Business start-ups and closures increase

A substantial rise in business start ups was negated by a similar rise in business closures in the first quarter of the year, according to research by Barclays Bank.

Barclays unveiled new figures showing that 110,300 new businesses started, almost one-quarter more than in the same period last year (88,800). It was the second strongest first quarter on record since 1988. However, the same research revealed that there has been a striking increase in the volume of closures. In Q1 2006 111,200 businesses ceased trading, an increase of nearly one-half on the same period last year.

Barclays did not see this as a cause for concern. John Davis, marketing director for local business at Barclays said: "A strong cyclical rebound in people starting a business has occurred in the first quarter but despite the high levels, the trading conditions for small business are still quite tough. We expect a more widespread improvement in small business trading conditions to occur later in 2006 and into 2007 as the current economic conditions pick up, providing improving opportunities for more individuals to set up and grow their business."

Other findings in the survey show:

• 20,600 women started a business in the first quarter of 2006 compared to 16,700 for the same period last year. This compares with 75,400 men setting up a business in quarter one 2006.
  
• Property Services led the way with start volumes around 43 per cent higher than the first quarter last year. However, the greatest absolute increases were seen in Business & Financial Services (up 6,100) and Motor Trades, Wholesale and Retail (up 4,100).
  
• Regionally, West Midlands and the South East saw the greatest percentage increase in the first quarter of 2006 for people starting up in business, compared to the same quarter in 2005; 34 per cent and 29 per cent respectively.

Closures

On the other side of the business stock, there has been a striking increase in the volume of closures. Barclays claim that this sharp rise in business closures is probably not a cause for concern. It comes after a number of years where start-up volumes have been strong and the total number of mainstream businesses has risen substantially.

The banking group claims that with modest economic growth in recent quarters there was likely to be some correction. However, it should be remembered that because there are more businesses operating the closure rate (as a percentage of stock) in the first quarter was only a little above the average seen over the past ten years.