The Pandepreneurs: the rise of new companies through lockdown and market adaptability
At the height of the lockdown restrictions, close to 9,000,000 workers were put on the Coronavirus Job Retention Scheme (see plot below). This has meant that these people have had a lot of paid ‘free’ time, but not without drawbacks, as this also meant a lower income and uncertainty about the future. At the same time, around 750,000 jobs have been lost throughout.
Could it be that this drove people to start new businesses? Maybe this allowed a lot of people time and opportunity to give their dream business a shot? Or maybe, some obvious gaps in the market began appearing — especially by new trends like a wider use of home office and demand for specific products?
I thought it would be interesting to try and answer these questions by exploring the Companies House data product, which contains information on new companies registered throughout the UK. A caveat of this dataset is that it’s a ‘snapshot’ of companies currently active in the UK. This makes year-on-year comparisons difficult, as we don’t know the total number of companies that registered in the past, only those that have survived until now.
The entrepreneurial rise
The first step would be to verify whether there has actually been a noticeable change in the number of companies registered in the UK. To do this, we have a simple time series plot:
Though the data is quite irregular — there are a lot of spikes and dips — there is definitely significant growth after April and reaching its highest point in July. Next we can explore how 2020 trends compare to the previous years.
When analysing this plot we have to remember the caveat outlined above, which is that we only get to see companies that have survived until today. However, if we assume that company registration and failure rates are fairly similar throughout the years, these lines should have similar shapes.
This indeed seems to hold true for previous years, with similar trends such as as a slight increase in company registration numbers in March, as well as in October and November, and fairly flat otherwise. What’s hard to miss is the dip in April and the peak in July of 2020. Based on this, I think we can confidently say there’s been a shift in the trend of company registrations after lockdown.
What services do these companies provide?
Now we know there’s been a significant increase in the number of companies registered, it would be interesting to see what industries have been most affected by these new trends. To find these, I calculated the year-on-year percentage change in the monthly number of companies registered per industry, and calculated the mean between April and August. I also filtered out SIC codes with less than 30 average company registrations per month, to reduce amount of noise.
Interesting to see some of these are quite logical industries that we would have expected to see growth in. They could be grouped up into categories:
Medical
There are a few related to medical and pharmaceutical supplies, such as: manufacture of medical supplies (32500), wholesale of pharmaceutical goods (46460) and retail sale of medical goods (47749). The description of these SIC codes is quite vague, but I can imagine there were companies set up to try satisfy the demand caused by the pandemic.
Cosmetic and toilet articles (a.k.a. hand gel and toilet paper crisis?)
The retail sale of cosmetic and toilet articles (47750) growth might be explained through the unexplained demand of toiletries at the start of lockdown. It could also be a shift towards more wellness focused products, as a quick scan of the company names several skin and beauty related companies.
Hobbies and the outdoors
We all know someone who’s started a hobby through lockdown, so it’s not surprising to see retail sale of sports goods, fishing gear, camping goods and bicycles (47640) in this list. People are trying to make the most of this summer by ‘staycationing’. Related to this might be sale of other motor vehicles (45190) which includes motorhomes and camping vehicles.
Online retail
Sharp rise in retail sale via mail orders and internet (47910) and the accompanying licensed carriers (53201). With most shops closed for such a long time and people stuck at home, most of our shopping has been online.
Specialised cleaning services
SIC Code 81222 — No explanation needed
Unknown (to me, at least)
I couldn’t find an explanation for the growth in agricultural raw materials, livestock and textile raw materials (46110) and operation of coach passenger facilities (52213). If you do, let me know!
Which industries saw a drop in new companies?
Now, let’s take a look at the industries that were hardest hit by the current situation.
Again, several of these make a lot of logical sense. I’ll split them into groups as I did before:
Hospitality
Hotels (55100), restaurants (56101) and pubs (56302) make the list, as anyone could have guessed. It’s really satisfying to see that although they took a big hit in April and May, the number of new companies is almost bounced back to its pre-pandemic levels! It is also interesting that, although much fewer, restaurants and pubs still opened at the height of lockdown in April, with around 200 and 100 respectively.
Performing arts
Performing arts (90010) and support to performing arts (90020) were (and still are) severely affected by the pandemic. Hopefully normality will resume soon enough!
Private medical practices
These seem to have quite erratic behaviour, but it also makes sense that they wouldn’t see a rise in new registrations, since they had to remain closed during the start of the lockdown (see dental practices which have a significant dip). It could also be due to doctors being very busy fighting COVID and thus, not setting up new clinics.
I’m surprised at how quickly the market seems to adapt to changes in the environment to respond to new demands and opportunities. It would also be interesting to explore how many of these new companies are ‘real’ startups and how many of these and existing companies creating new entities to serve to services.
Stay tuned for my next blog when I explore what these changes look like at a regional level and check whether there have been hotpots or if it has happened uniformly across the country.
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