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UK experiences first startup slump since 2008 recession

  1. nicolas_
    Francois Badenhorst

    Francois Badenhorst Deputy Editor Staff Member

    Posts: 91 Likes: 18
    5 |

    The first two-quarters of 2017 has the UK on track to experience its first dip in new company incorporations since 2008’s great recession.

    Since 2009-10, the number of new startups has increased every year, rising between 6% and 15% annually. But that trend seems to be ending. Q1 2017 saw the establishment of 170,143 new businesses. Still a substantial amount – but a 1.13% decline from 2016’s first quarter, which saw 172,096.

    And now, fresh data from Companies House reveals the downward trend has continued into Q2. The decline in Q2 has been even more pronounced: this year’s second quarter saw a 152,411 new companies incorporated, a 12% decrease on the same period in the previous year. 

    Q1and Q2, according to the data, has been the most popular time of year to incorporate a new business.

    The dip forms part of a broader decline in British small business confidence noted by The Federation of Small Businesses (FSB). The FSB’s latest Small Business Index saw “business confidence drop for the first time since wake of EU referendum”. What optimism remained, the report noted, was imbalanced across regions and sectors.

    Scottish small businesses, in particular, were pessimistic about the future. In terms of sector, the retail and wholesale trade was particularly rattled, the FSB noting a 9% decline in confidence from the Q1 report.

    Commenting on the FSB report, Nina Skero, the managing economist at the Centre for Economics and Business Research, noted “a new squeeze on household incomes” thanks to “inflation pushed up by the sustained weakness of sterling”.

    “Employee earnings growth is struggling to pick up, meaning that the rising cost of living in the UK is curbing the ability of households to purchase more discretionary goods and services,” says Skero. “Already, this appears to be having a notable material negative impact on the consumer side of the UK economy. Official figures showed the first decline in retail sales in three years in Q1 2017.”

    Altogether, it’s certainly not a catastrophe but the trends have some taking notice. Commenting on the Companies House figures, FSB’s national chairman Mike Cherry said: “Against a backdrop of unprecedented uncertainty, would-be entrepreneurs can be forgiven for delaying decision-making until there is more clarity about the future.

    “Small businesses desperately need certainty and an early decision on transitional arrangements would help alleviate investment concerns and avoid a chilling effect on the next generation of entrepreneurs on which the UK economy depends.”
    Cherry wasn’t crestfallen about the dip in general business confidence, however. But he did offer one caveat: “Employment and investment intentions among small businesses remain broadly stable, but this will not continue unless small firms get the certainty they urgently need.”

    As for UKBF members, opinions were mixed. Commenting on the decline of new incorporations, DavidWH astutely observed: “Have you considered the changes for Dividends and tax changes, as to a reason for the decline in new companies? Perhaps more are deciding to operate as sole traders?” Mark_Taylor_ feels the dip is part of the normal ebb-and-flow of business – with a small twist: it’s intermingled with some Brexit fears and pessimism.

    The Byre, however, offered a more sinister premonition: “I think businesses are right to be filled with a certain amount of gloom,” he wrote. “The crash of 2007-8 was really just a foretaste of what is to happen. In fact, had the various governments not intervened by printing money and using that to rescue the banks from their own stupidity and greed, the banks would now be the property of their creditors and a large number of businesses would have gone under.

    “It's a bit like forest fires - if we keep putting them out, the amount of dead wood in the forests builds and builds, until a fire comes along that goes out of our control and the conflagration is one that we cannot fight and it overwhelms us. Just as forests need forest fires to get rid of the dead wood and the sick trees, economies need downturns or even recessions, to weed out those sickly businesses that have borrowed too much or are working on too thin margins.”

  2. Clinton

    Clinton UKBF Ace Full Member

    Posts: 2,537 Likes: 805
    So to the average man this is all bad news. Inflation is going up? "Oh my God!"

    However, if you explain it properly rather than selectively quoting just the moaners, the picture is very different.

    Following the credit crunch the big danger was deflation. Why? Because a little bit of inflation is a good thing! Even the ECB recognises that and have been struggling to prevent the Eurozone from going into deflation. Yes, they are trying to get a bit of inflation there in Euroland!

    So we're on the right track. The Bank of England's mandate on inflation is not to keep it at 0%, it's to keep it at approximately 2%. (You can't keep it at an exact number hence the "approximately")

    And you know what the latest reading is? 2.9% i.e. a fraction over the 2% target.

