Tower Hamlets was the fifth most entrepreneurial borough in London in 2012, far outperforming the other ELL boroughs with 2,395 new businesses.
The borough consistently ranked above the ELL and London average for business birth rate since 2004, making it a particularly dynamic area of growth for start-ups. New businesses accounted for 17 per cent of trading businesses in 2012.
“We have always seen a huge appetite for entrepreneurship in the borough,” Jonathan Girling, Operations Director at the East London Small Business Centre, says. “Indeed, it has always been known for its enterprising spirit and community – with the leather and fabric trade, the rise of Brick Lane’s restauranteurs and, more recently, the large surge of small creative businesses and tech companies.”
After a considerable dip during the recession, the number of businesses still active a year after opening rose steeply between 2011 and 2012, from 81 to 94 per cent. The borough has a lower than average survival rate for businesses older than four years, largely because of the high numbers of businesses in sectors with high churn rates, such as finance.
However a high churn rate after four or five years of trading is not necessarily negative, as it can indicate an enterprising and lively business base. A low long-term churn rate, on the other hand, can be a sign of stagnation.
Girling said that the East London Small Business Centre has helped over a thousand Tower Hamlets residents in the last year with inquiries about attending startup courses or seeking business advice or funding for startups or existing small and medium sized enterprises (SMEs).
“Every year the number of individuals seeking our various business support services far exceeds that of any other east London borough,” Girling says. “The majority of people come to us because they want to explore the challenges and the freedoms often associated with running their own business. There are also those who want to start their own business as they view it as their only viable route to employment and financial security.”
A significant number of businesses in Tower Hamlets are small and medium size enterprises, with over three quarters employing fewer than 250 people. These businesses, however, account for only 27 per cent of employment in the borough.
This disparity is most likely due to the higher than average businesses density and levels of private sector employment in the Isle of Dogs, particularly in Canary Wharf. The largest business sectors in Tower Hamlets – finance and insurance, professional and technical, and business admin – are largely concentrated in these areas. 81 per cent of people in employment in the borough work in the Isle of Dogs and the City Fringe.
One of the challenges facing SMEs in Tower Hamlets is the size of the borough – just 8 square miles – and lack of small office space and clear town centre around which businesses cluster.