In my video interview last year with Sally Brooks of CMI, I discussed the topic of starting up a business during a recession.
I pointed out some of the advantages of developing a new business at a time when the economy is contracting – e.g. there is often better access to credit, and many components or items you need to develop the product or run the business could be cheaper to purchase.
However, I emphasised that you will still need those entrepreneurial skills that lead to success, such as, good networks, a clear understanding of the market opportunity, and sound financial and marketing plans etc.
I also highlighted some evidence from the ‘’Great Recession’ in 2009. This indicated that although there were greater start-up rates during that recession, evidence from later years (in 2018), also pointed to slightly greater failure rates for those new companies.
Starts-ups during a recession
The data recently released on the start-up rate during the recent recession make for interesting reading. During 2020 there were a record number of businesses started up in the UK – 770,000.
However, a significant number of new businesses were in the mail-order and online retail sales sectors.
In fact, there was over a threefold increase in the start-up rate of companies in these sectors. This is not surprising, given the length of the lockdowns that were introduced because of the pandemic.
But the interesting question will be – how many of these companies will survive over the next few years?
So yet again, over the next few years, we will have an interesting experiment on the advantages of starting up a company in a recession.
Some new firms are likely to grow successfully and even become household names but there are also likely to be some casualties with a large number of start-ups potentially contributing to the business failure rate over the next few years.
We will not know the outcome until 2026-27 but it will be interesting to see if the ‘pandemic’ start-ups of 2020 survive better than those new firms that were born in previous recessions.
You can watch the full 2021 interview below where Professor Brian Morgan gives his insight into entrepreneurial skills and applying a leadership mindset.