NECESSITY DRIVES LOCKDOWN BUSINESS CREATION

This picture tells a story of stubborn creativity despite the bewilderment of lockdown.

See how in mid-April, enterprise stuttered?  While we recoiled from pandemic shock, the number of new businesses incorporated was down 69% compared to the same period in 2019. 

But then the lines cross decisively as the mood shifts and innovation persists. In the fourth week of May, incorporations are higher than the previous year.  One week in June saw 82% more businesses created than in 2019.  This represents more than 10,000 additional businesses created in one week when compared to the same week the previous year[1].  Overall in June 2020, there were 40% more businesses created than in June 2019. 

Of course, the long term trend has yet to emerge.  We can’t yet grasp the shape of our new business communities.  But X marks the spot things changed. Counterintuitively, constraint enhances creativity[2]. 

Could it be when so much was stripped away, shut in and locked down, that a universal human drive to create and trade broke through?

The entrepreneurial myth says you have to be special to be an entrepreneur; you have to be a reckless risk-taker or a billionaire maverick called Elon.

But most of the world’s entrepreneurs are born of necessity as well as opportunity. 

While entrepreneurship can be a lifestyle choice for some, many create businesses because they have to. This is not to deny the painful grind of small business in the midst of recession.  But a shock can provide clarity and reinvention. The grandfather of modern economics, Joseph Schumpeter, called this creative destruction: the relentless surge of technological innovation that reinvents markets and declares yesterday’s products and services obsolete.  In a healthy Schumpeterian economy, profit is temporary, bankruptcy is predictable and monopolies fall as the next big thing breaks. 

The new Government schemes, announced last week, buy time.  But our economy will inevitably need new jobs and new businesses for the new normal. 

These stats are surprising and encouraging; it is remarkable that business incorporations are sustained at pre-pandemic levels despite the fear and uncertainty of the last six months. Entrepreneurship remains the irrepressible wave to carry us forward.

About the analysis and data methodology: the data analysis has been led by GetAutopsy,  a data and research company that captures and analyses information on distressed companies and new incorporations to understand sector trends and economic growth across regions. Launched in 2017, GetAutopsy has the largest proprietary dataset of distressed companies globally and is recognised by its refined data methodology to capture insights on this field. The analysis is done on a week by week basis tracking the total number of new UK company incorporations in a given week from March to July 2020.  A comparison is then drawn across the same duration tracking the number of new UK company incorporations in 2019 to show increase or decrease in percentage in each week  (Source: data captured via DueDil database)

[1] 22,863 businesses incorporated in 2020, compared to 12,532 in 2019

[2] https://hbr.org/2007/12/breakthrough-thinking-from-inside-the-box