What has boosted entrepreneurship in the UK?
The recession and ongoing financial stagnation has resulted in a new wave of entrepreneurial activity, often from people with non-traditional backgrounds.
The UK has seen a particular rise in entrepreneurship. A record 523,410 new ventures were created in 2013 alone, up from 484,224 in 2012. Following the lead of the US, government- and corporate-sponsored incubator schemes are proliferating, and success stories are frequently celebrated in the press.
The rise in female entrepreneurship marks one of the most notable cultural shifts. The percentage of small businesses run by women in the UK has risen 10% since 2008 to 30.2%.
Sarah Dening, CEO of Shop on Your Doorstep, has commented: "I believe that the recession has driven these women to focus hard […] I think the end result will be a more diverse UK business ethos."
There has also been a rise in graduate entrepreneurship, particularly within the technology industry.
Rajeeb Dey is CEO of Enternships, a company devoted to giving young people access to work experience in startup companies. He has said: "Gen Y graduates are generally less motivated by money, but more the ability to make an impact and have autonomy in their work, which working in startup environments allow."
One of the most potent explanations of rising entrepreneurship comes from Robert W. Fairlie in a recent paper for the Journal of Economics and Management Strategy: "The rapid increase in payoffs, the availability of newly unemployed workers, and a dearth of employment alternatives may have combined to create higher numbers of entrepreneurs than in pre-recession years."
In other words, many people are starting businesses, and seeking employment in new businesses, out of necessity, not just because it’s fashionable.
Our author Alexander S. Kritikos has nevertheless made the point that entrepreneurs can reinvigorate economies by creating jobs and new technologies.
Roy Thurik has also studied the relationship between entrepreneurship and business cycles, asserting that a strong period of opportunity entrepreneurship often precedes an economic upswing. However, this link is weaker when the entrepreneurial activity is driven more by necessity.
Related articles:
Entrepreneurs and their impact on jobs and economic growth, by Alexander S. Kritikos
Entrepreneurship and the business cycle, by Roy Thurik