The UK government’s clampdown on “disguised employment” by public sector workers is largely to blame for the drop in the number of new startups created in 2017, compared to the previous year.
That’s according to the latest research released by the Centre for Entrepreneurs, which found that 589,008 new businesses launched in 2017 – representing a 10.5% decline when compared to the figure (657,790) for 2016.
Additionally, it’s believed that the cumulative effect of business rate rises and other regulatory burdens, combined with muted encouragement for entrepreneurs from the current government, could be deterring individuals from turning their ideas into businesses.
Brexit, however, is not deemed to have had a significant impact on creation of small businesses in the UK. According to the findings, there was no slow-down seen in the final six months of 2016, hence why the UK’s impending departure from the EU is not likely to have had any impact last year.
“This is a welcome re-adjustment to business formation figures, which have become increasingly distorted over the past few years by the rise in contractor accounting firms. The company formation statistics now give far more accurate insight into the state of entrepreneurship nationwide,” said Matt Smith, director of the Centre for Entrepreneurs.
“With business registrations increasing for nearly a decade it is not surprising to see the record streak come to an end,” said Smith.
Virtual event platform Hubilo gets £17M funding, plans expansion in the UK
“While the tax clampdown is responsible for most of the drop, there is evidence that formations have fallen more than expected. To boost startup figures, the government must return to championing entrepreneurship and supporting entrepreneurs, as it did so well under David Cameron,” he added.
According to the analysis carried out by the think tank, the most obvious impact of the government’s clampdown was felt in Wiltshire, where 2016 saw 10,164 new businesses registered in the county, with 7,475 (73%) registered to an accounting firm that provides payroll solutions to contractors.