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.'
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.'
