Cities across the UK carry a diverse mix of unique qualities and characteristics that can support startup growth. Location plays a crucial role in business success. Using data from our Next X tool, BNP Paribas Real Estate has identified key markets with strong entrepreneurial potential.

While London dominates in terms of scale and total startup count, like-for-like metrics reveal interesting trends regarding emerging regional hubs with sector-specific strengths.

Between 2020 and 2023, over a million new businesses were launched UK-wide1. Greater London accounted for a 23% share of these, however the capital’s share is declining, while regions like Yorkshire and South West are increasing their share. Small-Medium Enterprises (SMEs) are increasingly targeting, and often thriving, in locations with a strong talent base and relative affordability.

Using over 20 data metrics, our Startup Index consists of four key subsections:

• Productivity
• Access to talent (e.g. young demographics, education levels)
• Connectivity / infrastructure (both digital and physical)
• Market dynamics (including business success, startup rates)

These metrics highlight both current and future opportunity markets, with implications across real estate sectors – from residential demand to office market dynamics regarding availability and affordability. 

The Startup Index top ten ranking is mixed between larger, more established markets (London, Manchester, Edinburgh) and smaller markets with less competition and lower operating costs (Cardiff, Oxford, Milton Keynes). 

Chart 1: BNP Paribas Real Estate Next X Startup Index – top ten ranking Source: BNP Paribas Real Estate

Knowledge Hubs Driving Growth

Many of the strongest performing markets are anchored by world-renowned education hubs. Cities such as Cambridge, Oxford, Edinburgh and Bristol are all home to multiple high-ranking universities, that not only attract global talent but also act as powerful engines for innovation. These academic hubs offer thriving ecosystems for university spinouts and early-stage investment.

For example, University of Bristol spinout Graphcore raised over £528m across nine funding rounds since inception in 2016 and scaled to 450 employees before its acquisition by SoftBank for c.$500m in July 20242. In Scotland, the University of Edinburgh has granted £200m of funding to over 500 startup firms as of last year, fostering localised SME growth3. 

Cambridge and Oxford, meanwhile, have become key centres for health tech and life sciences. Joint venture schemes alongside the private sector have helped develop industry-leading lab and Research and Development (R&D) space, resulting in a multitude of startups in these markets.

Such investment into post-graduate entrepreneurship not only drives economic growth but supports younger demographic growth – which has boosted the Access to Talent scores for cities like Bristol, Leeds, Edinburgh and Manchester.

Spotlight on: Leeds

Access to Talent

Leeds continues to attract a younger demographic, drawn by liveability factors including its vibrancy and strong academic institutions. Students make up 10% of the city’s population, (exceeding the UK major city average of 7.5%)4. Additionally, Leeds boasts a strong student retention rate at 39%, ranking fifth nationally5.

Schemes including the University of Leeds-led Nexus and SPARK programmes (offering £3,000 grants and business support to student/graduate startups) foster strong links between higher education and industry6. This continues to drive a young professional workforce, with young working-age population (20-40 years) growth of 2.8% expected over the next five years7. 

Residential development is responding to this demographic shift, with new schemes spanning Purpose Built Student Accommodation (PBSA), Build to Rent (BTR), co-living, shared-ownership and city centre apartments – subsequently supporting workforce catchment from a business perspective.

Strong Market Fundamentals

Leeds is home to 205 high-growth enterprises, outperforming other regional hubs like City of Bristol (150) and Central Manchester (180)8. This can be largely attributed to its thriving digital, tech and media sectors, which has enticed major companies like Sky Digital, Channel 4, BT and Direct Line. Global entrants, such as Australian property-exchange platform PEXA, have joined the local ecosystem – opening their UK HQ, and first European presence, in West Village in 2023.

The University of Leeds has invested heavily into supporting spinout startup companies, including successes such as Creavo Medical Technologies, Vet-AI and Tracsis – the former two still being headquartered out of the university’s £40 million innovation hub.

Its startup rate, totalling 3,805 in 2023, exceeds the major city average by 21%. And many of these are primed to survive and grow – Leeds has an above-average three-year survival rate of 54%9.

Leeds startup landscape

Chart 2: Key regional cities – startup count and business survival

Supportive Infrastructure

Infrastructure underpins the city’s growth as a startup hub. Leeds ranks among the UK’s most digitally connected markets, with 94% of premises having access to gigabit-capable broadband (2024)10. This is supported by strong power access, as well as numerous schemes led by Leeds City Council.