    In fact, it was expected to come in at 2.7% and it's amazing that, considering the low value of the pound over that quarter making imports more expensive, it came in at just 0.2% more than expectations. Now that the pound is going back up again inflation should drop in the current quarter. Why don't you tell us any of that in this anti-Brexit post of yours?

    If you go looking for some muppet to intepret every piece of news as bad news, then you're always bound to find someone.

    And it has bounced back since. But, no, don't tell us about that! Retail sales saw a small decline in Q1 and a bounce back in Q2. The BBC blames this bounce on hotter weather. Yeah, it can't be the strength of the economy, can it? I'm sure this bounce is most inconvenient for not fitting in with their (and your) narrative.

    And that UK retail sales is bouncing back strongly points to healthy overall numbers for 2017. Damn! What happened to that "notable material negative impact" bullsh1t?

    We've beaten deflation and got inflation back close to target. Retail sales have jumped. And you moaners are still finding nonsense to b1tch about?

    Get a grip, man!
    Last edited: Jul 31, 2017
    Posted: Jul 31, 2017 By: Clinton Member since: Jan 17, 2010
  3. Francois Badenhorst

    Francois Badenhorst Deputy Editor Staff Member

    Posts: 91 Likes: 18
    Hi Clinton, thanks for the comment. Safe to say you seem bullish about the UK's current business climate. I must say I don't think the article is that negative (and indeed the only reference to Brexit is one source's quote).

    That's by-the-by, I guess. But I notice you seem unworried about the pronounced downward trend of company incorporations in the UK? Is this slump - the first in nearly a decade - not news?
    Posted: Jul 31, 2017 By: Francois Badenhorst Member since: Aug 25, 2015
  4. Clinton

    Clinton UKBF Ace Full Member

    Posts: 2,537 Likes: 805
    Here's some news for you: There's always some good news and some bad news.

    Take all of it into account rather than just the idiotic ramblings of the Guardianista morons.

    So the drop in retail sales in the first quarter was bad news. Then, unfortunately for you, just after you posted the above, results for Q2 were announced and they show a rise in retail sales which makes a complete joke of all the earlier comments posted about Q1 results.

    Things go up, things go down. That's the natural order of things.

    Despite all the uncertainties thrown at us by the Brexit process, the lack of clarity on whether we'll be in the single market or not, the lack of even basic assurances about employees being able to continue working in the UK ... the UK economy is ticking over pretty well, inflation is close to target, the pound is rising, retail sales have bounced back.

    Personally, I'm stunned that we haven't had a huge hit in confidence and various indicators turning negative. Remember all the prophesies? Huge outflow of capital, property prices crashing, inflation running into double digits, emergency budgets, sharp increases in taxes blah, blah, blah.

    What happened to all that?

    It pisses me off no end that there are so many people simply hoping against hope that we'll hit the buffers some time soon, and trying their damndest to damage confidence.

    We took a bad decision, IMO, to leave. But we voted to leave. And the UK is holding up well. Now everybody needs to just get with the programme instead of just finding new things to b!tch about everyday.

    Let's you and me, and Pedro and Fran, and everybody else, all just be British about it - stiff upper lip, old chap. Knuckle down and get on with it.
    Last edited: Jul 31, 2017
    Posted: Jul 31, 2017 By: Clinton Member since: Jan 17, 2010
  5. Noah

    Noah UKBF Regular Free Member

    Posts: 140 Likes: 14
    While Clinton's "Things go up, things go down" point is well made, I think this "first startup slump" is good news. In my humble opinion, there are far too many businesses being started by people who have no clue what they are doing, waste their own and other people's time and money, and cause problems such as supporting (temporarily, but serially!) excessive property lease rates.

    Now, can anyone help me pull this ladder up?
    Posted: Aug 1, 2017 By: Noah Member since: Sep 1, 2009
  6. The Byre

    The Byre UKBF Ace Free Member

    Posts: 5,353 Likes: 2,135
    Yes, back-to-back, face-to-face, cheek-to-cheek, up against the wall (good heavens, an orange!) we'll do what we have to.

    Plucky John Mills will stick it out on the bridge, whilst Bernard Miles is roughing it below with Richard Attenborough. Alec Guinness and Denise Price, glint-eyed and stiff-lipped, are doing something unimaginable in the Map Room. David Niven is telling Susanna York that it's all pretty ghastly up there, but he'll do his best and, by Jove, he'll give Jerry what-for!

    "Hold me, Fiona! Hold me! Hold me like you did in Margate! Hold me like you did, before things got so messy!"
    Posted: Aug 2, 2017 By: The Byre Member since: Aug 13, 2013
    Francois Badenhorst likes this.