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Britain’s faltering economy has started to subdue its entrepreneurial spirit, according to a series of gloomy yet unofficial readings of start-up activity.
Unaudited figures from Companies House show incorporations in the year to the end of August 2008 were 343,747, down 25% on those in the same period the year before.
In other words, the UK public register of companies had 100,000 fewer incorporations in the year since the credit crunch began, compared with the year earlier.
Back then, 455,953 individuals registered a new business, indicating the crunch has cut start-up activity by a quarter, reveal the figures obtained by a national paper.
Meanwhile Barclays, which tracks new firms based on its number of new business accounts, expected the figures and warned that the downward trend would continue.
“People are going to delay their plans to go into business because it is a risk,” said Richard Roberts, head of the bank’s small and mid-sized business sector.
“It’s the same reason why people aren’t buying a new car, they are concerned about the economic outlook.”
Although the bank’s first quarter stats are due to indicate less of a fall in the number of new firms, they are likely to confirm start-up activity has waned, by about 14%.
When combined, both sets of figures imply the credit crunch fallout has halted the ‘avanti’ of new businesses, which, until now, had grown in strength ever year since 1994.
In fact, in the 12 months of last year, the majority of which fell before the crunch, official figures have shown that the UK’s business stock grew to 4.68million.
This represents annual growth of 4% and a 970,000 increase on the number of firms that set up 10 years ago, according to figures from the government released in August.
At the current time in the calendar, the Department for Business normally tells us which sorts of firms are succeeding and which are not by publishing survival rates.
But it seems belt-tightening is even going on in Whitehall: the department has said it will not be releasing data this year because of “resource constraints.”
"Please note,” it added, “this publication [about survival rates] will not be repeated in 2008. Updated estimates will be available, at the very earliest, in early 2009.”
While it may be a crystal-ball gaze too far to predict which sorts of businesses, by industry, have fared the best in terms of topping the survival ranks, some clues are emerging.
Last month, a survey of ‘at-home’ entrepreneurs found that more than 70% were confident that their business would maintain or even improve sales, even as economic woes persist.
“This certainly chimes with what we’re seeing,” said Gill Hunt, managing director of Skillfair, a staffing website for consultants, for whom it is typical to work from home.
“I was at a road-show hosted by the Institute of Business Consulting and of the 40 people in the room; all but 5 thought things were as good or better than they were this time last year.”
Ms Hunt explained that “many” of her site’s consultants were “so busy” they had started to form alliances in order to find “associates to work with them” to share their workloads.
If these consultants are running transactional websites they stand to do even better, as consumer appetite for spending online has so far defied any downturn.
According to the IMRG Capgemini e-retail index, more than £26bn was spent by the UK’s online shoppers in the first half of this year – up 38% on 2007 and equivalent to 17p in every pound.
It is these same internet-based businesses, particularly those specialising in technology, telecoms and media, which were last week described as “the only game in town” for investors.
Speaking to the FT, individuals offering seed capital or firms who have used such funding, said potential money-makers with an online set-up, especially in the Web 2.0 space, were the clear priority.
Alongside the resilience of internet shoppers, many would-be entrepreneurs will see this as a good time to set up their enterprise online, particularly as this involves less overheads than a traditional set-up.
The American entrepreneur Eric Ryan, who co-founded his ethical cleaning firm Method during the dotcom collapse, has perfectly summed up the opportunities intrinsic to a downturn.
“Starting a business in a recession is like vacationing in the off-season,” he said. “It’s a little less crowded and everything starts going on sale.”
This, it seems, is old news to BusinessesForSale.com, which says the economic woes are creating an opportunity for its active visitors to snap up undervalued firms.
Almost half of the site's users said the economic downturn was an advantage for business buyers and just over a third said it had made prices more competitive.
Two-thirds of users said banks were accommodating to their needs, and almost a fifth said they regarded buying a business as a safer investment than equities or property.
“Interest rates are still historically low and asking prices can be lower as sellers look for an exit,” said Tony de Vizio, BusinessesForSale’s director. “It’s a good time to buy your way into business ownership.”
Copyright 2008 FreelanceUK
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