Business Start Ups Down on 2005

The slowing economy has caused the number of small business start ups to fall by 13 per cent in 2005, the largest fall in the last decade, according to new figures from Barclays.

According to the research, 388,300 new firms started up in 2005, compared to 446,500 in 2004. The picture is not as bad as it might seem as both 2003 and 2004 were particularly strong years for business start ups with benign economic conditions and a temporary incentive in the taxation system.

A sharp drop in the number of people starting a business in the first half of 2005 (246,400 H1 2004 compared to 187,200 H1 2005) was largely responsible for the substantial change in the figures, as slowing economic growth put people off. In the second half of 2005 there was an encouraging upturn (201,100 H2 2005 compared to 187,200 H1 2005) bringing the figures back to ‘typical’ annual levels.

While the research shows a downwards move for England and Wales as a whole, 25 per cent of local authorities bucked the national trend and recorded an increase during 2005. The number of businesses set up in Poole in the South West recorded a 20 per cent rise, while those in Darlington in the North East and Rotherham in Yorkshire grew by 15 per cent.

John Davis, local business marketing director for Barclays said: “The number of businesses started last year moved back to more typical levels after a couple of boom years, the 13 per cent fall in start–ups in 2005 in effect is a large drop from a record couple of years. The underlying market in start-ups is still reasonably strong as was evidenced by the start-up numbers recovering during the second half of 2005.”

Other key highlights from the 2005 start-up research:

• Essex is the top area overall for starting a business in England and Wales with 9,700 set up during 2005, Kent is second with 9,200 and Surrey third at 9,100. Other leading areas outside the South East are Lancashire at 7,800, Birmingham 7,200 and Devon 6,000.
• The number of business started by men was 262,700 and women 125,600.
• 36 out of 169 county councils/unitary authorities bucked the national trend and recorded either an increase or no change in the number of businesses set up during 2005 compared to 2004. 12 of these were in London with Barking and Dagenham, Greenwich, Hackney and Newham leading the way with an increase of 20 per cent respectively. In the South - Slough and Poole led the way with an increase of 20 per cent year on year and the North – Darlington and Rotherham each recorded increases of 15 per cent.
• The largest fall recorded was in Hartlepool followed by Gwynedd and Newcastle upon Tyne – 50 per cent and -40 per cent respectively.
• Two small business sectors saw an increase in start-ups against the wider downward trend across England and Wales – Agriculture and Transport, Post and Telecoms. Agriculture grew from 6,700 in 2004 to 7,300 in 2005 whilst Transport, Post and Telecoms increased from 16,800 in 2004 to 17,500 in 2005.
• All other sectors saw a decline in the number of businesses set up. At an industrial level three sectors - business and financial services, motor trades, wholesale and retail and construction accounted for more than one half of start-ups (227,400) during 2005. The greatest decrease in start up volumes was in other services, which saw a decline of 30 per cent year on year.
• Business closures showed a modest increase of just under 4 per cent, a surprisingly modest rise considering the slowing of economic growth. In 2005 333,700 businesses stopped trading compared to 321,500 in 2004.