Scottish cities in the fast lane for new small firms

MORE Britons are launching their own business, largely due to the pressures of the recession, according to figures published today.

The number of entrepreneurs in the UK has risen by 117 per cent over the past five years, fuelling a 41 per cent increase in the total number of companies.

According to business information services firm Experian, many businesses have been formed as a result of recession, as people become self-employed after losing their jobs or begin working from home part-time.

Despite other evidence that Scotland's small firm creation is falling, Experian's research shows that Scottish cities are among those with the biggest growth in these so-called micro businesses. Edinburgh is second behind Belfast and Aberdeen third.

Charlotte Hogg, managing director of Experian UK & Ireland, said: "The recession will have been an underlying factor. Many start-ups will have been created because of a change of circumstance, where people found themselves unemployed and needed to look at alternatives."

Experian said most of the businesses were in the business management and consultancy sector, mostly training, public relations and marketing.

But Professor Colin Mason of the Hunter Centre for Entrepreneurship at the University of Strathclyde has cast doubt on whether this is an "entrepreneurial revolution" for Scotland where entrepreneurialism has tended to lag behind the UK.

He said: "It reflects the growth of home-based and part-time business and the growth of the so called freelance economy.

"Whether you call it an entrepreneurial revolution, I don't know. Households are multiplying their income sources."

He said the so-called "project economy" where people bring in income from different sources was "increasingly becoming the norm" but that this might not be suitable for all people.

"You have got to have a certain set of skills and a certain temperament. Only certain kinds of people will thrive in this kind of economy. They have to have the skills to sell themselves and be comfortable living with uncertainty," he added.

But Experian said that micro businesses, which employ between one and ten people, have proved more resilient during the recession. Its data shows that the same small businesses have maintained the lowest insolvency rate compared to other types of businesses over the past five years.

"Micro-entrepreneurs have also capitalised on their agility to provide great service at the most competitive price during the recession," said Hogg.

The analysis of over 4.3 million directors reveals that the explosion in the number of directors associated with one- and two-man businesses was spearheaded by male entrepreneurs, up 146 per cent, and, in particular, by male directors in the younger age groups.The number of female entrepreneurs also saw a significant increase - up 72 per cent over five years. This was led by older females - with a 29 per cent increase in the 60-69 age group and 13 per cent rise in the over 69 bracket.