Pandemic-born businesses could add £20bn to UK economy new study reveals
More than £20bn could be added to the UK economy in future from the number of additional businesses created during the pandemic, fresh data from a joint report by CBI Economics & NatWest Group reveals today (Thursday).
Some 800,000 companies were registered in the first year of the pandemic, a 22% increase compared with the previous year.
Compared with its international peers, the UK is a proven hub for entrepreneurship. Pre-pandemic the number of new businesses created as a share of total firms was 13%, higher than the U.S. (8%) and Germany (11%). Historically, the success and survival of these firms is also well established. In 2018, the one-year survival rate for new business was 89% – around nine percentage points higher than the EU average.
To gain greater insights about the hitherto little-known experience of pandemic-born firms, CBI Economics surveyed 543 firms (see notes to Editors for survey and report methodology). Key findings include:
- Only 13% cited regulation as a challenge when starting their business.
- Access to finance was a key concern for many burgeoning business leaders, with 55% highlighting this post 2020, compared with 42% pre-Covid.
- 4 in 5 firms report no plans to wind down their business.
- Pandemic-born businesses are more likely to say it is important to adopt the newest technologies compared to their pre-pandemic counterparts (56% versus 71%).
- Pandemic-born businesses are 20% more likely to use both sustainable materials and suppliers, compared with firms established prior 2020.
The commitment from new businesses to sustainability is real and enduring. The Book Shelf is a West Midlands-based firm helping authors publish their work through a combination of coaching and editing. Its founder, Ameesha Smith-Green, said: “Everything we do as a business is trying to encourage authors to be more sustainable. We encourage ebooks and print on demand rather than book printing. We’re also working towards B Corp certification, and we’ve set up a partnership with the Rainforest Trust.” As a NatWest business banking customer, Ameesha received regular calls from the bank checking on her wellbeing and enquiring whether she needed any extra support.
As the UK’s economic outlook weakens, it’s imperative founders with the vision and determination to begin their businesses amid a pandemic are helped to succeed and scale.
‘Generation Covid’ businesses also revealed a mismatch in founders’ expectations regarding the agility of more established banks versus challengers, with some assuming the former’s size would preclude dynamism or idea generation.
Indiecom, a telecoms platform based in Northern Ireland, enables customers to better understand the performance of their mobile network provider. Co-founder Conor Morrow said: “While the financial support has been valuable, the business coaching has been the real support tool – signposting opportunities and ways to grow.” The firm benefitted from its relationship with Ulster Bank.
Tony Danker, CBI director-general, said: “Pandemic-born businesses – led by ambitious, resilient entrepreneurs – have innovated in so many ways, and at such speed, giving me great sense of optimism. It’s crucial we give these leaders the support they need to grow and succeed. Rising energy prices, supply chain challenges, an uncertain economic outlook and cost-of-living crisis mean we’ve some testing months, and possibly years, ahead. For start-ups which count their experience in months, not years, that environment is even tougher. That said, even if the cost of doing business is rising, the cost of starting a business shouldn’t. The UK needs the ideas and ingenuity of entrepreneurs to help us grow.”
Alison Rose, chief executive of NatWest Group, said: “A thriving economy is dependent on a flourishing entrepreneurial culture. As we come out of the pandemic, despite rising inflation and the cost of living crisis, now is a great time to start a business and become an entrepreneur. There’s more support than ever in terms of access to grants and funding, networking and mentoring and angel investment. And as the biggest lender to businesses, we are determined to play our part. This report helps shine a light on the resilience and determination shown by businesses started during the pandemic. We need to give start-ups the support they need to not just survive, but also to thrive.”
Martin McTague, national chair of the Federation of Small Businesses, said: “The need to adapt and innovate over the pandemic has given us a wave of fantastic new start-ups, from those who turned hobby businesses into full-time endeavours, to established business owners launching new enterprises as the economy changed.
“Firms have emerged from lockdowns to face spiralling operating costs, labour shortages and new trade paperwork. If we want new companies to achieve their full potential, government urgently needs to work with industry to address those challenges.
“The business community as a whole shrank over lockdowns to the tune of hundreds of thousands. Unless action is taken now, that trend could continue as a cost of doing business crisis leaves many fearing for the future.”
Richard Bearman managing director of Small Business Lending, British Business Bank said: “We are delighted to have supported this research by CBI, which provides important insights into the challenges overcome, and resilience and adaptiveness shown, by new businesses born in the UK during the pandemic.
“Supporting businesses in their formative years by helping them navigate obstacles, identify opportunities and share lessons learned, can help them thrive and prosper.
“I’m thrilled to see some of our inspirational Start Up Loans recipients showcased. They are great examples of what can be achieved with the right support, business plan, entrepreneurial spirit and resilience, even during a time of ongoing economic uncertainty.”