The impact of sector, specialisation, and space on business birth rates in the United Kingdom: A challenge for policy?

The authors use VAT data to shed light on the pattern of variation in business birth rates across the local authority areas of the United Kingdom. They seek to provide policymakers with a more realistic assessment of the extent to which their interventions might be able to affect the rate of new-business formation. An empirical investigation of the separate impacts of sector, specialisation, and space, suggests that the share of business-services businesses in the business stock seems to play the largest role in accounting for the spatial distribution of the business birth rate across the United Kingdom; and that this share is significantly influenced by the spatial pattern of population density. Policies which involve setting 'targets' for business birth rates need to take the local 'context' into account and, perhaps more importantly, aspirations may have to change: it seems unlikely that stimulation of business birth rates should realistically be expected to close the 'enterprise gap' between different parts of the country.