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Best cities for small businesses revealed

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Cambridge, Edinburgh and Brighton are home to Britain’s most productive small businesses, with Liverpool, Rochdale and Chatham in Kent falling behind, research has found.

A study by the Centre for Cities thinktank found significant regional variations in the performance of small- and medium-sized enterprises, and urged city leaders to maximise the potential of these firms.

The report, Small Business Outlook, found SMEs were likely to be more productive if they pursued “high-growth” strategies, such as competing on quality rather than price, pursuing innovation, investing in training and developing their workforce, offering customised goods and services and operating in competitive markets.

It found Cambridge was the most likely place to house such firms, which tended to be more profitable and to drive national economic growth over the longer term. Edinburgh, Brighton, Swindon and Derby made up the top five.

At the bottom of the table were Chatham, Rochdale, Liverpool, Worthing and Blackpool.  

The report urged city leaders and the government to work together to ensure cities provided the best environment for businesses through investment in skills and infrastructure.

It argued that “a more radical approach to fiscal devolution”, giving cities greater control over economic development, was in the interests of national government, town halls and businesses. Cities needed greater long-term certainty over funding streams to allow them to plan for the future to deliver the skills and infrastructure businesses needed.

Alexandra Jones, chief executive of Centre for Cities, said the disparities told “the story of Britain’s uneven economic recovery”.

She said: “Cities with the largest share of SMEs employing high-growth strategies have wages that are, on average, 18% higher than the bottom five cities.

“Firms that adopted higher growth strategies were less likely to have taken cost-cutting approaches – such as implementing redundancies – during the recession, and are now more likely to be actively recruiting and expanding their businesses in the recovery.

“By contrast, the cities hit hardest during recession had fewer firms adopting high-growth strategies, and these places continue to lag behind other parts of the country in terms of employment and productivity.”

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