New research shows that despite the fact that UK entrepreneurs generate £950bn in annual revenue, entrepreneurs in the most innovative regions are struggling to access the funding they need to grow.
The number of patents being granted by the UK Intellectual Property Office across the UK reflects the quantity of new and innovative products and technologies being developed across the country. The report found that the East of England was the most innovative region in the UK, with 15.4 patents granted per 100,000 adults in 2022. Other hotspots include London, the South West and the South East, with, 11.4, 11 and 10.5 patents granted per 100,000 adults respectively.
The research also revealed that entrepreneurs in the UK are already adopting breaking edge technologies, including AI. 35% of respondents to the survey stated that their business had already adopted AI in some capacity, while another 40% said that while they had not adopted AI yet, they are considering how to do so. The UK was recognised as a hotspot for innovation when the University of Oxford placed it fourth in the 2023 Global Innovation Index.
Innovative businesses struggling to scale up
Unfortunately, the regions where entrepreneurs are more likely to invest in innovation are also the regions where entrepreneurial businesses struggle to scale up. The research shows that while innovation in the East is thriving, the region also has the lowest survival rate: only 34% of businesses started in 2016 were found to be active 5 years later. Similarly, out of the 12 regions, London placed 8th for business survival and the South West placed 9th, despite ranking 2nd and 3rd for innovation respectively.
Allowing innovation to flourish
In order to address roadblocks to growth, we first need to recognise the barriers to, and drivers of, growth for UK start-ups. The report maps the UK entrepreneurial economy, defining its strengths and weaknesses, and highlighting potential areas for growth.
Access to funding could be a critical roadblock preventing innovative entrepreneurial businesses from scaling up, with one fifth of entrepreneurs citing it as a top barrier to growth. More worryingly, in businesses which are 2-3 years’ old, this number was 26%. The government and private equity industry need to work together to create an environment where entrepreneurs can more easily access funding for growth.
Beyond access to finance, growth limitations include the tax burden, which 24.25% of survey respondents said was likely to hold back growth, and recruiting and retaining staff. 13.75% of respondents said recruitment was a roadblock to growth, while 12.5% said keeping staff was the problem. The UK needs to ensure that the domestic business environment enables businesses to grow, and that talent is created and protected at home.
Jamie Roberts, Partner and Head of Investments South, YFM Equity Partners, that commissioned the report, comments: “As their enormous contribution shows, entrepreneurs are the beating heart of the UK economy, and it is imperative that the UK government creates an environment where these business can thrive. The government has repeatedly shown its commitment to fostering innovation in the UK, and has also highlighted the importance of innovation to a healthy and growing economy.
“However, today’s research shows that SMEs need better support, particularly when it comes to accessing finance to back their numerous and varied ideas. UK entrepreneurs also have a responsibility to help themselves, ensuring they are proactively looking to understand how they can best access funding, what funding is most suitable for their business, and what government schemes are available to support. In this way, we can help innovation in the UK flourish.”