This report is intended as a basis for discussion only. Whilst every effort has been made to ensure the accuracy and com
Special Interest paper
Report prepared for the City of London Corporation by Experian Published November 2012
Characteristics of SMEs and Social Enterprises around Tech City
Characteristics of SMEs and Social Enterprises around Tech City is published by the City of London. The author of this report is Experian. This report is intended as a basis for discussion only. Whilst every effort has been made to ensure the accuracy and completeness of the material in this report, the City of London and the author, Experian, give no warranty in that regard and accept no liability for any loss or damage incurred through the use of, or reliance upon, this report or the information contained herein. http://www.cityoflondon.gov.uk/economicresearch
November 2012 © City of London PO Box 270, Guildhall London EC2P 2EJ
With grateful thanks to Social Enterprise UK for providing their sample data for use in this mapping exercise http://www.socialenterprise.org.uk/
Introduction This project follows a previous report by Experian, published by the City of London – Mapping SMEs in the City1 - which looked at the size profile (turnover and employee size) and geographic location of SMEs situated in the City of London. This new project explores the characteristics of SMEs and social enterprises in the Tech City area, that is, the electoral wards located immediately around Old Street roundabout. The research looks at the profile of businesses across the most recent three years, to observe if and how the business population is changing. The City of London Corporation has a longstanding interest in supporting enterprise in its neighbouring areas, understanding the potential that small and growing businesses have to fuel regeneration through creating jobs and attracting investment. The current exploration of Tech City helps to understand this important cluster and the ways in which the area is developing. Methodology Tech City For the purpose of this mapping exercise the Tech City area is defined here by combining ten electoral wards located in the vicinity of Old Street roundabout: Bishopsgate, Bunhill, Clerkenwell, Cripplegate, Haggerston, Hoxton, Portsoken, Spitalfields and Banglatown, St Peter’s and Whitechapel. This is the same definition used in Centre for London’s A Tale of Tech City report (2012)2. SMEs and social enterprises have been plotted in this area and their characteristics examined for the last three years using the Experian pH Megafile3 – Experian’s business data source. Social Enterprises Social Enterprise U.K. provided a file of business names and addresses of their members. These companies were matched to the Tech City analytical population to give an indicative sample.4
http://www.cityoflondon.gov.uk/business/economic-research-and-information/researchpublications/Pages/Mapping-SMEs-in-the-City.aspx 2 http://www.demos.co.uk/files/A_Tale_of_Tech_City_web.pdf?1340965124 3 http://www.experian.co.uk/phgroup/how-we-do-it/the-ph-megafile.html 4 The social enterprises have been taken from recent sample surveys and therefore may not fully reflect the entire population of social enterprises located in this area as at 2012. 1
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Headline Findings The overall number of businesses in Tech City has remained relatively stable across these three years. A 9% increase is seen from 2010 to 2011, followed by a 5% decrease of the absolute population size from 2011 to 2012, giving a small overall increase across this period of around 3%.
Tech City firms year on year Year 2010 2011 2012
Firms
% Change on prev. year
15,126 16,418 15,608
9% -5%
AllsitesinTechCityArea ChurnStatus Entrants Stable Leavers Churn Total
Sites
%
6,373 9,235 5,891 493
29% 42% 27% 2%
21,992
100%
Although the change in overall numbers is small, only around 40% of the companies have remained the same across this period, hence there is evidence of change within the population. Over a quarter of all businesses within the sample are classified as ‘entrants’ present at the end of the period but not the beginning. A further quarter are classified as ‘leavers’ - present at the start, but not at the end of the timeframe. Just 2% are classified as ‘churn’ - only present in the middle year (2011) in the analysis. St Peter’s and Clerkenwell are the most stable wards and the Retail and Wholesale sectors show the most stability.
A number of business characteristics were analysed to determine any changes or trends prevalent in the Tech City area. Sector Industry Classification At the industry level, Business Services represents almost a third of the Tech City population. Retail accounts for the second highest proportion at 18%, with a quarter of this comprising of ‘Restaurants and Food Services’. Size of firms Over three quarters of Tech City business sites have fewer than 10 employees. However the evidence indicates firms are increasing headcount with an increase in the proportion of sites with 11 + employees observed across the period. Corporate status Three quarters of businesses in Tech City are independent. Age of business Tech City firms tend to be relatively young; half of the Tech City population is 5 years old or younger with little change in age of the period examined due to the gradual churn observed in the population, with new companies emerging to offset the companies that are leaving.
Overall pattern e changess in the bussinesses tha at comprise e the popu ulation the ere are no Despite prevale ent trends in the age e of businesss, Sector Industry Cla assification n, number of employ yees or corporate sta atus in the Tech City Area. The business characteristtics of the enttrants, leav vers and th he stable businesses b a all also are o very simila ar. The Business Service e and Reta ail sectors comprise c ju ust under half h of Tech h City’s rela atively you ung, balanc ced popula ation. Desp pite busine esses chang ging at an individual level, the analysiis suggests a relativelly stable bu usiness eco osystem ov verall, for th he last thre ee years. Social Enterprisess enterprisess exhibited d a much la arger degrree of stability than th he rest of the Social e Tech C City popula ation, with 69% 6 of soc cial enterprrises classifiied as ‘stable’ acrosss these three y years, versu us 42% of th he Tech Ciity populattion as a whole. w
The ele ectoral wards of Hoxtton, Hagge erston and d Bunhill sho ow the highest numb ber of social e enterprisess in the sam mple. Typic cally, social enterprise es in the sa ample are older o than 11 1+ years, predomina p ntly indepe endent, with less than 50 emplo oyees, butt have a highe er concentration of headquart h ters relative e to the Tech City po opulation. e profile (tu urnover an nd employe ees) of soc cial enterprises was compared c The size to the profile of indepen ndent businesses in Tech City. Social S ente erprises were larger in n terms of both h turnover and emplo oyees relattive to inde ependentss in Tech City. C
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Tech City: 2012
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