Start-up boom levels off as business numbers fall

The number of active businesses in the North West fell by over 1,600 in May after reaching record levels the previous month, a sign that recent rapid growth is starting to level off.

The fall is the first since August last year, according to research by insolvency and restructuring trade body R3, when numbers fell by just 66, and follows a period of two and half years which have seen business numbers rise from under 320,000 to almost 370,000.

The figures show there were 368,167 active businesses in the region in May – 0.4% fewer than in April but still 17% higher than in December 2015.

Paul Barber, North West chair of R3 and a partner at Begbies Traynor, says: “The unprecedented rise in the number of active businesses in recent years reflects the start-up culture. It is arguable that the people in the North West have tried to embrace that entrepreneurial culture and are more open to running their own business or, in some cases, more than one.

“However it may be that the rapid month-on-month growth is simply unsustainable. New businesses are particularly vulnerable in the first few years so we can always expect some fall-out. But at the same time changing trends and other pressures have resulted in the loss of many traditional-type businesses. While we have seen a rise in insolvencies recently, other businesses may have chosen to close down voluntarily.”

Barber said it was difficult to pinpoint any particular sector where numbers had fallen, although some sectors had bucked the trend.

For example, there were 129 more restaurant businesses in May than the previous month and 222 new construction firms. Overall the North West figures are in line with the national figures, which also show a fall of around 0.4% in business numbers in May.

Barber added: “Britain has become more of a nation of entrepreneurs in recent years which can only be a good thing. However new ventures always entail risk, while the climate of uncertainty, change in the tax and other regimes and technological disruption is challenging, even for established firms let alone less experienced entrepreneurs. All businesses need to keep a close eye on profitability and seek expert help at an early stage if financial problems arise.”