Starting a business is no easy feat. You need a wide knowledge of market competitors, a savvy business and marketing plan, and often a handful of investors, not to mention a killer niche that is demanded by the locale.
Despite the renowned difficulty of starting a business, there were over 800,000 new businesses registered in the UK in 2020. It would seem that the entrepreneurial spirit is alive and well and that many took the opportunity during the coronavirus lockdown to kickstart their own ventures, as this represented a marked rise from previous years. With so many people choosing to develop their business ideas or to formalise their side hustles, it is important to know what the best industries are for start-ups. So what are the industries most likely to result in business success?
Recent analysis by Ember revealed that the retail trade (not including retail of motor vehicles) tops the rankings of industries in which businesses are most likely to succeed after scoring highly in a number of key indicators. Ember is a cloud accounting company that automates accounting and tax to help make business admin simpler and more cost-effective for freelancers, contractors, start-ups and small businesses.
Commenting on the study, Ember co-founder Daniel Hogan said: “It’s fascinating to see how the UK’s different industries perform in this analysis, and there are some very interesting insights for the country’s would-be entrepreneurs. Retail’s good survival rate and high ratio of new businesses make it a very attractive proposition for start-ups.”
We are going to have a look at what Ember found in their study and which industries are the most and least likely to result in business success.
What industry is most likely to result in business success?
Ember’s analysis revealed retail to be at the top of the overall industry rankings. The construction industry came second on the list, with the wholesale industry ranking third for business success. The motor trade industry placed fourth in the index and had the best average survival rate for companies, while the property industry ranked fifth. The finance and insurance industry was rated as the least favourable in which to start a new business. The healthcare industry was rated second last in the list, and the production industry was placed third.
Ember’s research used ONS data to assess Britain’s 15 broad industry groups on factors including the number of businesses that were started between 2014 and 2019, compared to the number that failed in that time period, and the number of companies in that sector turning over more than £1 million. Each indicator was indexed to provide a score out of 100, with 100 being the best possible score. The scores were then averaged to give each industry a final rating out of 100. You can find the full table at the end of this article.
So let’s jump in and take a look at the details of what Ember found in their analysis.
The top three ranking industries were retail, construction, and wholesale, with respective index scores of 66.2, 57.1, and 54.8 out of 100.
The retail industry encompasses a broad range of markets that are all characterised by the process of selling products directly to customers. This includes products that are sold online, by mail, via door-to-door sales, in-store sales, and even some service-related businesses such as beauty salons.
Thanks to it having one of the highest survival rates and a healthy ratio of companies starting compared to businesses failing, retail topped the rankings with an index score of 66.2 out of 100. New retail businesses created between 2014 and 2019 had an average survival rate of 75%, and as one of the most common businesses in the UK, the potential market is large.
As with retail, the construction industry is a broad category that includes the construction of buildings, civil engineering, maintenance, and disposal, amongst other activities.
Construction came second in the list of industries most likely to result in business success with an index score of 57.1 out of 100. In June 2021 the output of the construction industry fell below the levels prior to the coronavirus pandemic in February 2020. However, this monthly fall was in contrast to a quarterly rise in April to June 2021 from January to March 2021. Despite these minor fluctuations, the construction industry remains one of the most likely to succeed when it comes to business success.
The wholesale industry is defined by the government as separate from retail and encompasses establishments primarily engaged in selling merchandise to retailers or, sometimes, other wholesalers. The wholesale industry supplies industrial, commercial, institutional, farm, construction contractors, or professional business users.
The wholesale industry came third in the list of industries most likely to result in business success with an index score of 54.8 out of 100. Outside of the years analysed by Ember, the wholesale industry continued to succeed. Between 2020 and 2021, the wholesale industry proved itself resilient to the damaging impact of the pandemic as it showed the second greatest increase in business creation.
The bottom three ranking industries were finance and insurance, health, and production, with respective index scores of 39.1, 43.6, and 44.7 out of 100.
Finance and insurance
The financial industry is a broad section of the economy made up of firms and institutions that provide financial services to commercial and retail customers. As well as banks and investment companies, the finance industry also includes insurance companies.
Of the 15 industry groups in Ember’s analysis, finance and insurance rated as the least favourable industry in which to start a new business, with one of the lowest survival rates for new companies. In the years beyond Ember’s analysis, the financial industry has continued to struggle. During the coronavirus pandemic, the financial sector experienced record falls and, as in any crisis, new businesses and startups were the least likely to survive.
The health industry includes businesses that provide medical services, the manufacturing and supply of medicines and medical equipment, social work, and residential care activities.
The health industry ranked second last in the list of industries most likely to result in business success with an index score of 43.6 out of 100. However, there remains hope; since 2019, the health industry has experienced a boost and in 2021 it saw the second largest fall in closures across all industries. This is perhaps down the rise in demand for health and social care during the pandemic and the subsequent lockdowns.
The production industry includes many different sectors such as the manufacturing of paper and paper products, mining and quarrying, energy supply, water supply, and waste management.
The production industry came third last in the rankings. The future continues to make for grim readings as the production industry experienced a significant fall in growth and a high number of closures during the coronavirus pandemic. However, on the positive side, between 2014 and 2019, the production industry did have the highest ratio of businesses turning over more than £1 million, with 8.48% of companies reaching that level.
Where to start a new business?
Now that we know the industries that are most and least likely to result in business success, you may be wondering where in the country is the best place to start a new venture.
Well, luckily, the whizzes at Ember have figured that out for us as well. Their research revealed Redditch in Worcestershire to be the best place in Britain to start a new business after the town scored highly in a number of key indicators for business success.
So if you are thinking about setting up a small business or startup, you might want to consider one of the higher ranking industries on the list and heading off to Redditch in Worcestershire to seek business success and fortune.
So there you have it. Starting any new business is a notoriously tricky venture, but there are certain avenues that are more likely to yield success than others. The retail, construction, and wholesale industries are most likely to result in business success than other industries. They also remained comparatively stable during the instability that the world experienced between 2020 and 2021.
So for all the entrepreneurs and budding business gurus out there, be sure to consider the findings from Ember’s research when developing your new business idea. You never know, you might be onto the next big success in the business world.
|Industry||Index score (out of 100)|
|Professional, scientific & technical||51.6|
|Accommodation & food services||51.1|
|Business administration & support services||47.6|
|Information & communication||47.0|
|Transport & Storage (inc postal)||46.7|
|Arts, entertainment, recreation & other services||44.9|
|Finance & insurance||39.1|