How is business confidence faring in the devolved nations?
Monday, September 11, 2017
According to research from accountancy firm UHY Hacker Young, entrepreneurs are four times more likely to start a business in London than in the Vale of Glamorgan.
UHY examined the number of new businesses set up in 2015 per 10,000 people, also known as the business birth rate, and found England to be significantly outperforming its devolved counterparts. While in England, 53 people per 10,000 started a business, this figure slipped to 40 for Scotland, 37 for Wales and by almost half to 29 for Northern Ireland.
On its release the research caused something of a stink and was identified by some as evidence of systemic bias in government business initiatives to favour England. UHY partner Colin Jones acknowledges that government support for devolved business had been “far less visible” than in England, citing high-profile English examples such as the Northern Powerhouse and London’s Silicon Roundabout.
The print sector has always been well represented in the devolved nations, but speaking to those involved it becomes clear that it is not only budding entrepreneurs that are feeling the pinch.
In a bid to further cement itself as the voice of print in Scotland, Graphic Enterprise Scotland has recently changed its name to Print Scotland. Director Garry Richmond opted for the change in order to “better reflect its membership” but Richmond fears for the current print landscape north of the border, believing much more needs to be done to support Scottish print entrepreneurialism via improved tax incentives.
“The market is very difficult for print in Scotland and in particular for anyone caught in the middle, between a large company and a micro-sized company,” he says.
“SMEs seem to be hit the hardest, while the larger concerns, the J Thomsons and Bell & Bains, seem to be doing well.”
Richmond also says there has been a “proliferation of smaller businesses” opening up in the wide-format signage and digital sectors in Scotland, which runs contrary to the evidence in the report and may be explained by the fact that the data used is two years old.
He says: “I’m no professor but I think that it could be that you are seeing people being made redundant from ailing print companies and coming back as smaller copy shop printers.”
Founded almost 200 years ago, Scottish book printer Bell & Bain has consistently been at the forefront of industry innovation, but its managing director Stephen Docherty fears that starting a business now is more a “labour of love” than anything else, and he has choice words for a UK government not providing the necessary support to lead to profit-making businesses based outside of England.
Bell & Bain has in the past utilised funding opportunities instituted by the Conservative government to borrow money and invest in new kit, but Docherty feels there isn’t enough assistance and is frank in his view that with challenges such as tax, business rates and customer accessibility, he would not find it appealing to set up a business in Scotland today.
Jonathan Lewis , who runs Welsh book printer Gomer Press, based in Carmarthen, says: “One of our main challenges is staffing; where we are based we can’t just advertise for a folder operator and pick one up.”
Lewis is not surprised to hear that the bottom four regions in UHY’s research – Vale of Glamorgan, Ceredigion, Torfaen and Blaenau Gwent – are all situated in rural Wales, and highlights a time when the devolved Welsh government handed out grants frequently to help aid new business, including a property development grant he secured in 2004 now virtually unheard of.
“We have been toying with the idea of building an extension but the cost of building here is the same as in any part of the UK,” says Lewis.
“So we could build an extension that costs £500,000 but if we try to sell it to the market it will be valued at £250,000.”
No discussion of the UK’s current business landscape would be complete without a look at our impending EU exit, and, for companies in Northern Ireland, fear of a hard border is causing the likes of DigitalPrinting.co.uk’s Gary White to consider setting up outposts over the border in the Republic, looking to retain a viable trade root with the EU.
“For a lot of people in the online space, sending stuff from Europe to the UK, or the UK to Europe is going to get harder, says White, whose home is currently without government – the Northern Ireland Executive, led by the DUP, collapsed earlier this year and power-sharing talks are stalled.
“Everyone seems to agree that there can’t be a hard border but no one seems to be able to agree on how it should operate.”
Border issues are causing business confidence in an already shaky market to crash. Joanna Calixto, managing director of Belfast-based MSO Cleland concurs, and cites uncertainty as the biggest challenge currently being faced by the FMCG packaging specialist.
“Based on the complete uncertainty surrounding what form Brexit will actually take, if we watched the news and reacted to every change in outlook we would have already completed 57 different strategic reviews,” she says.
Richmond remains equally frustrated that Brexit uncertainty is causing so much worry in a nation that exports £12bn worth of goods to the EU a year, and in which all 32 electoral regions voted for Remain.
But at least in Scotland, there are those looking to tackle the situation. Print Scotland is working hard with MSPs to improve training and help fill succession gaps, while the recent Barclays Review into Scottish business rates recommended targeted reductions in bills and a 12-month relief period for businesses investing in expansion. More measures may yet be required to help encourage and sustain entrepreneurialism in these three pillars of the British Isles.
More can be done but study doesn’t tell the whole story
Kyle Jardine, research and Northern Ireland manager, BPIF
We need to be careful about how we interpret the research; England has many large cities and that is likely to have a positive effect on the business incorporation data. In Northern Ireland, where I am based, and in the other devolved nations, there are fewer cities of significant size – in larger cities it can be easier for entrepreneurs to reach the customer base that they need for their efforts to bear fruit.
Northern Ireland has a large public sector, which drives a lot of the economy. It also has a significant rural economy so that counts for a lot of employment. There are also a few other large employers out there - such as large retailers, universities and well-established companies in the manufacturing and construction sectors; so there’s less scope to encourage entrepreneurial spirit.
Getting skilled employees and investment support are the challenges that companies are looking to address with guidance from devolved governments. However, in Northern Ireland we are in a difficult situation at the moment as the local government is not doing its job. The promise of extra support from the UK government could help or hinder these negotiations, depending upon the approach taken by the various involved political parties.
In terms of government support, more can always be done. There are various levels of support available but it can be difficult to find and navigate through the red tape. However, I know that some companies are getting valuable support and a number are also able to work closely with colleges and universities to get some of the additional support that they need.
At the BPIF we have a regional structure, North West, North East and so on, and we do have a number of members in Wales and Scotland. The nature of devolved government is something that is becoming more relevant as increased powers are devolved. I am hoping to offer some regional analysis soon in our quarterly Printing Outlook survey.”
Are you feeling the devolved nation pinch?
Andrew Jones, managing director, Stephens & George
“I don’t really think too much of the research. At the end of the day people decide to go into business for their own reasons. I mean mainly there are fewer people in those countries, there are 60 million living in England and 3.5 million living in Wales, so I suppose that would have a big effect in terms of client base and when people are considering starting up a business. Apart from that I can’t think of any link between devolved nations and lower business confidence.”
Terry Scanlon, managing director, West Port Print & Design
“We have challenges being on the east coast of Scotland. We have lots of tourists because of the golf and the history in St Andrews but compared to the 70s and 80s when we were making 35% profits, our margin is now 13%; we’ve had to cut margins and tighten up. We would have a lot more customers if we were in the city; we’ve ‘devolved’ ourselves though and started doing large-format and are starting to do quite well with that, so we’ve adapted slightly and changed our business plan to make more money.”
Matthew Ronnie, managing director, Solway Print
“I think the need for business is probably a factor and also pure population numbers. London has more people than the whole of Scotland, but I’d like to think that we are an entrepreneurial-spirited place and I don’t think that we’ve got any more constraints than in England apart from our customer base being smaller. We see that with US clients, for every 10,000 or so we sell, they would be selling 25,000. You could interpret that to the England/Scotland divide but then one of our biggest customers is based in London.”