An ‘East/West divide’ has opened up when it comes to business start-ups and firm growth in the Northern Powerhouse area, new research has found.

The Enterprise Research Centre’s Northern Powerhouse Growth Dashboard found that in
the most recent available figures (2018), Greater Manchester’s start-up rate was among the highest in the entire UK (58 per 10,000 population).

But while other parts of the North West including Liverpool and Cheshire also displayed
healthy start-ups rates, many areas east of the Pennines lagged far behind, with the North
East region having the lowest rate of just 19 per 10,000 people.

According to the Government’s definition, the Northern Powerhouse area stretches
northwards from a line running between the Mersey estuary in the west to the Humber
estuary in the east. It takes in 11 Local Enterprise Partnership areas (LEPs), which roughly
correspond to local authorities.

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 Sheffield City Region (2.1%).

But for firms scaling from £1m-£2m turnover to more than £3m, Cheshire and Warrington led the pack, with 9.1% of firms there achieving this over the 2015-2018 period. On this metric, Cumbria (8.6%), Sheffield (7.9%) and Greater Manchester (7.7%) also performed above the UK average (7.4%).

Cheshire and Warrington also contain the highest proportion of so-called ‘high-growth firms’, those growing their headcount by an average of 10% or more over a three-year period.

Areas in the east tended to show less dynamism, with the Tees Valley having the lowest
proportion of firms falling into this category.

The ERC has presented its findings in a meeting convened by the Greater Manchester
Growth Company – the body charged with boosting economic growth and skills development in the city-region – involving all 11 LEPS in the Northern Powerhouse region.

Mark Hart, ERC Deputy Director and Professor of Small Business and Entrepreneurship at
Aston Business School, 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 across the Northern
Powerhouse region.

“Manchester and some other parts of the North West seem to be forging ahead when
it comes to creating a good environment for start-ups and early-stage firm growth.
But to the east of the Pennines we’re seeing fewer entrepreneurs and slower growth.

“These findings may strengthen the case for investment in better east-west transport
infrastructure. But policymakers also need to study carefully what some Local
Enterprise Partnerships are doing to foster an enterprise culture locally and spread
best practice.

“If the Northern Powerhouse is going to be a meaningful economic unit, we have to
address the inequalities that appear to be leaving its eastern half decidedly underpowered.”


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