Increase in Registered Companies Indicates a UK Wide Start-Up Boom

The largest start-up boom in the UK for the past decade has been one of the unexpected results of the coronavirus pandemic.  New businesses have been created in response to necessity, the changes to work and lifestyle, and the opportunity many have had to reassess their priorities and goals.

Record Increase

Companies House records that the number of incorporations in the first quarter of 2021 increased by 41,546 (24.5%) compared with the same quarter of the previous year. This is the largest one-year-on quarter increase since 2012, when quarterly breakdowns were first recorded.

The Interdepartmental Business Register, which excludes single person limited companies and non-profit organisations, recorded that in the first three months of this year, there were 137,000 new businesses across the UK.  This is up 14 per cent compared with the previous quarter and the highest figure since quarterly records began in 2017.

The start-up boom began in earnest after the first reopening in summer 2020. Low interest rates, plenty of government support and more people shopping online have all been key drivers.  Geographically, areas of the most significant growth have been commuter towns whose populations have been working from home and seaside resorts which have benefited from the rise of UK-based holidays.

Adapting to a New Normal

Towns like Denton, Erdington, and Birkenhead have been impacted for decades by the closure of their primary industries.  High street food shops, banks and chain stores have been closing their doors and the towns had largely become commuter suburbs for Manchester, Birmingham, and Liverpool, respectively.  Working from home is no longer compulsory but will likely remain a feature of life moving forward, and new businesses have risen to meet the needs of a more constant population.

Barbers have been the vanguard of the start-up boom, with 1,969 opening and 1,234 closing, a 5.1 per cent increase. Beauty salons, grocers and ice cream parlours also feature prominently amongst the new businesses.  Ronald Nyakairu, senior manager for Insight & Analytics at private equity company LDC, said that changing work corresponds to the availability of locations previously vacated by larger chains had been key contributing factors:

“The move to working from home has seen often neglected commuter suburbs like Kilburn, Denton and Erdington enjoy an increase in footfall.

With vacancy rates at record levels, the number of units available to let has never been greater. This has facilitated generous property terms for independent retailers including rent-free periods or landlord contributions.”

A Continuing Trend

The last quarter of 2020 saw a 24 per cent annual increase in business creations, which is “contrary to expectations that business creation would be lower due to the coronavirus pandemic”, according to the Office for National Statistics (ONS), which published the data.  This led on to the record-breaking figures for the first quarter of 2021.

Industries that showed the greatest increases in business creations in this first quarter compared with the same period last year were retail, wholesale and logistics. These were consistent with a rise in new businesses trying to address the increased need for online shopping and home delivery services.

Easements

A small caveat may lie in the set of easements announced by Companies House on 16 April 2020. They included the temporary pause of the strike off process (voluntary and compulsory) to give businesses affected by the coronavirus outbreak the time they needed to update their records filed with Companies House and help them avoid being struck off the register.

The impact of this announcement was that compulsory dissolutions from 2 April 2020 onwards were temporarily paused, as was the final stage of voluntary dissolutions.  It is difficult to make full comparisons to pre-COVID-19 levels due to the disruptions to the strike off process which has affected seasonal trends.

However, though the overall balance between creation and dissolution may shift, the record rate of new businesses being incorporated still stands, and this start-up boom has continued into the second quarter. According to weekly data published by the ONS, the number of business incorporations in April was up 20 per cent compared with the same month in 2019 and the growth pattern is clear.

If you would like to know more about setting up a business in the UK please feel free to contact Briars.