British start-ups are more likely to survive their first year of business than their European peers, says Rousseau Associates, the business consultancy specialising in SMEs and owner-managed businesses. 

According to Rousseau Associates, 93 percent of the 234,000 UK businesses launched in 2011* survived their first year of business, compared to an average survival rate across Europe of 83 percent. The UK’s business survival rate was also better than Europe’s other biggest economies, France (79 percent) and Germany (78 percent). Rousseau Associates says that the UK has less restrictive employment laws than many other European countries. This has given UK start-ups easy access to staff, and scope to vary the number of hours worked and the number of staff employed without facing expensive legal issues. The UK has additionally experienced amongst the strongest economic growth in Europe, boosting new businesses’ chances of survival.

Start-ups in the UK have also been given a significant helping hand by a number of Government initiatives, some proving more successful than others. For example, R&D tax relief, which allows small businesses to claim an additional 125 percent of their eligible R&D costs from their taxable income, has given a boost to many research – intensive businesses.

Rousseau Associates adds that the National Insurance Employment Allowance which was introduced last year to enable employers to reduce their NI bills by up to£2,000 per year, significantly reduces the cost to start-ups of taking on their first employee.

However, there have been some Government initiatives that have received less praise. For example, the Enterprise Finance Guarantee scheme, which aims to facilitate lending to viable businesses that have been turned down for a loan, and the Enterprise Capital Funds, which brings Government money together with private sector investment to establish funds to invest in small businesses. These schemes have so far shown limited success in filling the void left by the lack of bank lending. Michael Heath, Business Development Director at Rousseau Associates, comments: “UK SMEs have been given a helping hand with favourable Government policies, which have allowed them to keep growth on track.”

“These policies have helped to make it less of a risk for start-ups to take on new staff and expand. While zero hours contracts have often been misunderstood they can offer both employers and employees flexibility. They enable casual, part-time or short-term employment for those just starting out or returning to work, and it allows employers to have more flexibility over their wage bill and number of employees. The recession also forced a great deal of innovation. For example, while the high street was facing huge numbers of voids the pop-up shop and restaurant model provided an efficient way for entrepreneurs to test new concepts before committing to setting up a business.”

“Similarly the proliferation of incubators and accelerators across a range of sectors meant that many start-ups were better funded and had access to better advice than might previously have been the case.” Rousseau Associates points out that the newly appointed Government have pledged to cut red tape by £10bn for small businesses. It has also vowed to treble the number of start-up loans available and help businesses to expand from small to medium-size through the Help to Grow scheme.

The first ever small business minister, Anna Soubry, has been appointed to help push forward the small businesses agenda, adds Rousseau Associates. Alex Ambler, also a Business Development Director at Rousseau Associates, adds: “Innovation must be nurtured by supportive Government policies, so it’s vital that the new Government continues to reduce levels of red tape and increases support for small businesses. In its first year a new business is particularly vulnerable, access to funding and tax relief can provide a real boost to their chances of survival.”

British start-ups more likely to survive their first year of business than European peers – 95 percent of UK start-ups survived their first year (2011/12)