COVID impact on business community may be milder than feared

Date : 01 December 2021

Emergence of COVID-19 in the UK created severe economic effects, with many activities curtailed in an attempt to control spread of the disease.

There was concern that some businesses would close permanently – government therefore offered lavish financial support, incurring debt in the process.

This support appears to have been successful in keeping otherwise-viable businesses going, although exiting special measures is sure to be tricky and emergence of the Omicron viral creates new challenges.

ONS quarterly data on “business demography” records numbers of business “births” and “deaths” up to Q3 2021.

This source shows that “births” continued through the COVID period. “Deaths” were slightly elevated, but there was no catastrophic increase in the overall “death-rate”, when compared with the years pre-COVID.

Businesses in the transport and storage sector saw significant “churn”, with large numbers of losses, but also large numbers of new business formations.

Over the COVID period (roughly Q2 2020 to Q3 2021), the number of “births” exceeded the number of “deaths”, suggesting that the total number of active enterprises actually rose slightly.

However, appearance of a new, small business does not necessarily compensate for the disappearance of an established business which may have higher turnover or employment.

More detailed data is now available for the full year 2020, showing estimated demographic change by business type.  

This data suggests that UK food businesses were fairly robust in 2020, despite the social and economic turmoil created by COVID-19.

There was no dramatic increase in “deaths” between 2019 and 2020, although it is not clear what might have happened without government support.

In some areas – foodservice being the exception – there was a step-up in business “births”, suggesting that entrepreneurs (and their backers) continued to see opportunity in the food industry.

Note 1: Business demography refers to the number of enterprises, not the number of active locations; a retail business with multiple outlets would still count as “one”.

Note 2: SIC 2007 code 47.2 covers specialist food retail outlets such as burtvhers and gfreengrocers, not supermarkets. Data for supermarkets is not available, but IGD thinks it likely that very few new supermarket businesses were opened in the study period.