Opening your own HR consultancy, recruitment agency or employee learning and development service sounds like a winner anyone can ride to the finish line. After all, human resources are a vital part of any company. More and more business leaders are outsourcing these functions to experts with years of experience under their belts. However, certain cities offer more opportunities for those looking to enter the world of HR. That is why Pace HR has analysed data from Companies House to uncover the success rate of new companies offering and managing human resource functions. Read on to discover the best cities to open an HR company.
So, What is the Success Rate for HR Companies?
As HR professionals, we know how important it is for our clients to have a strong company culture and values. But it can be easy for many consultancies to forget to look internally and do this for themselves as well. In some cases, this may lead to your products or services coming across as inauthentic and not relevant in the current climate. Consultancies that model authenticity can foster a strong sense of belonging with their employees and build stronger relationships with the companies they partner with. If you have attended an industry talk or networking event, you may have heard that over half of new businesses fail within the first few years. This is a stat that gets thrown around a lot but is there any truth to it and is it relevant to the HR industry? Our research revealed that out of the 17,019 HR companies that opened in the last five years 6,416 have either gone into administration, liquidation, or are now dissolved. To put that into perspective, around 2 in 5 HR companies close their doors within the first five years. These odds are more promising than we initially thought.
The Best Cities For New HR Companies – Did Your City Make the List?
Of course, people play a key role in the success of a company but we cannot ignore the importance of location. After all, where your company is based will influence your earning potential, expenses and even your future growth. If you are thinking about expanding to a new location or are just curious about the success rate of HR companies in your area, here are three cities where new HR companies are thriving.
1. Mansfield and Sunderland
Mansfield and Sunderland top the list with the most successful new HR companies. Both cities currently have an HR company success rate of around 86%.
2. Ipswich
Ipswich takes the second spot at 73.2%. In the last five years, 41 HR businesses have launched in the city and only 11 of these businesses have closed their doors.
3. Crawley
Crawley ranks as the third-best city for HR consultants, with a business survival rate of 72%.
The Worst Cities to Open an HR Company
Here are the cities where new consultancies struggle to keep the lights on.
1. Leicester
Leicester has been crowned as the worst city to open an HR company, with a failure rate of 79%. Out of the 445 companies that opened, 350 have closed.
2. Hull
Hull takes the second spot at 56%. 34 companies providing human resource functions launched in the city between 2018 and 2023 only 15 of these companies have managed to survive.
3. Swansea
Swansea currently ranks as the third worst city for new HR companies, with a business mortality rate of 52.2%.
Methodology
We analysed data from Companies House to find the number of businesses registered under the SIC code 78300 for companies offering human resources provision and management of human resources functions in the UK’s 50 most populated cities (excluding London boroughs). The team looked at companies that were incorporated between January 2018 and December 2023 and compared that to the number that have gone into administration, liquidation, or are now dissolved. To improve the accuracy of the data, cities where there were less than 20 new HR companies registered were excluded from the dataset. If you have any questions about our findings, get in touch with us.