Real estate providers have begun capitalising on this. Flexible office space has grown extensively, with total serviced office square footage in the city doubling since 2020, to now account for a 3.7% share of total office stock. However, this still lags behind Birmingham (5.3%) and Manchester (5.2%), indicating room for further growth in the flexible workspace market.

Liam Ridley, Senior Associate Director: “Leeds is rapidly emerging as a leading UK startup hub, driven by a skilled talent pool and strong digital and tech sector – particularly within the health-tech space. Demand for high quality offices persists, but with a relatively constrained pipeline, demand is turning to alternative options including the thriving flex office sector – much of which being driven by SME’s.”

Chart 3: Serviced office growth in Leeds

Coworking: A Catalyst for Knowledge Sharing

Coworking operators have continued their rapid growth across the UK since the pandemic, with the market becoming increasingly diversified and established. This has established strong incubation hubs for startups by creating collaborative environments that can encourage knowledge sharing and networking opportunities.

The subsector was accountable for a 6.6% share of total take-up across the Big Ten regional office markets in 2024, exceeding the ten-year average of 5.9%. Manchester and Birmingham lead the way, with the highest levels of serviced offices – both in terms of supply and share of total office stock. There is a noticeable gap to the next tier of cities, indicating relative undersupply. 

Of the larger regional markets, serviced office stock in Glasgow only represents 2.3% of total stock. With limited new office developments in the pipeline, serviced office space could offer an important solution for SMEs seeking quality workspace.

Cardiff has the lowest penetration of serviced office stock. Despite its smaller market size, the Welsh capital ranks seventh in our Startup Index, highlighting strong entrepreneurial potential and suggesting headroom for further coworking expansion.

Chart 4: Serviced office stock and share of total stock, Big Ten regional office markets

London's Sphere of Influence

Several markets within London’s commuter belt feature prominently in the Startup Index, including Reading (5th), Milton Keynes (10th) and Slough (16th). These locations benefit from proximity to London’s dynamic economy, whilst offering more affordable rents – a combination proving attractive for startups seeking profitability and scalability.

In the case of Reading and Slough, the arrival of the Elizabeth Line has expanded commuter catchments whilst supporting connections to the City of London’s global financial ecosystem. Digital infrastructure also plays a huge role. 

Slough (which ranks second in our Connectivity/Infrastructure rank) is the UK’s leading datacentre market and offers some of the country’s fastest download speeds, helped in part by its location along the transatlantic fibre-optic line. In turn, and perhaps unsurprisingly, the M4 Corridor has become a crucial telecoms and digital tech hub, home to multiple household names, as well as boasting the second highest startup rate in 2023 after London. ONS data confirms this trend, with Reading and Slough both achieving amongst the strongest GDP growth and GVA figures in the UK11.

Despite affordability issues (for both employers and employees), London itself ranks in the top ten. This is underpinned by the sheer scale of the market, investor networks, global connectivity and corporate HQ presence. The resounding success of startups in London, such as fintech company Revolut and global geocoder What3words, continue to put the capital on the global map in terms of business opportunity.

Which Markets are Missing? 

A number of high-potential cities narrowly miss out on the top ten, including:

• Liverpool (13th): an emerging hub for the media and AI sector. While limited Grade A office supply current limits city centre opportunities, Liverpool’s Knowledge Quarter is expected to deliver over one million sq ft of commercial space by 204012.
• Brighton (17th): strong performance in ranking in regard to young population growth and new business creation. However, metrics such as job density, catchment sizes and productivity currently limit its overall score.
• Cambridge-Oxford Arc: an already well-established region within the Startup Index, but further markets within the region are primed for future growth. Luton (37th) already scores extremely high in terms of Connectivity/Infrastructure, bolstered by its airport access and datacentre expansion. The Luton Enterprise Zonie is expected to unlock further business growth and productivity performance.

In Summary

While London and commutable South East locations rank very well, its promising to see the ranking spread relatively evenly across the country. This underlines the UK’s appeal from a R&D standpoint, bolstered by its renowned higher education institutions, providing a core talent base for innovation and technology.

Clustering of high-growth subsectors has also allowed cities across the UK to become specialist in certain fields, whether it be in gaming and media, medical technology or fintech. The presence of key clusters can create healthy competition, strategic partnerships and pooling of resources / facilities that has been pivotal for some of the country’s most expansive startups.

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Sources:

1ONS Business Demography
2 Graphcore.ai
3 University of Edinburgh
4 ONS
5 Liberty Living
6 University of Leeds
7 ONS
8 ONS Business Demography
9 ONS Business Demography
10 OFCOM
11 ONS
12 Liverpool Knowledge Quarter