Every cloud... Recession boosts UK entrepreneurs

The number of new start-ups in the UK has more than doubled since 2005. Proof that necessity is the mother of invention?

by Emma Haslett
Last Updated: 05 Nov 2010
Given how tough times have been for small businesses lately, it might not see the ideal time to launch a start-up. But it appears that wannabe UK entrepreneurs are a resilient bunch: according to new figures by Experian, the number of people starting businesses has more than doubled over the last five years (up 117%, to be precise). Pretty impressive stuff, when you consider the fact how difficult the climate has been for at least the second half of that period. Though some of these entrepreneurs might not have had much choice...

According to the study, the total number of businesses in the UK has grown by 41% – and apparently, it’s all down to a boom in one- and two-man bands, which have seen a 183% increase. That means the number of micro-businesses in the UK has almost tripled. Experian, which spoke to 4.3m entrepreneurs during the study, reckons that a large proportion of these new entrepreneurs were made redundant during the recession. In addition, we’d wager that a significant number of others will have been forced into part-time work, or are trying to supplement their income after a wage freeze.

So it doesn’t come as much of a shock that consultancies are one of the most popular businesses start-ups – their number has increased by 181% since 2005, and the rate shows no sign of slowing. Although David Cameron did promise during the election that overpaid Government consultants would be one of the first groups to suffer during cuts, so watch this space on that one. (Either that, or we’ll hit a tipping point very shortly where consultants have nothing to do but advise other consultants. To paraphrase Stephen Hawking: ‘Consultants all the way down’).

Interestingly (and perhaps surprisingly, given the vociferous complaints we’ve heard from small business organisations recently about bank-related cash flow problems), the survey found that the smaller the business is, the less likely it is to go insolvent. Businesses become particularly vulnerable when they're employing about 10 people. Since that happens to be the exact point at which George Osborne's new NI tax break cuts out, maybe that's a good argument for a Treasury re-think.

Nonetheless, it’s positive to see that despite the gloomy outlook in recent years, people have still been risk-friendly enough to start businesses. That's just the kind of attitude that could help steer the UK away from that dreaded double-dip.

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