UK ranks second in G7 economies for economic impact of entrepreneurship
The UK is fourth in the world and second out of the G7 economies, in a new ranking of the impact of entrepreneurs on their overall economy from Shopify. UK entrepreneurs in Shopify’s ecosystem generated £28.8 billion worth of business activity in 2022 and contributed £14.3 billion in GDP impact.
The beta launch of the Shopify Entrepreneurship Index, which provides data and rankings on 40 countries around the world, is a new study conducted in partnership with Deloitte using data on the millions of entrepreneurs in the Shopify ecosystem and supplemented with IMF, OECD, and World Bank data for the purposes of economic modelling.
The ranking will be released on a quarterly basis, making it one of the most timely and frequently updated ways to understand the state of entrepreneurship around the world.
UK entrepreneurs in Shopify’s ecosystem are bucking the trend seen in other sectors of the economy. Notably, the data shows that UK businesses grew their exports by 8% in the last year, selling £3.2 billion of goods, second only to the USA ($7.3 billion vs. $3.9 billion in USD for the UK). This follows data released from Shopify in 2022, which showed that merchants in London sold the most products globally during Black Friday Cyber Monday, with one in four (24%) sales for UK merchants being cross-border.
Countries were also rated on the impact entrepreneurs have on jobs. The Shopify Entrepreneurship Index highlights that British businesses on Shopify have directly supported over 78,000 jobs and supported just under 200,000 jobs in total in 2022. Globally, the number of jobs supported reached 5.2 million.
Commenting on the importance of how entrepreneurs support jobs, Jack Kennedy, UK Economist at global hiring platform Indeed, said: “Though there is growing optimism that the UK will avoid recession this year, there are signs of a softening labour market, so opportunities to enable entrepreneurship, support jobs and encourage economic growth are a welcome sign both nationally and globally. Entrepreneurship is key to small business growth, which is critical as these companies make up a significant part of the UK economy.”
The UK's success has, in part, been enabled by decades-long investment in incentives and support structures to help UK entrepreneurs succeed. Initiatives such as the British Business Banks' Start Up Loans programme, as well as the UK Government's recent expansion of investment reliefs, have enabled UK entrepreneurs to attract and retain great talent. Investment in British export support, such as through the Export Academy, has also helped UK businesses to go global.
Despite its high rating, the impact of local entrepreneurs on GDP saw a 1% reduction from the same time period last year. There is a danger therefore that the UK could fall behind other nations if the UK Government does not continue their ambitious vision for boosting UK entrepreneurship. Revisiting incentives for UK SMEs to digitalise will be essential to compete with ambitious support programmes launched in other parts of the world. The digitalisation of exports, particularly through the UK Government’s Electronic Trade Documents Bill, could also help UK SMEs cut through friction to export to the world.
Deann Evans, Director of EMEA Expansion & Partnerships at Shopify, comments: “It’s great to see the UK ranking fourth overall in the beta launch of the Shopify Entrepreneurship Index, in spite of the challenging economic climate we’re in. Clearly UK entrepreneurs on Shopify are harnessing their skills to grow and contribute to their communities and the economy. However, as other nations bolster their support ecosystems, provisions need to be made if the UK is going to maintain its status as a leader amongst the G7 economies.”
“Released quarterly, the Shopify Entrepreneurship Index will serve as a barometer on the state of global entrepreneurship from the Shopify ecosystem, providing policymakers with the insight they need to inform their decisions on how best to support entrepreneurial growth,” continued Evans. “It will be interesting to see how the ranking changes next quarter as economic pressures continue.”
"This new report will be a valuable resource for a wide range of stakeholders, including academics, policymakers, and business leaders who are seeking data on the rising phenomenon of digitally-enabled entrepreneurs," said Dr. Gary Dushnitsky, Associate Professor of Strategy and Entrepreneurship at London Business School. "This initiative serves many benefits. The quarterly cadence of release is particularly important, as it reflects the dynamic nature of entrepreneurship. It will further allow for the tracking of trends over time, providing important insights into the state of entrepreneurs."
The data also suggests that digital tools and infrastructure could be helping to "level up" regional economies across the UK. 60% of entrepreneurs in the Shopify ecosystem are based outside of major cities and metropolitan areas, demonstrating that location is no longer a barrier to growth. However, while initiatives, such as regional investment zones, may provide localised support structures, more investment is needed to fully unlock the potential of digital entrepreneurship across the country.
Further insight from the data shows:
- Globally the USA ranks first in the Shopify Entrepreneurship Index, followed by Lithuania and Romania.
- Regionally, Europe dominates the rankings, taking 11 out of the top 20 countries.
- Combined, entrepreneurs in the Shopify ecosystem across the 40 countries have positively impacted GDP by $229.3 billion in the last 12 months.
- China ranked 8th, witnessing a relative drop of 19% in exports.
- Outside the US, Vietnam saw the most jobs directly supported (91,000), and 471,474 supported in total.
- Hong Kong significantly punched above its weight, ranking 9th and entrepreneur impact on GDP growing 17.8%.
- With three Eastern European countries ranking in the top 10, it is evident that the entrepreneurial landscape in Europe is shifting from the West to the East.
- Entrepreneurship in Lithuania is booming with a Shopify Entrepreneurship Index ranking of #2, while Romania (at #3) witnessed the sharpest growth in exports, reaching 107.2%.
- Denmark continues to outpace many similar economies in Europe and the world, with a Shopify Entrepreneurship Index ranking of #7.
- California is the powerhouse of entrepreneurship in the United States. Entrepreneurs on Shopify created 134,000 jobs and were responsible for $2.5 billion in exports over the last 12 months.
This version we are launching today is the beta version of this Index. In the future, we will share even more data aimed to inspire smart policies, and give leaders the insights they need to harness the power of entrepreneurship.
To create the ranking, the GDP impact, business activity, jobs supported, and exports generated by those entrepreneurs is compared with the national values of each country or state. The performance of each statistic is assessed both at the per capita level and overall. To rank the economies, a weighted average of two values is used for each factor - the absolute value and growth rate.