03The companies behind the jobs miracle
New businesses (start-ups and new branches of existing businesses) played very different roles in job creation compared to existing businesses (defined here as those that formed before 2010). This section sets out the geography of this.
Box 2: How are existing businesses and new businesses defined?
Existing businesses – those that existed before 2010, so were at least three-years-old in 2013, which is the point from which job creation is measured in this report.
New businesses – those that are new to an area, having been set up since 2010. In this research, this group includes start-ups and new branches of existing businesses.10
New businesses play a disproportionately large role in job creation and losses across Britain
Start-ups and new business branches have been responsible for the majority of job creation and most of the losses.11 And, as creation in these businesses outweighs losses, the net contribution is positive.
In contrast, existing businesses saw far fewer jobs created and lost. As losses outstripped gains, during the jobs miracle, the number of roles generated in established businesses fell. This is shown in Figure 4.
While new private sector businesses created around 18 million posts between 2013 and 2019, and lost 14.3 million, existing businesses generated 1.3 million jobs and lost 2.3 million.
Figure 4: Gains and losses were higher for new businesses and, for existing businesses, losses outweighed gains
These trends were particularly prevalent in cities and large towns. In urban areas, new businesses played an even greater role, making up a higher share of both gains and losses. This was especially evident in the most dynamic cities and large towns, driving the pattern seen in Figure 3. Cities and large towns where new businesses had the highest gains were also the most dynamic, with a larger degree of churn than other urban areas (see Figure 5).
Figure 5: Cities where new businesses had the highest gains were also the most dynamic
This raises interesting questions about the role of specific businesses in decisions about local economic policy. Local enterprise partnership boards across England usually allocate a number of seats to people from existing businesses. Their voice is important but should be balanced with the views of those from newer businesses.
Box 3: Job creation in London and Burnley
Between 2013 and 2019, Burnley and London saw similar levels of private job growth (23 per cent and 20 per cent respectively). But it was achieved differently.
Job creation and losses in existing businesses were comparable, with both losing more than they gained. However, the most significant difference was among start-ups and new branches.
While those in London created around 11 new positions for every 10 private sector jobs that existed in 2013, and lost around 8.4, the churn in Burnley was smaller.
At a rate of slightly more than 8.2 posts created per 10 private sector jobs, new businesses in Burnley generated fewer roles, but lost just 5.5.
Figure 6: Burnley and London saw similar job creation, but this was the result of different underlying dynamics
New businesses creating more roles is the key driver of jobs growth, not existing ones losing fewer
As previously mentioned, there are two factors that affect jobs growth – the number of posts gained and the amount lost. As Figure 7 shows, while there is a positive relationship between the absolute number created by new businesses and overall net private sector jobs growth, there is no correlation between losses in these firms and jobs growth across cities and large towns. This suggests the most important factor is the creation of roles, rather than specific moves to stop them being lost, either through extending support to existing businesses or aiming specifically to increase the survival rates of new ones.12