U.K. budding entrepreneurs face financial hardship due to economic strain
Start-up ventures are grappling with the repercussions of an unpredictable economic climate, as fresh research indicates that these businesses are hiring fewer employees than ever before. According to Cynergy Bank's latest Business Births and Deaths Index, the average number of staff for a new enterprise has plummeted to 2.64, a stark drop from 3.5 in 2017.
The results, which are based on data from the Office for National Statistics for the first quarter, were reported after a crackdown on employment rights regulations and a wave of tax increases in the Autumn Budget. The scholarly report also reveals that the number of jobs created through new startup formation narrowly surpassed job losses in the first quarter, but with a net gain of only 4,334, down significantly from 110,242 in the same period in 2017.
Meanwhile, an alarming number of businesses are shutting their doors, with a record total of £27.4 billion in turnover attributed to closures and overseas relocations during the first quarter. This represents a substantial increase of £5.1 billion compared to the same period last year.
Nick Fahy, chief executive of Cynergy Bank, expressed concern over the downward trend in employment and the record-high closure rate. He suggested that some larger firms might be opting to relocate abroad in response to recent unfavorable tax changes, highlighting the need for a more supportive environment for UK businesses.
Separately, research from banking powerhouse HSBC unveiled that one in four UK startups lacks essential resources needed for growth. Moreover, over one-fifth of founders admitted to not receiving adequate support after consulting government programs, educational resources, and mentoring. Despite these challenges, Tom Wood, head of business banking at HSBC UK, emphasized the critical role of start-ups in the UK's economic and social landscape.
Enrichment Data: The decline in employment by start-up businesses can be attributed to several key factors, including reductions in hiring by new businesses, an increase in business closures and relocations, adverse tax and regulatory changes, and a lack of confidence and support for new ventures. These trends pose significant challenges for sustained economic growth and employment generation in the UK.
The decline in employment by start-up businesses has led some larger firms to consider overseas relocation, as a response to recent unfavorable tax changes (finance, business). Despite these challenges, essential resources for growth are lacking for one in four UK start-ups, with over one-fifth finding inadequate support from government programs and mentoring (insurance, finance, business).
