Smaller businesses backed by the Start Up Loans programme have higher survival rates finds independent evaluation

• Independent evaluation of Start Up Loans programme finds businesses it supports survive longer, grow more and create jobs across the UK, mostly outside London and the South East
• Companies supported by Start Up Loans are far more likely to survive their first five years (69%) than comparator businesses (43%)

Smaller businesses backed by the government’s Start Up Loans programme have higher survival rates than other businesses, finds and independent evaluation, conducted by SQW working in partnership with Professor Mark Hart, Qa Research and The Data City.

The programme also supports a significantly greater proportion of smaller businesses outside London and the South East, as well as female and Ethnic Minority entrepreneurs.

Highlights

The evaluation measures the impact of loans drawn down by two cohorts of smaller businesses who took out loans in financial years 2018/19 and 2021/22, and key findings include:

• Economic impact: For every £1 in economic costs of the programme, between £5.50 and £5.60 of additional Gross Value Added (GVA) is generated for the UK economy
• Job creation: In addition to the employment of the loan recipients themselves, one additional employee job was created for each loan, on average.
• Business growth: Loan recipients’ businesses experienced stronger growth since incorporation than comparator businesses
• High proportion of female founders: 41% of Start Up Loans recipients are women compared to 20% of zero employee businesses being women-led. ^{Read footnote text 1}

Since the programme started in 2012, Start Up Loans has provided more than £1.1bn of start up financing to UK start up and early-stage businesses, across more than 118,000 separate loans.

Serving under-served UK start ups

Based on self-reported evidence from 804 loan recipients from the 2018/19 and 2021/22 cohorts, the evaluation estimates that just over two-thirds (68%) of the finance provided by Start Up Loans would not have been provided by mainstream finance providers – indicating the programme achieves its objective of providing vital support to UK start-up businesses and addressing a gap in the market for under-served founders.

Job creation

The evaluation shows that 804 loan recipients responding to the evaluation survey had created 826 net additional employee jobs in the last completed financial year. This means that in addition to the employment of the loan recipients themselves, on average just over one net additional employee job was created for every loan provided for the survey respondents from the two cohorts.

Supporting under-represented business owners

The evaluation found business owners with potentially more business and life experience fared better. The evaluation found enterprises set up by loan recipients aged over 30 years were more likely to still be operating, at the time of being surveyed, than those set up by younger entrepreneurs 18-30 years. The probability of survival was 70% for the former group vs 60% for the latter. Those aged 30 and under were more likely to report increased business and personal confidence than those aged over 30, and more likely to attribute their increased business confidence to the Start Up Loans programme.

Female founders: Start Up Loans has a relatively high proportion of female beneficiaries. Across both cohorts, 59% of loan recipients were male and 41% were female. This is substantially higher than the 2022 Small Business Survey which reported that 20% of zero employee businesses were ‘women led’ ^{Read footnote text 2} .

Ethnically diverse founders: The Start Up Loans programme has also attracted a relatively higher proportion of loan recipients from Black, Asian or Other Ethnic Minority backgrounds compared to the UK business owner population. Across both cohorts 18% of loan recipients identified as being from an Ethnic Minority background, compared to 4% of businesses with no employees being led by people of a Minority Ethnic group ^{Read footnote text 3} .

• ^{Return to footnote location 1}

  Department for Business and Trade (2023), Longitudinal Small Business Survey 2022, https://www.gov.uk/government/statistics/small-business-survey-2022-businesses-with-no-employees

• ^{Return to footnote location 2}

  Department for Business and Trade (2023), Longitudinal Small Business Survey 2022, https://www.gov.uk/government/statistics/small-business-survey-2022-businesses-with-no-employees

• ^{Return to footnote location 3}

  Department for Business and Trade (2023), Longitudinal Small Business Survey 2022, https://www.gov.uk/government/statistics/small-business-survey-2022-businesses-with-no-employees