Start-up businesses all the rage

An interesting short BBC article that reports that the number of new businesses set up in the UK during the first six months of 2010 was the highest amount in more than a decade. This was a 51% rise on the first six months of 2008, when the UK first went into recession.

It’s interesting that the recession should provoke a wave of business creation. Economists tend to believe that recessions can be part of a process of ‘creative destruction” (see ‘Dragon’ Theo Paphitis here). And according to the authors of a recent study, “The recession left many people out of work or unhappy in work, and it is these people that are now using their own initiative to set up their business and help kick-start the economy again. Many of these people are not serial entrepreneurs, but instead are normal, hard-working people who have decided that they want to make a difference to their lives.”

I wonder what proportion even used redundancy payments as finance for their start-up.

The research also showed that only 0.6% of firms founded in 2009 had since gone into receivership or liquidation, compared with an average of 4.5% of those firms set up between 2000 and 2008. The authors note that the recession had given new small firms a much greater resilience.