Examining the effect of graduate start-ups on the UK business landscape
The Five-Year Graduate Business Boost
As this year’s freshers settle down in their new digs ready for several years of study, a new wave of graduates is boosting future prospects by starting their own businesses. Over the past five years, the number of new companies being started by graduates has risen steadily despite economic and political uncertainty.
We’ve gathered the data to determine whether or not UK graduates can hope to have a big impact on business, and found the institutions where self-starters are getting the best possible chance of success.
Graduate start-ups vs UK registrations
Between 2014 and 2017, enterprising graduates in the UK registered a total of 16,202 new businesses within two years of leaving university. This figure includes social enterprises, which are defined differently from traditional businesses as not-for-profit community schemes. There were 13,713 active companies started by students at the end of the 2017/18 academic year.
Graduate start-ups account for roughly 1% of all UK business launches in each of the years under analysis. Starting at 1.13% in 2014, the figure declined to just under 1% two years later, before rising again in 2017.
Considering the estimated 32.78 million people currently in employment in the UK, 1% of business creations seems more than a reasonable contribution from the country’s graduates.
Universities are beginning to play a part in shaping graduates’ attitudes towards their future careers more than ever. Where vocational courses sharpen a particular set of skills to boost students’ chances of employment, universities have recently begun to give budding entrepreneurs a grounding in business from which to pave their own way, within the courses themselves.
Additionally, more and more unis are offering more extracurricular opportunities such as mentoring, desk space and even financial support to help the most promising ideas get off the ground. With more than 25,000 companies making up the graduate start-up sector, we’re seeing a new and more enterprising generation of university leavers, keen to make their mark on the business landscape.
So how has the graduate start-up sector affected the UK’s economy as a whole?
Contribution to UK economy
Since 2014, the UK’s graduate start-ups and social enterprises have turned over an estimated £2.8 billion in total, according to figures from HESA. Broken down further, 13,713 companies generated £822 million turnover in the most recent academic year of study, 2017/18. This massive total even compares favourably against some of the world’s best-known brands. Here’s how the total turnover for all the student start-ups stacks up against some of the world’s biggest hitters.
Student business turned over £822 million
Technology and increasing access to entrepreneurial support are lowering the barriers to business, meaning more and more people are pitching in to come up with ideas for products and services without the formalities.
We see the same thing in Silicon Valley – the suits and boardrooms where businesses grow being gradually replaced by casual computer geeks sharing ideas over cups of coffee at their WiFi-enabled coffee shops. That entrepreneurial spirit is being felt in every measure of a good business – employee headcount being just one.
In 2017/18, the UK’s graduate businesses employed 25,677 people. Let's put that into a wider context alongside some of the nation’s leading businesses.
With over 25,000 people employed in the graduate start-up sector alone, there’s plenty of potential for any number of these companies to grow into roles forming the backbone of the UK economy – or, in the case of ‘unicorns’ like Oxford Nanopore and Darktrace from our recent study (click here) – to make a worldwide impact with vast valuations and external backing.
According to HESA data, UK grads have received more than £820 million in external investment since 2014/15. Whether wowing backers with miracle tech, or bidding for extra funding to improve infrastructure and grow their company, graduate businesses are proving an attractive investment from outside interests.
Social enterprises – raising awareness of issues
More than 1,200 people were employed by graduate social enterprises in 2017/18 – only a fraction of the total employed by graduate businesses overall. But their work in raising community and issue-based awareness around a number of different great causes is to be commended.
Some of the UK’s biggest brands are themselves social enterprises, including the Co-operative and The Big Issue. Money made through these ventures is invested back into them or their driving causes, which, in the above examples, means more money on strengthening local communities and tackling the homelessness crisis.
We observed an average of 102.5 new graduate social enterprise registrations for each of the years in our study, and almost £25 million of total external investment. Students showing passion for local causes is not a new endeavour, but as Dr Robert A. Phillips of Manchester Enterprise Centre points out, it’s only in recent years that the level of support for social entrepreneurs has been adequate enough to sustain them.
“While some students volunteer and others donate to (or collect for) charities, working with a social enterprise allows those who have some time but little money to earn something while helping a cause they feel passionate about.”
Heightened awareness of good causes spread via social media to larger audiences and the opportunity to learn new and valuable approaches to doing business are just two of the reasons why graduates are increasingly turning to social enterprise.
Data from HESA shows that four of the UK’s 105 universities each played a part in more than 200 graduate start-ups during the 2017/18 academic year, with a further six each responsible for 100 or more.
Which universities are playing the largest part in equipping their students with the tools and resources to start their own business?
Business-boosting universities: Top 5
Royal College of Art
- 250 graduate start-ups registered in 2017/18
- 2,155 students enrolled in 2017/18
Royal College of Art’s incubator InnovationRCA was nationally recognised for its success in forming new businesses this year, with an award from the UKBAA Angel Investment Awards. RCA was also voted the world’s best Art & Design university for the fifth year running in the Quacquarelli Symonds (QS) rankings, boosting its credibility as the post-grad destination for budding creatives.
