Business finance experts at NerdWallet ran a study on 25 UK cities to find out which would be the most likely to weather a recession. The study used data from the ONS and other sources, looking at active business population, business survival rate, and disposable income, among other factors.
The Bank of England has warned that the UK Economy will soon enter a recession from the end of 2022 to the end of 2024, forecasting five quarters of negative growth.
While some businesses will receive some Government support for the next six months, small and medium firms will be the ones hit the hardest. In light of this, NerdWallet researched the cities best-set to make it through a recession and recover faster.
Leicester sits at the top of the table, scoring highly for most of the factors used in the study, with the Midlands scoring the highest in business birth rates, and second in terms of average disposable income. It saw close to a 14% business birth rate over 5 years, the highest in the table by some way.
Coming in second, Bolton had the highest disposable income than any other city, it also scored highly in business births, with a positive 4%. While it did not have as many “recession-proof” businesses as other cities in the table, its overall score led it to the runner-up position.
The top five cities, showing some of the factors used to rank them.
|Business Survival Rate
|Business Birth Rate
|Rate of "Recession-Proof" Businesses
|Average Disposable Income
While Bolton’s business birth rate was far lower than Leicester’s, it still maintained a higher survival rate than the overall winner. This means that although fewer new businesses emerged over the course of five years, a higher proportion of those that started were able to stay open than in Leicester. In contrast, Leicester enjoyed an impressive birth rate, but with a smaller fraction of those businesses still around five years later.
Leeds, Birmingham, and Sheffield follow in the table, and are among the top five UK cities who could show the most resilience in the face of economic downturn. Out of all the cities used in the study, Birmingham had the lowest business survival rate, but was able to get a place in the top five due to its high disposable income and number of active businesses.
While those living in Leicester have cause to be optimistic, none of this guarantees that any one city will thrive during these unprecedentedly difficult times.
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On top of energy costs, businesses will also have to deal with less disposable income from existing and potential customers, which could result in a significant decrease in foot traffic in all sectors.
Connor Campbell, business finance expert at NerdWallet said:
“There is no doubt that the next five quarters will be tough on everyone, and while consumers will be highly affected, the knock-on effects of the cost of living crisis will see a lot of businesses losing customers through no fault of their own.
While no business or city is truly recession-proof, it’s potentially good news for those who live and work in both Leicester, as they seem best-equipped to deal with the uncertainty ahead.
Nevertheless, wherever your city ranked in this study, it’s still a period of high anxiety for business owners, especially those who are struggling to secure funding, or are worried about how the energy price increase will affect both their own bills, and their customers’ incomes.”
At the bottom of the table, Plymouth scored last in the rankings. While it did not score last in any of the categories, it scored second lowest in both active business population, as well as in disposable income.
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