth of 50 per cent since 2001.
And it is small firms that have led the growth in employment since 2009, with microbusinesses (those employing less than ten people) being responsible for half of all the jobs created. In contrast, large firms created only 24 per cent of the total.
But what is the state of entrepreneurship here in Wales? Certainly, there has been a greater effort by Welsh Government in promoting this area of economic activity over the last few years but has there been any real changes in the enterprise ecosystem in which entrepreneurs live and work?
As part of a presentation to Welsh Government this week, I examined the data available on a range of factors and discovered the following twelve key facts about entrepreneurship in Wales in 2019.
- First of all, Wales has a lower opportunity perception than the UK. According to the Global Entrepreneurship Monitor (GEM) which is the most comprehensive annual study of entrepreneurial activity, only a third of the Welsh adult population perceived there would be new start-up opportunities in the next six months as compared to 40 per cent for the UK.
- And whilst fear of failure is holding back 42 per cent of the non-entrepreneurial Welsh adult population from starting a business, this is only slightly lower than the UK.
- In terms of entrepreneurial intention, only 6.8 per cent of adults in Wales expect to start a business in the next 3 years as compared to 8.5 per cent for the UK although the conversion rate from entrepreneurial intention to starting a business is higher, probably due to the support structures available here in Wales.
- However, total entrepreneurial activity remains lower in Wales with only 6.1 per cent of the Welsh adult population being involved in starting and managing a new business as compared to 7.9 per cent for the UK.
- If we examine the data for new business births for the UK, we find that 14,120 new business were established in Wales in 2017 (or 3.7 per cent of the UK total) and this is the highest level of new business starts since records began.
- Nevertheless, there is still a proportionally lower business start-up rate in Wales with only 73 business births per 10,000 adult population as compared to 92 for the UK.
- The data also shows that over the last few years, the survivability of Welsh start-ups has increased with 44 per cent of new Welsh firms surviving their first five years.
- The development of greater numbers of innovative firms are key to the development of a more competitive economy and the promotion of greater levels of entrepreneurship within higher education certainly has a role to play in this. Certainly, there were proportionally higher levels of graduate start-ups from Welsh universities in 2017-18 i.e. 254 graduate start-ups from out of 4024 UK graduate starts.
- Wales also does better than the UK in terms of university spin-outs namely those businesses that are developed from academic intellectual property. However, whilst here are 131 active spinoffs in Wales, they remain small with an average of only five employees and a average annual turnover of only half a million pounds.
- Whilst we know through the Wales Fast Growth 50 initiative that there are some amazing high growth Welsh businesses, according to research from Barclays bank, they account for 2 per cent of all high growth firms in the UK.
- This low proportion of growth firms may be due to the lack of venture finance that is currently available within Wales. For example, if we examine business angel investment via vehicles such as the seed and enterprise investment fund programmes, we find that Wales accounted for 2 per cent of the number of these investments in the UK in the period 2012-18 and only 1.5 per cent of all SEIS/EIS investments by value.
- And whilst funds managed by the Development Bank for Wales meant that Wales accounted for 11.3 per cent of all UK venture capital backed companies, these only attracted 3.9 per cent of the total amount of venture capital in the UK in 2017. This meant that whilst the average venture capital invested into Welsh firms was £439,000, the UK figure was nearly three times higher (£1.3 million).
Therefore, the statistics suggest that whilst there could be improvements, the situation regarding entrepreneurship in Wales could be said to be getting better especially in terms of the creation of new firms. However, more needs to be done to ensure that those companies expand and create jobs and wealth in the economy, especially of ensuring they get access to the right level of capital that is required for growth.