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Is London losing its hold as the UK’s hub for growing businesses?

The Real Business Hot 100 2015 list, showcasing Britain's brightest businesses, suggested that we might be seeing a move away from London and the South East as the dominant forces of the UK economy.
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Location has become something of a hot topic in regards to upcoming businesses – where should they be based, are some areas becoming too much of an exclusive bubble, and how can we get more focus on areas outside of London?

While the 2015 London Technology Week was an endeavour in showcasing the scalability of digital companies, Real Business questioned the lack of acknowledgement regarding the promising development happening in other UK cities.

We’ve also seen earlier research flagging up the increasingly eye-watering rent prices for London’s tech bubble in the east – rents nearly doubled over the past five years. Despite the focus on the capital, other businesses have been looking elsewhere to prosper – and the government has committed to introducing legislation with the aim of rebalancing economic recovery through the creation of a “Northern Powerhouse”.

It remains to be seen whether this comes to fruition with the recent changes to the £38.5bn plan to upgrade the UK’s rail network – notably the long-awaited upgrade of the York-Manchester trans-Pennine route being shelved. 

However, in a sign that perhaps times are changing and London isn’t so aggressively dominant when it comes to the best of British business anymore, our Hot 100 for 2015 revealed some interesting regional analysis.

While the capital was the epicentre of the fastest growing businesses in 2014 with 43 per cent of the 100 based there, for 2015 the spread had evened out. The South East contributed the highest percentage of businesses with 25 per cent, while London was second with 23. There was still a drop of over ten per cent to the next areas – with the North West and South West both offering ten per cent of the businesses, but it’s still notable that there has been a move away from London’s stranglehold here.

This can only be a positive signal for those hoping to see progress in regards to the UK economy across the board, as well as for businesses of all sizes hoping to prosper, but not wanting to relocate to London to do so.

London is, of course, still a significant presence in terms of boasting the second highest number of businesses within our Hot 100, yet the list also indicated the capital’s contribution was decreasing for the second year in a row – in 2013, 49 of the 100 firms were based in London, in 2014 it was 43 and for 2015 it was down to 23. 

While there’s a way to go before other areas can be seen on a more equal footing, the Hot 100 indicated that progress is moving in the right direction. In terms of the regional spread at the top end of the table, the ten fastest-growing companies came from the following regions:

(1) East Midlands

(2) Yorkshire

(3) London

(4) North West

(5) London

(6) South West

(7) South West

(8) South East

(9) London

(10) London

This range reflected that businesses are doing well for their respective areas all across the UK.

Read more about the 2015 Hot 100:

Interestingly, recent research from the Enterprise Research Centre suggested that Northern Ireland was the best place in the UK to start and grow a business – more small companies there hit £1m in revenues within their first three years of business than anywhere else in the UK. A ten per cent average was recorded for firms reaching £1m in three years compared to 7.9 per cent of small businesses in London and 6.2 per cent in England overall.

There were just three companies from Northern Ireland in this year’s Hot 100 – placing at 11, 68 and 89, but this doesn’t negate the impressive survival ability of companies based there.

The question is whether low overheads in terms of rent and staffing costs will prove greater draws for growing businesses – and whether the changing perception of where businesses need to be in order to develop, will impact on diversity of locations chosen by companies. Firms may have previously overlooked other regions, deciding the higher overheads in London had to be weathered for a chance at success.

There has been an increasing focus on utilising the significant talent pools elsewhere though, as well as acknowledgement from the numerous startup incubators cropping up, that more can be made of local university talent – by securing it to help develop the local area, rather than seeing it rapidly bleed away to London and the South East.

It remains to be seen if this will continue for the coming year – though there have certainly been enough signs to indicate that other regions have renewed confidence in establishing themselves as hubs for growing businesses. 

Will we see fewer London companies in the Hot 100 for the third year in a row in 2016? If so, will the government’s Northern Powerhouse project have enough of an impact to seriously affect the rankings of our Hot 100 list? Are we getting closer to seeing London and the South East toppled from their long-term dominance? You’ll have to check back in next year to see.

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