Why the UK is making strides in the startup community

Peter Crush

Wednesday 18 March 2015

It was 19th century English literary critic William Hazlitt who famously wrote: “Prosperity is a great teacher; adversity is a greater.” When it comes to explaining the recent dramatic rise in British business start-ups, never a truer word was spoken.

Thanks to rising unemployment; below inflation pay rises; loss of faith in traditional career ladders and low engagement levels, in recent years, record numbers of people have ditched being the employee to instead become the boss. In 2012, there were 484,224 new start-ups formed, and this jumped to 526,446 in 2013. Last year, this figure was beaten again, with 581,173 new businesses registered with Companies House.

This growth in start-ups coincides with a 20-year high in the number of self-employed people. Around 4.6 million people are now their own bosses. This equates to 15 per cent of the entire UK workforce – a proportion two percentage points higher than in 2008, and up from only 8 per cent in 1975.

Although tradespeople have long bolstered self-employment figures, the data suggests that the greatest growth comes from the ‘knowledge economy’. A major catalyst for this phenomenon has been the fact that the technology has finally caught up. Centre for Entrepreneurs chairman, Luke Johnson says: “Traditional jobs for life have largely disappeared; entrepreneurs have higher profiles than in the past, and they are now seen as role models. But more important than all of this is the fact starting a business has become easier, quicker and cheaper than ever thanks to technology.”

Low-cost

According to website fourhourweek.com, which surveyed more than 1,500 new businesses, 22 per cent of people said they were able to start a brand new business for just $100-$500, with only 14 per cent saying it cost them more than $5,000. Today, a computer, plus an internet connection, is all knowledge workers need to create a web-presence and an email address. ‘Moores Law’, which states that computing power doubles every two years, is still functioning (largely because the IT industry actually uses it to set planning targets), meaning laptops with all the power business-owners need can now be bought for less than £200.

“Cheap technology now gives people the ability to sell their skills to a global audience from their living room,” explains Xenios Thrasyvoulou, founder of PeoplePerHour. Thrasyvoulou heads one of a growing number of businesses that match companies to people selling the skills they need. Eventually, he predicts there will be a ‘wikinomics world’ where talent is borderless; available to a global market; no longer ‘owned’ by organisations, but hired on an ad-hoc basis. He pursues: “We know hundreds of skilled people who – after going on maternity leave, for example – evaluate their lives, sign up with us, and now work for whoever wants them for short, sharp projects. These people will never go back to their old employers again.”

Other organisations doing similar things include blur Group, which launched in 2007. Last year it reached $300 million-worth of ‘projects’ outsourced to people outside organisations’ walls.

Baby Boomers

According to the British start-ups statistics, it’s not just young people who are utilising cheap technology to start a new venture. ‘Baby Boomers’ (those born after the end of WW2, and before 1964), are joining in the fun too. The percentage of entrepreneurs who are Baby Boomers has grown from 14.3 per cent in 1996 to 23.4 per cent today, and, in every year of the last 15 years, Baby Boomers aged between 55-64 have had a higher rate of entrepreneurial activity than Generation Y.

“Being their own boss is the biggest driver when it comes to setting up a business,” according to Rebecca McNeil, managing director for business lending and enterprise at Barclays. “Experts also suggest older age is where the technology-experience ‘sweet-spot’ is reached: These people have the knowledge they need to sell to others, as well as the IT literacy. Younger people merely have the latter.”

Of course, it should be recognised that technology only makes starting a business easier. Maintaining it is another issue, and every new business still needs competent staff to keep it going. While IT improvements are making launching businesses easier, new research shows start-ups, in particular, still suffer disproportionately from late payment, and they also find it difficult to borrow money. One in five start-ups had a request for a bank loan declined in 2014 (source: alternative finance company Fleximize), while according a 2014 YouGov poll, 85 per cent of small businesses suffer from late payment, apparently amounting to £39.4 billion that’s still owed to them. So, in conjunction with this burgeoning of start-up enterprises, it should be noted that the level of outstanding payments has doubled in the last four years.

But let’s not forget that with simpler, more intuitive IT (and even supporting technology, like Crunch, which provides outsourced cloud-based accountancy software) starting a business has never been easier. With a great idea, all people need is minimal technology – and they seem to be grabbing this opportunity with gusto.

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