LONDON 4th May 2020, The Mailing Co, a marketing agency specialising in the UK startup sector, released the most recent research on the effect of lockdown on new company formations.
Said Christopher Wright, Founder, “This would normally be one of the busiest times of the year. We analysed data from Companies House and discovered new company formations were down by about 25%, or 30,000 new businesses, compared to the same March/April period last year.”
Combined with the inevitable increase in business deaths from the effects of lockdown, the shortfall could leave a hole in markets for years to come. The loss of so many SME limited companies going into the system slashes the market opportunity for finance, insurance, tax revenues and thousands of niche suppliers to specific trades.
Unsurprisingly most sectors crashed during April. Anything in food and beverage was almost non-existent (new pubs and licensed restaurants down 75% for the month compared to April 2019). Trades like plumbers, electricians, carpenters fell by around half. Even management consultants lost just under 1000 new startups.
Sectors experiencing the biggest growth – mainly internet and mail order retail – made impressive gains, but nowhere near enough to offset the losses elsewhere.
The majority (around 75%) of limited companies in the UK are single director outfits with no employees. Contractors, freelancers and other sole traders may have purposefully not registered as a limited company in this period for fear of losing access to vital government support packages. Before the Bounceback Loan Scheme launched on the 4th May, there were few options open to sole Directors for support.
But – there is light at the end of the tunnel with the last two weeks of April showing signs of recovery. The first half of the month chalked up half the number of startups in the same period last year. However, from the 15th-30th, figures were down around 4% only.
Coming weeks will show if the drop in UK entrepreneurs is just a delay or a permanent fixture.
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