New ‘east-west divide’ splitting north start-up economy

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While western areas including Manchester are thriving, regions east of the Pennines are lagging behind, the study says

An “east-west divide” has opened up in the number of start-ups created across the north of England, research reveals.

Data suggests a larger number of start-up firms are thriving on the west side of the Pennines, with significantly fewer to the east.

This runs contrary to the government’s Northern Powerhouse ambition to “level up” the North, the study said.

The Department for Business, Energy and Industrial Strategy said it remains “committed to the Northern Powerhouse”.

The Enterprise Research Centre (ERC) said its findings strengthened the case for better east-west rail links, and challenged the government to do more to help foster “best practice” for businesses.

The study analysed the latest available data for start-up rates, from 2018.

It found Greater Manchester’s rate was among the highest in the UK, with 58 per 10,000 population.

But while neighbouring regions including Merseyside and Cheshire also showed healthy rates, many eastern areas “lagged far behind”, with the north-east having the lowest rate of just 19 per 10,000.

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The study highlighted Greater Manchester as an area where start-up companies were flourishing

Peter McDowell, of Business Durham, which supports economic growth in the region, said there was a “natural cultural tendency” for many people in the north-east to join large employers, with the region traditionally regarded as a manufacturing and an “export economy” rather than a haven for start-ups.

He said the region also struggles to retain university graduates, with many choosing to return to regions with larger urban economies.

Mr McDowell added: “This is no surprise. The north-east has lagged behind many other parts of the country. It would be the same if you compared it with North Wales, or the south.

“This is why we are working on many projects and initiatives to promote more investment and growth in the area and encourage more new businesses.”

Greater Manchester also had the highest proportion of start-ups that manage to reach the £1m turnover milestone within three years (2.2%).

East of the Pennines, start-up growth was generally slower, with the exception of the Sheffield City Region (2.1%).

‘Inequalities’

The ERC has presented its findings in a meeting involving local authorities across the Northern Powerhouse area.

The government defined the Northern Powerhouse as stretching northwards from a line running between the Mersey estuary in the west, to the Humber estuary in the east.

The ERC’s deputy director Mark Hart said: “While the current political rhetoric talks of ‘levelling up’, what we’re seeing in business dynamism terms is a clear ‘east-west divide’ emerging.

“If the Northern Powerhouse is going to be a meaningful economic unit, we have to address these inequalities.”

The Department for Business, Energy and Industrial Strategy said: “This government remains absolutely committed to the Northern Powerhouse and levelling up growth across the whole country to drive productivity, empower communities and rebalance opportunity.”