UK spin-out companies now employing 100,000 people

Recently released figures show that a record number of student start-up companies were created at UK universities last year.

Data published by the Higher Education Statistics Agency (Hesa) shows 5,122 spin-offs and start-ups were registered across 125 higher education providers in 2021-22.

Of these, 4,735 were student start-ups – up 5 per cent on 2020-21, and the most since the higher education business and community interaction survey began.

The figures also include staff start-ups, formal spin-offs (either not owned or partly owned by higher education providers) and social enterprises.

As a result, there were 21,162 companies based on HE providers’ intellectual property active in 2021-22, employing the full-time equivalent of almost 100,000 people – almost a fifth of which were at the University of Cambridge alone.

This is a significant rise from just 13,067 companies employing 41,791 people in 2014-15.

Nathan Benaich, a general partner at venture capital firm Air Street Capital who collated the world’s largest database of university spin-out terms, said it was encouraging to see so many new businesses but warned that UK universities have contributed very few unicorns – start-ups valued at more than $1 billion (£805 million).

He also cautioned that financial figures will be skewed by a few larger companies, meaning most will be very small and have very low revenues.

“To ensure ideas translate from early inspiration to sustainable, successful businesses, it’s crucial they’re able to spin out in the right way,” he added. “This means low to zero equity takes, quick turnaround times and an end to punishing royalties.”

Hesa figures show that students at the University of the Arts London (UAL) created 431 start-ups in 2021-22 – three times more than in 2020-21, and more than any other institution.

Richard Sant, head of careers and employability at UAL, said: “This is a positive development for UAL and the wider sector, as it indicates the success of the university in nurturing creativity and innovation among its students.

“UAL believes that creativity and innovation are intertwined, with creativity being the key to finding innovative solutions, developing vision and being resourceful. Therefore, it is not surprising that many UAL students and graduates choose to start businesses or lead companies.”

UAL was followed by Kingston University, where students created 220 start-ups. Post-92 institutions such as these created two-thirds of new student start-ups last year – compared with just 17 per cent from within the Russell Group.

Beauhurst, a high-growth company consultancy, said a record number of company foundations were also incorporated across the UK as a whole last year.

Henry Whorwood, head of research and consultancy at the firm, said: “It's worth noting that student start-ups are growing faster than company foundations across the wider economy, which means that entrepreneurship is growing in popularity among students faster than the wider economy.

“Some of this will be cultural, but some will also be down to enterprise education teams at universities.”

The University of Central Lancashire (UCLan), which has one of the highest numbers of active firms, said rising numbers of student businesses were linked to the gig economy.

“We expect graduates to have multiple careers, and many choose start-ups,” said Sue Smith, chair of the Centre for SME and Enterprise Development at UCLan.

“Through creating an entrepreneurial culture, we have increased capacity across our staff and students to embed the skills required to be enterprising whatever career a student chooses.”

The northwest, where UCLan is located, was the second-fastest growing UK region for active firms year-on-year, behind only the West Midlands.

Universities’ intellectual property raised more than £329 million of income in 2021-22, including £86 million from the sale of spin-offs.

The government recently appointed Irene Tracey, vice-chancellor of the University of Oxford, to co-lead a review into turning university research into commercial success.

A government spokesperson said it was aiding universities and investors in developing guidance on how best to spin out companies, as well as providing financial support.

They added: “This includes the £280 million Higher Education Innovation Fund, with £20 million specifically for commercialisation, and the broad range of financial support that university spin-outs can also access from Innovate UK and the British Business Bank.”

patrick.jack@timeshighereducation.com