The North East has the lowest rate of people working in SMEs in the country, but those businesses are the most likely to survive, according to a new study.

A new report by Newcastle technology giant Sage and innovation foundation Nesta shows how the region has the lowest rate of SME start-ups in area UK region other than Northern Ireland, but also the lowest rate of SME “deaths” in England, Scotland and Wales.

But the report says that high levels of business survival can translate into low productivity and says that “creative destruction” can be good for the economy after finding that areas where large numbers of companies fail tend to have higher productivity.

The report highlights Sunderland as the having the North East’s most productive SME community, possibly due to the automotive cluster around the Nissan plant.

Stephen Kelly
Stephen Kelly

SMEs in Sunderland typically generate £139,000 of turnover per worker, compared to £91,000 in Newcastle, £90,000 in County Durham and £86,000 in Northumberland

Sunderland was praised for having an advanced incubator network through Sunderland Software City, and for its plans to develop a central business district on the site of the former Vaux Brewery.

The report has been published as Sage, which sells much of its technology to SME bosses to help them run their companies, tries to make itself as a champion for smaller firms under the leadership of CEO Stephen Kelly.

Mr Kelly said the report highlighted huge gaps in productivity between SMEs in different parts of the country and between different sectors of the economy, which public bodies needed to address.

Mr Kelly said: “Our call is for Government to work with local authorities, mayors and MPs to deal with this current productivity log jam locally.

“This can be achieved by driving up standards in education and providing appropriate digital skills, training, and digital tools for our entrepreneurs. Secondly, we give small and medium businesses access to easy to use productivity metrics and benchmarks.

Sage, at the Great Park, Gosforth
Sage, at the Great Park, Gosforth

“Finally, we recommend ensuring local authorities have the means and strategies in place to support, fund and educate small and medium businesses in a targeted fashion.”

The report highlights areas of SME strength in different parts of the region, with Newcastle’s smaller companies being cominated by the accommodation and food services sectors, with strength too in the health sector and professional, scientific and technical services.

By contrast, Sunderland , County Durham and South Tyneside’s SME sector was dominated by production companies and Northumberland had a high number of smaller firms in agriculture, forestry and fishing.

The report has been launched at the House of Commons by First Secretary of State Damian Green.

He said: “I hugely welcome this report by Nesta and Sage. The data and insights are a valuable addition to our own evidence base and enhance our understanding of the rich and complex SME landscape.

“With reports such as this, combined with the Government’s efforts to make the UK the best place in the world to start and grow a business, I’m confident the future looks bright for SMEs in our country.”