50,000 fewer start-ups in the UK during 2008

The latest estimates of the number of new businesses that will be set up during 2008 suggests a 50,000 fall in start-ups compared with 2007…

50,000 fewer new businesses than last year is obviously bad news for the economy, although it is not entirely surprising given the events of recent months.

The worst of the decline in startup business numbers is expected to be over by the end of the year, according to Barclays estimates revealed at the National Federation of Enterprise Agencies conference in York.

One ray of sunshine is that Barclays believes that the SME market is better financially prepared to weather the economic downturn than during the last major recession of the early 1990’s. SMEs have taken early action to cut costs and have lower levels of borrowings compared with equity financing and cash balances.

You could argue that the wave of redundancies now sweeping the UK, particularly in the financial services sector, will be a trigger for many people to start their own business. Redundancy pay and other support is often the deciding factor in encouraging a new entrepreneur into business. If this is the case, then we might expect to see start-up numbers growing again in 2009, assuming the bleak economic outlook and lack of bank funding doesnt put them off.