The UK is becoming the new self-employment capital of Western Europe, as more entrepreneurs flock to British cities to launch start-up businesses.
Within this growing nation of up-starters, there is a legion of business school graduates who have shirked the corporate scene.
Instead of pursuing financial sector and management consulting jobs, these graduates are helping the UK become Europe’s biggest entrepreneurial centre.
UK self-employment has risen 8% in the past year, more quickly than the majority of other European start-up destinations, according to analysis from the think tank IPPR.
Overall, 14% of the UK’s working sector is now self-employed, compared with 10% in Germany, 11% in France and 13% in Switzerland and Belgium. About 7,700 people in the UK become self-employed or become entrepreneurs each week.
A cluster of these entrepreneurs are using British business schools to launch their ventures. At Cranfield School of Management, based near London, 17% of 2013’s MBA cohort started their own businesses.
At Oxford’s Saïd Business School, 13% of their 2010 graduates launched their own businesses. Derek Walker, director of careers, said that a significant number of students chose to start their own businesses last year, too.
Although 96% of London Business School’s MBA cohort received job offers last year, 20 started up their own ventures.
Around 526,000 new businesses were launched in the UK last year – a new record, according to data from Companies House.
Bernhard Niesner, the CEO of Busuu, is a graduate of IE Business School’s Spanish MBA program (taught in English). But, like many other entrepreneurs, he decided against setting up in the Milan area or further afield in Silicon Valley in favour of a London launch.
“It’s the best ecosystem at least in Europe and maybe the world for a start-up like ours,” he said. “There is a big talent pool, and a lot of people with similar experience in what we are trying to do.”
One reason for such an upsurge in UK-based entrepreneurs is increased access to venture capital. The European Investment Fund pooled €612 million into UK SMEs through portfolio funds, according to its 2014 report, with sizable investments in British-based companies such as Skyscanner, one of Europe's fastest growing tech firms.
Silicon Valley is home to more of these technology start-ups than London’s Silicon Roundabout, but Joanna Shields, CEO of Tech City UK, Europe's fastest-growing cluster of tech companies, said there is incredible momentum in the UK’s technology and digital sectors.
“Our goal now is to build on these foundations and help growth-stage businesses scale rapidly, and generate jobs,” Joanna said.
Figures published in the Tech City’s annual report show the number of technology companies in London increased 76% from 2009 – 2012, and that the tech sector in the capital grew by nearly 17% in the same period.
The rapid adoption of entrepreneurship in the UK has highlighted how much the financial crisis has changed the labour market. Self-employment in the UK has accounted for about a third of the rise in total employment over the past four years.
Despite the excitement, some argue that many of the newly self-employed are in fact barely working at all. That would suggest there is more untapped potential in the economy than the 6.5% UK unemployment rate would suggest.
“The UK is just as much a nation of shopkeepers as a vanguard of cutting-edge capitalism,” said Spencer Thompson, IPPR’s senior economic analyst.
Despite more capital being pumped into the UK, eyebrows are still raised at the prospect of start-up funding – lambasted as “Mickey Mouse funds” – within Europe.
Matthias Ummenhofer, head of venture capital at the European Investment Fund, said: “Unfortunately in Europe still, in many cases, if we wouldn't be the cornerstone investor in a fund… Funds don't happen. People have a very hard time raising money.”
Yet there are a bevy of business school-bred start-ups that are attempting to crack this market, and they see the UK as their ideal launch pad.
The language of business
Bernhard, CEO and co-founder of Busuu, has found a niche: “We offer the first language learning app that allows direct exchange with native speakers.”
The language learning company provides free access to audio-visual online courses. Through Android and iOS apps, the Tech City-based business teaches 11 different languages, from German to Mandarin.
English is the most popular, accounting for more than 40% of language learners, followed by Spanish and French. Flexibility has allowed the company to tap into a younger market through technology.
“Nowadays language students want to learn in a flexible and mobile way, whether at the bus-stop or on the beach,” said Bernhard.
He thinks his London location has helped Busuu solve one of its biggest challenges: finding the right talent. “We moved the company last year from Madrid to London, and to find top talent, it’s much easier being in London,” Bernhard said. “It was definitely the right decision for us to come here.”
The start-up was founded in early 2008 and has grown to have more than 45 million global users. In 2012, the company notched 10 million downloads of its Android and iOS mobile applications.
Busuu has raised £3.8 million in funding since its launch. The company expects to generate revenues of £7.9 million this year.
Going ape for start-ups
Jerome Mayhew, managing director of Go Ape, has a simple explanation for his company’s success: “When we opened Go Ape, something like this didn’t exist in the UK. We created our own market and dominated it.”
The tree-climbing entrepreneur, an alumnus of UK-based business school Cranfield, operates in Britain’s leisure sector. The adventure activity business operates 28 locations around the UK.
Growth exploded when Go Ape targeted new demographics – it now caters for corporate events, which help drive revenues up. “We’ve focused on [corporate events] in the last two or three years, and it has a 30% growth history year-on-year,” said Jerome.
He met his fellow apes at business school, and the co-founders have expanded into the US market with six strategically placed locations. They plan to open five more American courses every year through to 2018 and beyond.
“We intend to grow as fast as we can there,” Jerome said. But it has been more difficult to attract US customers. He added: “We have an entirely US team. When it comes down to judgment calls on cultural differences, we go with their advice on that.”
Since launching in 2001, more than 2.5 million customers have used Go Ape. The company turned over about £11 million in 2011, with profits of around £1 million. As well as further expansion in the US, it is looking at branching out into South Africa and Russia.