In the UK, following the news that the number of company insolvencies registered in January 2022 has more than doubled when compared with the same month of the previous year, business finance experts are calling for more support for small business owners.
Dean Salmon, accounts senior at The Accountancy Partnership, a UK online accountancy services provider, and online accounting software to businesses nationwide, said:
“The pandemic unexpectedly produced a record number of entrepreneurs, with nearly half a million new business registrations occurring despite the vast economic uncertainty – a record 84,758 additional businesses when compared with the previous year.
Naturally, a larger number of businesses means a greater proportion of these enterprises will come to an end within the first year – particularly due to the new challenges posed post-pandemic, such as inflationary trends, supply chain disruptions, energy price hikes and material shortages.
However, small businesses are fundamental to the health of the economy. They create three out of five jobs and account for half of the nation’s private sector turnover, so it is important that we provide new owners with the support they need to continue past their first 12 months of trading.”
On average, research by The Accountancy Partnership, found that new entrepreneurs rated their business knowledge a mere 5/10, demonstrating that many were unprepared for the challenges of running a business.
By educating and guiding these owners through the available resources to assist with future challenges, it can help to limit the number of businesses that cease trading and ensure fledgling companies are best equipped for the future, says Salmon.
Fledgling Businesses Started Due to Redundancies
The job market during the pandemic in 2020 was scarce, with 370,000 redundancies made throughout the August to October period alone and the unemployment rate rising to a staggering 5.1% by the end of the year.
When you consider that there were also 726,000 fewer people on company payrolls in January 2021, it isn’t unreasonable to assume that job losses served as a primary motivation for the many concerned people who were forced to find new ways to make ends meet – especially as starting a successful business in normal circumstances is incredibly difficult.
"As the job market begins to pick up post-pandemic, new entrepreneurs may be rethinking their decision to go alone, which is completely fine," says Salmon. "However, a number of resources and organizations are available to offer advice and support on a wide range of potential challenges, allowing new business owners to remember their reasons for first taking the leap into entrepreneurship."