The other new economy

I’ve been polishing up a theory that the UK small businesses community, freshly empowered and armed to the teeth for the first time with great and inexpensive business tech, will render medium sized businesses extinct and shift the wider dynamics of the UK economy.

In short (there’s more background here and here), today’s new generation of small businesses needs no physical office, can run customer support and marketing online alongside rich line-of-business apps like CRM, invoicing and accounting. While a start-up still needs classic things like a great idea, some capital, entrepreneurial drive and peer-support, operationally speaking it’s never been easier to start and run a business.

Individual hunches are one thing but hard data is another and so this afternoon, over a mince pie, I pulled together some figures from the UK’s Office of National Statistics and from other sources; UK company formations, unemployment, redundancies and GDP growth and then I normalised and charted them. The comparative trends were pretty interesting (click the chart to zoom).

My (non-expert) takeaways and observations.

  1. There’s usually a spike in company formations every January, not surprisingly there was no spike in Q1 2008 at the height of the financial market meltdown
  2. The January 2009 company formations spike wasn’t a spike, it just kept on going.
  3. There’s an interesting correlation between the increase in redundancies and the beginning of the increase in the company formations from late 2008.
  4. New company formations are running at double their pre-GFC levels and the January spike was back in 2010.

Now, I don’t know if company formations ramped in this way during previous economic recessions, but I’d certainly doubt it. And while four datapoints and half an hour of spreadsheet work does not get me a promotion to the post of Her Majesty’s Government’s Enterprise Champion, it doesn’t exactly blow a hole in the hull of my Rise of the Small Business theory either.

One Comment

R K Dean
December 12, 2010 at 9:44 pm

Starting a small business is one thing, keeping it going is the true test of any Rise, especially if you started in an industry that the govt completely and suddenly changed the “playing field” one operates under.

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