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Coronavirus: Startup numbers jump amid economic disruption

Tom Belger
·Finance and policy reporter
·4-min read
File photo dated 04/03/20 of a woman using a laptop. Nearly a third (30%) of adults feel more vulnerable to fraudsters as the Covid-19 pandemic has triggered a boom in internet shopping, banking and video calling, a survey has found.
Startups are on the rise. Many new firms are individuals, setting up limited companies. Photo: PA

UK startup numbers are on the rise amid the economic disruption of the coronavirus, official figures show.

Business chiefs said the figures showed entrepreneurs would play a “vital role” in the UK’s recovery from the crisis, but needed government support with startup costs and bank action to fix problems creating accounts.

More than 95,000 new businesses were created between July and September, according to new analysis of VAT, HMRC, Companies House data and business surveys.

It marks a 5.3% increase on the same period the previous year, and a 7.2% increase on the previous quarter, but remains lower than levels seen in the first three months of 2020.

The figures were compiled by the Office for National Statistics (ONS), which said they echo other data pointing to growth in the number of new firms.

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“This is somewhat contrary to expectations that business creation would be significantly lower because of the coronavirus (COVID-19) pandemic,” said the ONS in a bulletin published on Thursday.

New business creation. Chart: ONS
New business creation. Chart: ONS

But the increase may be a product of the enormous upheaval sparked by the pandemic, from widespread job losses to remote working to a handful of booming sectors.

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The ONS said firms created during the past three months were “smaller than usual” as well as “more likely than usual to be in industries less affected by the pandemic.”

Industries with rising startups included “those that offer greater opportunities for homeworking,” according to statisticians, such as professional and administrative service industries. Many new firms are individuals, setting up limited companies.

A surprising growth area was retail, despite the high-profile woes of UK high streets even before the virus hit. This could reflect an increase in online retailers, since there has been a large increase in online retail sales during the pandemic,” said the ONS.

The virus has taken a toll on entrepreneurship in many of the worst-hit sectors. “There were falls of around one half in the education, arts and entertainment, accommodation and foods services, and construction industries as well; again, these were all industries negatively affected by the pandemic.

“There were also sizable drops in business creation for some industries that might be expected to be less affected by the pandemic, including the finance and insurance, and ICT industries.”

Bryn Glover, editor of entrepreneur advice website Startups.co.uk, said the site had seen growing interest in content on how to start takeaway firms, move businesses online and create websites.

He told Yahoo Finance UK: “Since the beginning of lockdown in the UK, we've seen a rise in companies trying to do things differently. Naturally, this has also meant an increase in the number of people interested in launching businesses designed to fix or help with new problems.

“The pattern isn't too dissimilar from events over the last 20 years - the financial crash in 2008 was at least partially responsible for the rise in gig-economy business since then, and we fully expect to see a new wave of industries and small businesses forming in the coming months and years.”

The data comes amid growing criticism of UK banks, with entrepreneurs reporting significant struggles to merely open new business accounts, limiting the ability of some to secure bounce-back loans.

“It’s unacceptable that thousands are struggling to open commercial bank accounts and apply for bounce back loans. And too many have been left out of [government] support measures, not least the newly self-employed and company directors,” said Mike Cherry, national chairman of the Federation of Small Business (FSB).

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He added: “A significant growth in start-ups and self-employment was fundamental to our recovery from the last recession. These figures suggest they are set to play a vital role in our economic bounce back once again.

“Government at all levels must ensure it’s putting the right infrastructure in place to help entrepreneurs capitalise on shifts in the business landscape. Sadly, not every job that was there before coronavirus hit will return.

“Policymakers should be encouraging those who are out of work to strike out on their own. A Kickstart start-up scheme, modelled on the Kickstart employment initiative, which builds on the success of the New Enterprise Allowance and Start-Up Loans programme would mark one way forward.”

It comes after former chancellor Sajid Javid this week urged the government to raise support for jobless entrepreneurs to £100 a week for a year.

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