Necessity drives lockdown business creation

Co-written with Louise Nicolson, entrepreneur and author of The Entrepreneurial Myth and Maryam Mazraei, founder of GetAutopsy and Investor at Ascension Ventures.

This picture tells a story of stubborn creativity and innovation despite the bewilderment of the national lockdown faced in the UK.

Since official national lockdown measures there has been a marked growth in new business incorporations, compared to the same period in 2019.

One week in June saw 82% more businesses created than the same week in 2019. In real terms this is more than 10,000 additional businesses, compared to the same week the previous year (22,863 businesses incorporated in 2020, compared to 12,532 in 2019).

Overall in June, there were 40% more businesses created than the same period in 2019.

Despite lockdown, overall business creation was still up 3% from March to July 2020, compared to the same period in 2019 (283,524 businesses incorporated in 2020, compared to 282,781 in 2019)

While we recoiled from pandemic shock, the number of new businesses incorporated was down 69% compared to the same period in March 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. With a clear spike in June 2020, seeing 40% more businesses created than in June 2019.

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 throughout this period, 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