Recent ONS business data has shown that in 2009-10 the rate of businesses closing was higher than the rate of businesses starting up. This is known as the birth and death rate, and the ‘net rate’ shows the difference between each rate. In 2009-10 this net rate was affected by the recession and was negative. This data treated an ‘enterprise’ as an entity producing goods or services that had either turnover or employment during the period.
Reasons for the fall in business start-ups
The fall in the net rate in England was the result of the birth rate falling from 2008 to 2010 and the death rate increasing dramatically in 2009. The birth rate was falling pre-recession and throughout this period, but the recession was a major reason for the dramatic increase in death rates. The recession lasted five quarters from Quarter 3 in 2008 to Quarter 3 2009, and the rate of business deaths was 12.1 per 100 active enterprises in 2009.
We can see in the chart that the net rate of enterprise births and deaths stayed relatively stable from 2004 to 2007, then declined in 2008 and more noticeably so in 2009. In 2010, the enterprise net rate showed signs of recovery and became positive once more in 2011. After the recession, the birth rate in 2011 was 11.4 births per 100 enterprises, which is higher than the rate in either 2009 or 2010.
Chart 1: Enterprise net rate, birth rate and death rate in England from 2004–11
Partnerships between local authorities and businesses
Despite fluctuations in enterprise net rates in England between 2004 and 2011, similar changes were also seen in Local Enterprise Partnership areas (LEPs). Local Enterprise Partnerships are partnerships between local authorities and businesses. They decide what the priorities should be for investment in roads, buildings and facilities in the area.
Following a similar pattern to England overall, the London, Tees Valley and Thames Valley Berkshire LEPs all had higher enterprise birth rates than death rates from 2004 to 2008. These three areas also all had higher death rates than birth rates in 2009, having fallen dramatically from 2008.
In 2010, the London and Thames Valley Berkshire LEPs recovered somewhat to have positive enterprise net rates, whereas the Tees Valley LEP’s net rate continued to fall in 2010 and recovered later. In 2011, these LEPs all had higher positive net rates than they did in 2004.
Chart 2: Enterprise net rate for three Local Enterprise Partnerships from 2004–11
These statistics were analysed by the Area Based Analysis team at the ONS using business demography data. If you’d like to find out more about the latest enterprise birth and death rate statistics read the full article and for more area based analysis, visit the regional theme pages of the ONS website. If you have any comments or suggestions, we’d like to hear them! Please email us at: firstname.lastname@example.org.