We’re just a month into 2023, but with all this talk of an upcoming recession, an increase in interest rates, and the ongoing cost of living crisis, you’d be forgiven for thinking that it’s shaping up to be a year to forget for Britain’s small businesses.
However, new figures released by Companies House – the UK’s official registrar of companies – and the Office for National Statistics, indicate that we haven’t lost our zeal for entrepreneurship and continue to endeavor to put our financial well-being into our own hands.
A record year for company formations
Recently released data shows that Companies House incorporated 784,762 new businesses in 2022. That’s a jump of nearly 30,000 businesses compared to 2021.
This is news that will no doubt give reason for optimism, especially when you consider that 2021 saw a decrease in company formations for the first time since 2017.
This means that, as of the end of December 2022, there were 5,053,281 companies on the Companies House register (these figures do however include companies who are currently going through the dissolution or liquidation process).
What does 2023 have in store?
According to research from Enterprise Nation conducted at the end of last year, 2023 could be the UK’s most entrepreneurial year yet, with 30% of the UK’s adults thinking about starting their own business (or side hustle), with 10% of adults having an ‘action plan’ to set up a business in 2023.
And it looks like the UK’s entrepreneurial spirit has been passed on to the younger generation, with 48% of people aged between 18 and 24 thinking about starting a business this year.
Perhaps the most surprising finding was that when asked why they wanted to start their own business – only 6% said it was because they’d lost their job, with:
- 53% of women citing money concerns (compared to 35% of men)
- 33% mentioning the cost of living crisis
- 29% expressing a desire to “follow their dreams”
Enterprise Nation’s founder, Emma Jones CBE commented:
“There is clearly a huge appetite to start a business in the UK. While not everyone is an entrepreneur, many people now see starting up as an accessible way to supplement or take control of their income at a time of higher pressures on personal and family budgets.
“Recessions are well known for motivating people to start-up, but while that’s usually down to unemployment, this time many are planning to start a side hustle while holding down a full or part-time job.”
Recessions and startups
Successful businesses have a habit of emerging during periods of turbulence. Airbnb, Uber, WhatsApp and Instagram were all born during and around ‘The Great Recession’ (2007-2009).
In fact, half of all the Fortune 500 companies were created in a crisis – with businesses such as Revlon, Hewlett Packard, Costco, Microsoft, and LinkedIn all emerging ‘during times of economic crisis or depression’.
So why do startups thrive during periods of uncertainty?
There are a number of reasons. The most obvious is redundancy. People are forced into a situation where they need to make money and, rather than seek employment (and risk redundancy again) – look into going it alone by turning that long-gestating business idea into a reality.
Also, during precarious periods (such as the pandemic), people take a step back and re-evaluate everything – including their work life. They then decide that becoming their own boss could be the solution to a happier life, so make moves to start their own business.
And then, when it comes to growing a startup – because of redundancies – there’s a larger pool of talent to choose from when recruiting.
A good time to invest?
Speaking to Thisismoney.co.uk, Malcolm Turner – Manager of Titan VCT – highlights why recessions are actually a good time to invest in startups:
“Venture capitalists are quite strange in that they really like the opportunities that recessions create. It really comes down to one thing, and that’s funding scarcity.
“You read about the redundancies happening across the sector. Within Twitter or Microsoft, or any of the big tech firms, they are reducing headcount considerably.
“You also have the growth-stage companies who are, because of their funding scarcity, not hiring as many people or reducing their headcount as well.
“So that means you get this massive influx of talent, which means our portfolio companies can then hire. Historically, one of the biggest barriers and biggest challenges of building a business is just getting the right people around you.”
So there you have it
It would be tricky to deny that the last few years have been hard for businesses – of all shapes and sizes.
Regardless of where you are on your business journey, it’s understandable if the current economic climate – and the reporting of it, leaves you feeling concerned about your company, and overall financial well-being.
However, with the news covered in this post, we believe there are reasons to be optimistic for both, 2023 and beyond.
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Got a question? Leave a comment and we’ll get back to you as soon as possible. Thanks for reading.
