By Andy Houston, Head of Barclays Wealth Management

2017 was an uncertain year for UK entrepreneurship: while entrepreneurial outputs were at their strongest since Barclays Wealth & Investments began tracking them as part of the UK Entrepreneurs Index in 2011, the growth patterns driving this output have been less stable. However, regional data has revealed positive new trends – including promising entrepreneurial growth outside of the hub of London and the South East.

The national picture

With enterprise growth traditionally increasing and decreasing sequentially year-on-year, 2017 saw the highest upshot since 2013. This was driven by strong activity in start-ups and exits – particularly a jump in mergers and acquisitions – though growth indicators, including expansion funding and number of high-growth companies, were down for new companies for the second year in a row.

While record level of M&A activity is positive for entrepreneurs who benefit from the wealth creation that comes with exiting a business, the research shows opportunities to scale-up businesses are not necessarily being taken. The uncertain political and economic environment in 2016, which made it difficult for businesses to plan ahead and grow, may have created the conditions that encouraged exits rather than growth.

Despite the positive news, the number of UK high-growth companies was at its lowest level since the Barclays Entrepreneurs Index began tracking it in 2011. This may partly be due to interest in early exits, but could also be because of decreasing levels of venture capital (VC) investment.

Traditionally strong regions maintain national footing

Even with a mixed national entrepreneurial environment, certain regions showed greater momentum than the rest of the country. London, traditionally the top UK region for entrepreneurship, maintained its standing across all metrics. London accounts for over a quarter of all high growth companies in the UK, with 1,529 out of a total 4,110. Not even this powerhouse was untouched by the larger fluctuations in the UK, however, with the number of private equity-backed companies declining slightly year-on-year.

The South East and East of England also remained strong for entrepreneurial activity, coming in second and third nationally, respectively. Both have a solid showing of high growth companies, with the South East’s 572 and the East having 360, and the South East performing the strongest outside London for VC funding at £58 million.

Expansion outside the hub regions

However, while entrepreneurial activity may be traditionally rooted in the South, there are hotspots for growth around the UK. The North West is a well of activity, with venture capital investment growing 9% in 2017. It also has the fourth-largest number of high-growth companies in the UK. Additionally, at 55 companies (up from 42 in last year’s research), the number of North West businesses receiving expansion funding outstrips every other UK region except London (66), and is within arm’s reach of the capital’s figures.

Likewise, in Yorkshire and the Humber, venture capital investment is bucking the national trend with available VC funding increasing by 17% over the last 12 months. With 238 high-growth companies, Yorkshire is mid-range among the regions for high-growth enterprises, behind the North West (320), West Midlands (271), East of England (360), South East (572), South West (239) and London (1,529). It also has strong expansion investment, with £57m invested in the region and 10 companies that have received expansion funding.

Room for improvement? Regions falling behind

Despite optimism for entrepreneurial hotspots outside London, not all regions are seeing the positive signs of the North West. The Wales and North East, for example, are slowing on Index metrics. Wales, for instance, has the second-lowest number of high-growth companies in the UK at 77 – though this still tops Northern Ireland’s 12, and the region has not seen any increase in VC funding. However, it’s not all bleak – Wales has the highest ratio of private equity-backed companies per 1,000 companies of any UK region, at 0.41.

The North East has seen a decline in expansion amongst its entrepreneurs. While the region has 97 high growth companies, more than Wales and Northern Ireland, it has just 19 companies backed by private equity funding, fewer than any other region. Its expansion activity has also slowed, with just five companies receiving this type of funding, the lowest number in the UK, and the value of this funding is also the UK’s lowest, at £10 million. The North East has seen stronger metrics in entrepreneurship in the past, however, pointing to its potential to regain its foothold amongst start-up businesses in the future.

2017 revealed a mixed national picture for Britain’s entrepreneurs. While not all regions saw the same level of entrepreneurial growth, the emergence of hotspots like the North West offered a promising change from a concentration of start-up activity in and around London. With 2018 holding new challenges and opportunities such as Brexit, it remains to be seen how UK entrepreneurs will continue to adapt and grow.