Britain’s start-ups reeling from economic pressure
Start-up businesses are feeling the sting of an uncertain economic landscape as fresh research shows new firms are employing fewer staff than ever before.
The average number of staff for a new firm had slumped to 2.64, down from 3.5 in 2017 according to Cynergy Bank’s latest Business Births and Deaths Index.
The research, which draws on Office of National Statistics data for the first-quarter, came after a crackdown on employment rights regulation and a flurry of tax hikes in the Autumn Budget.
Business confidence plummeted in the aftermath as firms braced for the increased costs to come into effect in April.
The number of jobs created through new business formation narrowly skimmed past job losses in the first-quarter but with a net gain of only 4,334. In the same period in 2017, the figure topped 110,242.
Meanwhile, more firms were shutting their doors in record numbers. The total turnover of businesses closing or moving overseas smashed £27.4bn in the first-quarter, Cynergy Bank’s analysis of departures from the Inter-Departmental Business Register shows.
This marked a £5.1bn jump on the same period last year.
Tax changes driving firms to relocate
The contribution of businesses closing has slowly begun to eclipse that of new businesses Whilst in the last 12 months, new start-ups generated £90.4bn, the total turnover of firms shutting for the same period reached £92.27bn.
Nick Fahy, chief executive of Cynergy Bank, said: “It is concerning to see new businesses employing fewer and fewer staff, and the turnover of closing or relocating firms at an all-time high.
“It is possible that some of these larger firms are choosing to relocate abroad in response to recent unfavourable tax changes, which underscores the need for a more supportive environment for UK businesses.”
This comes as new research from banking juggernaut HSBC revealed one in four UK startups lacked essential resources required for growth.
One-in-five founders said they had not found the right support after consulting government programmes, educational resources and mentoring.
Over a quarter of those who started a new business said they continued to struggle due to ill-support.
Tom Wood, head of business banking at HSBC UK, said: “The thousands of businesses in the UK that start up each year are a critical part of our commercial landscape.
“We should never underestimate their value, from both an economic and social impact perspective.”