Self employment thrives in wealthy areas

Sunday 24 May 2015

Entrepreneurship is most likely to thrive in areas where wages are high, according to a new study by economists at the University of Sussex and the University of Sheffield.

They say that efforts from successive governments to boost entrepreneurship in areas where self employment is low have generally failed. There are fewer sole traders, limited companies and people looking at setting up a business in areas where there is less enterprise.

Looking at census data from England and Wales over the past 90 years, the researchers found that areas with low enterprise such as County Durham have had the lowest levels of self employment in each decade from 1921 to 2011.

They produced an Enterprise League Table for between 1971 and 2011, in line with when governments were actively trying to promote entrepreneurship. The results are based on self employment rates among people aged 18 to 65 across the 384 local authorities in England and Wales.

In areas where enterprise was low in 1971, these rates remained low throughout the forty years that followed. There were also some big changes in certain areas over the course of the study period.

Each London borough managed to move up the league table over 40 years. For example, Ealing went up 206 places and Newham rose 149 places.

Some coastal towns, on the other hand, saw a massive fall in where they placed on the league table. Blackpool dropped by 141 places and Bournemouth fell by 139. On the other hand, Brighton only fell by three places.

Commenting on the results, professor of enterprise at the University of Sussex and co-author of the research David Storey said: “Between 1971 and 2011 the increase in self-employment rates in England and Wales overall was very rapid, doubling from six per cent to around 13 per cent, but there were considerable regional variations.

“Governments have used public money to raise rates in low-enterprise areas in the belief that this would lead to wealth and job creation, but it hasn’t happened. Instead, entrepreneurial activity has changed in line with the economic prosperity of the area.”

He said that this suggests entrepreneurship comes as a result of wealth creation, rather than being a cause of it.

Researchers also looked at factors that influenced changes in self employment rates and the effects that immigration had between 1971 and 2011. They found that, between 1971 and 1981, areas that had more immigrants also had lower rates of self employment yet in 1991, 2001 and 2011, immigrants tended to be in areas where self employment was higher.

Professor Storey suggested that this is because newer generations of immigrants favour enterprise as a source of employment.

By Victoria McDonnell

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