The UK's small towns are threatening to displace London as the epicentre of British entrepreneurial dynamism, according to a new survey.

Without doubt, the continuing advance of information and communication technology is a major factor George Cox, Institute of Directors

While London still has proportionally more start-ups than any other region, the capital is ranked only third in terms of business profitability, behind Bromley in Kent and Falkirk in Scotland.

And businesses in Ipswich, Suffolk, have a better track record on job creation than any other postal district except east London.

The survey, carried out by the Royal Mail with researchers Market Location, also shows that small towns in the south east of England are home to more successful businesses than major industrial cities in the north of the country.

David Brent

Redhill in Surrey, Chelmsford in Essex, and Slough in Berkshire - the setting for the BBC's popular The Office series - all earned a place in the top 20 business hotspots, well ahead of Newcastle in 37th place, Liverpool in 78th, and Manchester, ranked 86th.

Ranking (business profitability)

1. Bromley 2. Falkirk 3. London EC 4. Milton Keynes

The survey ranked the UK's 121 postcodes in order of overall business dynamism, taking into account the number of start-ups, levels of business profitability, and number of jobs created.

A total of 2 million companies were analysed, the Royal Mail and Market Location said.

Analysts said the strong performance of small towns reflected the spread of computers and telecommunications equipment, making businesses less dependent on easily accessible city centre locations.

"These results paint an encouraging picture of entrepreneurship in the UK," said George Cox, director general of employers' association the Institute of Directors.

"Without doubt, the continuing advance of information and communication technology is a major factor."

Scotland competes

The survey also shows that London's status as the home to the greatest number of start-ups is facing a particularly strong challenge from Scotland.

Ranking (job creation)

1. London EC 2. Ipswich 3. London WC 4. Colchester

Scotland came a close second to the capital in terms of overall start-up numbers, buoyed by high levels of entrepreneurial activity in Glasgow, Edinburgh, and, perhaps surprisingly, the Hebrides.

While the recent economic downturn has piled the pressure on new businesses, they have been partially cushioned from the downturn by increased government support and advice for would-be entrepreneurs.

According to the Department of Trade and Industry, there were 20,000 more companies in the UK last year than in 2000, with more than 60 new businesses launching every day.