Business Baby Boom: Businesses being set up at a record rate despite pandemic
November 8, 2020
3 min read
What's going on here?
Despite there being a pandemic raging across the world and a recession wreaking havoc on the economy, many small businesses have sprung up throughout the UK, and beyond.
What does this mean?
One might have thought starting a business in the depths of a pandemic with no clear end in sight, not to mention a recession, would be considered foolhardy. But some have decided to do just that, using their hard-earned savings and taking out loans to chase their dreams, from cafes to beauty salons, bars to dog training centres.
The same trend can be seen across the pond, where America has seen record-breaking numbers of new businesses opening their doors. According to studies based on applications for loans typically associated with new business formation, the number of new businesses started in the last quarter could be the highest on record.
What's the big picture effect?
What has driven this remarkable uptick is unclear, though in America, it is likely linked to their covid-19 response. The US government did not attempt to protect jobs in the same manner as other countries. This has resulted in many people being left unemployed, pushing them to search for new opportunities. An increase in unemployment benefits has given many the chance to pursue their own businesses.
This argument does not follow in the UK, whose job retention scheme has been one of the most generous but has seen a similar increase in entrepreneurship, according to Companies House. Although speculation exists that, as the furlough scheme winds down, we could see the unemployment figure rise rapidly, so perhaps people are seeing clouds on the horizon. One factor is the government’s economic policies, which have been aimed at encouraging recovery, as the country began opening up again. An example of this is loans to set up innovative businesses, this has provided financial means for Britain’s would-be entrepreneurs. Many of these new businesses have made excellent starts, despite going against the trend which suggests a move away from brick-and-mortar business. This could be due to their locations. Many are based outside of big cities, in small commuter towns, where big city office workers find themselves spending more time as they work from home. This could be a cause of concern, if, beyond the pandemic, we return to the status quo of commuting into cities. However, more and more businesses (including law firms) are planning for flexible, remote working strategies. If this persists in the months after lockdown eventually lifts, these businesses could see long-term viability and success, as communities become localised outside cities. Pandemic-born independent cafes could replace Pret a Manger as the City’s favourite lunch provider.
We have heard tales throughout lockdown that small businesses would suffer, and it was only big companies, with huge cash reserves, that would survive. One survey found up to two thirds of small business owners feared for their future. So, why is it that these new, small businesses seem to be thriving? Is it as simple as they were designed to operate in this environment, whereas others have been unable to adapt to the rapid changes in regulation and circumstance?
Perhaps an unexpected rise in entrepreneurship is a small silver-lining to be found in the midst of the horrors of the pandemic. It could even prove a boom to the economy, in the long-term, as new businesses with fresh and innovative ideas replace old ones, stuck in their ways.
Report written by Joshua White
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