Why is this National Indicator important?
New business formation is a good indicator of how conducive we are to entrepreneurship in the business environment. At the moment, however, we lag behind the UK. Small businesses are the lifeblood of local town centres and communities. That's why a fundamental aim of Government is to improve the business creation and growth of small businesses in Scotland.
The provision of good quality support and assistance will remain crucial to increasing new business formation and sustainable growth of enterprises. But, in the longer term, real improvements in our cultural approach to entrepreneurship and enterprise will provide the greatest and most long lasting benefits.What will influence this National Indicator?
- Business formation is determined by a number of factors, including:
- General economic conditions: a stronger economy leads to a greater demand for products and services, providing opportunities for new enterprises to supply them. A strong and stable economy also increases optimism in the future and the chance of a new business succeeding.
- Effective regulation: valuable and targeted regulation creates a more conducive business environment, making the start-up process simpler and more attractive to potential entrepreneurs.
- Access to finance: new businesses require finance and investment to set up and commence trading. The relative availability of this finance will help determine the number of new starts.
- Entrepreneurial attitude: the attitude of the Scottish population towards entrepreneurialism influences new business formation. The greater the spirit of entrepreneurialism, the more businesses will be started.
What is the Government's role?
Increasing sustainable economic growth is the Scottish Government's top priority and the actions we are taking will help enable more business start-ups - especially important in the current economic climate.
Enhancing the quality and focus of support for business and innovation will have a direct impact on our achievement of this indicator. The reforms to Scottish Enterprise and Highlands and Islands Enterprise, the transfer of the Business Gateway contracts in the Scottish Enterprise area to Local Authorities and the extension of the Business Gateway service to Highlands and Islands Enterprise area will support and stimulate business creation, competitiveness, innovation and growth across Scotland.
Business Gateway provides a first stop access for all forms of business support including start-up training, business advice and details of financial support that may be available to support new businesses. The role being given to local government will ensure a more responsive, accessible and joined-up business development service. Not only will this increase the number of people setting up in business, it will also make business support more accessible at a local level.
Scottish Enterprise and Highlands and Islands Enterprise will focus their support on the areas where they can have the most economic impact - investment and innovation by companies and sectors which have growth potential and are of national or regional significance.
How are we performing?
The number of business start-ups in Scotland has been relatively stable for the last ten years. The latest figures show 35 registrations per 10,000 population in 2007, up from 28 in 2006. However, it is likely that this increase, in part, is a reflection of a change in business behaviour in response to a recent change in tax legislation.
Source: Department for Business, Enterprise & Regulatory Reform.
Note: The sharp increase in the latest year may partly reflect the impact of changes to tax rules relating to composite managed service companies in April 2007.
Methodology
This evaluation is based on: any difference in the rate within +/- 1 per 10,000 population of last year's figure suggests that the position is more likely to be maintaining than showing any change. An increase of 1 per 10,000 population or more suggests the position is improving; whereas a decrease of 1 per 10,000 population or more suggests the position is worsening.
For information on general methodological approach, please click here.
Further Information
2007 Spending Review Technical Note
Statistics Topic Page
Who are our partners?
Local Authorities (lead role)
Scottish Enterprise
Highlands and Islands Enterprise
Related Strategic Objectives
Wealthier and Fairer