University of the Arts, London
- 240 graduate start-ups registered in 2017/18
- 18,970 students enrolled in 2017/18
Uniting seven of London’s most notable arts colleges under one banner, UAL’s distinguished alumni and cultural renown have made it one of the most attractive places for creative study. UAL offers a variety of short courses to help students establish the basics of business, including the ability to reflect on which of their skills serves the biggest needs and how to spot opportunities.
- 229 graduate start-ups registered in 2017/18
- 17,630 students enrolled in 2017/18
According to HESA data, approximately one in ten of England’s graduate start-ups was set up by former students of Kingston University in 2015. The Guardian league tables also saw Kingston named as the best place to study design in the UK. The university’s enterprise scheme offers workshops and events, a dedicated workspace and regular Hackathons.
The University of Central Lancashire
- 201 graduate start-ups registered in 2017/18
- 23,000 students enrolled in 2017/18
UClan has links with several North West enterprise schemes to help graduates get their business off the ground. The Preston-based university focuses on mastering the digital sphere, business training and green business initiatives. UClan is recognised here as the highest business booster outside London, and one of the youngest universities to break the QS rankings.
- 197 graduate start-ups registered in 2017/18
- 6,000 students enrolled in 2017/18
Originally a fine arts school, Falmouth University has seen specialist courses for app and games development attracting worldwide attention. The university’s Launchpad project is a one-year course whose recipients receive a stipend to pursue their tech start-up while also studying for an MA in Entrepreneurship.
Between them, these top five ranking universities have been instrumental in the creation of more than 1,100 new business in 2017/18 alone.
Rounding out the top ten:
Only one of the top five universities listed has a single social enterprise listed among its ranks – here, Manchester Metropolitan University and the University of Bedfordshire contribute another 7 to the top 10.
Interestingly, only 3 of the top 10 are based in the North of England. But with links to the North West’s burgeoning business scene, UClan and Man Met are well-placed to take advantage of the UK’s unofficial Second City’s growth. While some students are lucky enough to receive funding to reach their goals, for example at Falmouth, others need to juggle their studies with running a business on the side – with mixed results.
The personal cost of student business
Figures shared with us by Save The Student shed light on the personal costs of running a business while studying. The Student Money Survey in 2018 identified 4% of respondents were running their own business while at university. From these students’ responses, we can get a good look at just how they manage their time with both their studies and a fledgling business to think about.
Our student-preneurs earn £253 a month on average from their businesses. But with monthly costs like rent (£412) and groceries (£93) to think about, the sums don’t add up.
To try and mitigate their monthly spend, our business-focused undergrads get an average of £164 per month from their parents. But 36% of respondents don’t think this is enough to get by on. For many students the money situation can be disheartening:
- 90% keep track of their spending
- 80% worry about having enough money to live on
- 55% say their mental health suffers because of money worries
- 33% say their studies suffer
Although these results are reflected quite closely in the overall Student Money Survey, it’s worth noting that a smaller portion of student-preneurs feel their studies are suffering as a result of their financial situation than the overall scores (35%).
There are some trade-offs for our fearless student businessmen and women, however; the overall spend on going out and socialising is £49 per month. For the 4% who run a business while at university it’s much lower at £36 a month. Spend on Health & Wellbeing (£13 vs £15) and Course Materials (£13 vs £15) are also lower for students who run a business than those who don’t.
In order to feel more financially comfortable, the 4% of students who run a business at university are making sacrifices in their lifestyle and even their mental health. But with growing support from university incubators and an increasing priority in supporting students with mental health issues, help is more visible for those who feel they need it.
The powerful impact of universities’ incubators and accelerators, plus increasing support for students and graduates looking to start their own business, can only be a positive prospect for the UK landscape. With the number of active companies on the rise throughout our study, and turnover gradually increasing with a sharp rise last year, we’re excited to see what the future holds for UK graduate companies when the support system solidifies even further.
With universities putting more into their graduate support schemes than ever before, it’s no surprise to us that big companies are spotting the potential for world-beating products and services arriving fresh off the campus. A survey by Enterprise Educators UK reveals that studying entrepreneurship as part of their day-to-day routines made students more business-minded. 53% of respondents said it had a very positive impact. A further 13% of respondents say they took an accredited entrepreneurship at university because they were in the process of setting up their own business at the time!
Pareto Law have been at the forefront of entrepreneurial Graduate talent for nearly 25 years, having placed over 27,000 salespeople into roles with huge ROI.
To find out how a Graduate can transform your sales team today, call us on 0330 057 9138 or click the button below.
To encourage the next generation of graduates to start and grow their own businesses, Pareto Law is offering one lucky UK student £10,000 worth of sales training.
By sending us a video of themselves delivering a short video pitch, we’ll help the lucky winner to grow their business potential exponentially. To enter the competition, head over to our competition page here.
To hear from some of our most successful alumni, watch our Grad to Greats from 2018.
The Five-Year Graduate Business BoostExamining the effect of graduate start-ups on the UK business landscape
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