Big fall in start-ups as uncertainty takes hold

THE number of business start-ups in Scotland has fallen dramatically this year, prompting fears that economic instability is deterring budding entrepreneurs from launching companies.

New figures from the major banks show that just 5,550 business were set up in the first quarter of 2008 – 1,154, or 17 per cent, lower than the first quarter of last year.

The figure was also lower than the first quarter of 2006, when there were 5,991 start-ups – but slightly higher than the final three months of 2007 when there were just 4,792.

According to the figures from the Committee of Scottish Clearing Bankers, there have been falls in start-ups this year in all but one of 17 types of business they monitor.

The figures show that the number of new partnerships was worst hit. Almost a quarter fewer new partnership businesses were launched in the first three months of 2008 than in the same period last year.

The number of new sole traders slipped by 13.8 per cent to 2,725 and the number of new limited companies dropped by 19 per cent to 2,216.

One of the worst hit sectors was in the area classified as "recreational, personal and community service" which reported a 38 per cent fall, from 719 in the first quarter of last year, to just 443 in the first three months of 2008.

Agriculture, hunting and forestry was the only sector to report an increase, from 133 in the first quarter of 2007 to 146 in the same period this year.

Electric, gas and water supply dropped from 33 start-ups last year to just six this time, while new construction-related firms dropped almost 100 to 748.

Geographically, the number of start-ups dropped across almost the entire country, with Shetland and Orkney the only areas to report an increase in new firms. The number almost doubled to 21 in Shetland and grew by three to 23 in Orkney.

Edinburgh reported 300 more start-ups than Glasgow in the first quarter of 2008, at 959. But both cities recorded a drop – of 11.6 per cent and 19.2 per cent respectively.

Last night experts said the figures – which chart the number of new business accounts opened with Royal Bank of Scotland, Bank of Scotland, Clydesdale and Lloyds TSB – reflected economic uncertainty among would-be entrepreneurs, coupled with worries over business-tax reforms.

David Lonsdale, assistant director of CBI Scotland, said: "Clearly there is a good pipeline of thousands of new businesses starting up, though it is a shame that fewer entrepreneurs are taking the plunge than a year ago."

Gavin Brown, the Scottish Tory spokesman on enterprise, said new businesses could benefit from the Scottish Government's business rate cuts.

He said: "Although disappointing, it demonstrates how right the Scottish Conservatives were to focus on accelerating the proposed business rate cuts.

"The Small Business Bonus took effect from 1 April this year – I hope this can provide a much needed and deserved boost to businesses across Scotland."