Entrepreneurial activity lift

Date : 16 September 2020

Provisional “fast” indicators from ONS suggest that the UK economy continues to recover from the stresses of coronavirus and lockdown. Activity remains below the level seen just before lockdown and below the level seen in Summer 2019.

Encouragingly, the number of company incorporations which fell sharply during lockdown has risen as lockdown has been released.

This suggests returning appetite for risk amongst both entrepreneurs and the investors that back them, but not necessarily improving economic fundamentals, with both coronavirus and EU Exit to contend with.

It may also reflect ongoing loose monetary conditions, with credit both plentiful and cheap at present. Data from the Bank of England shows that loans to SMEs have risen strongly, although it is not clear from the data whether this lending is being used to support new businesses (a promising sign) or existing businesses (less promising).

Voluntary company dissolutions are flat, notwithstanding very challenging conditions. This is likely due to cash support provided by the government e.g. special loans and grants. Forbearance on the part of creditors may also be a factor.

The “acid test” of business durability may come over the next few months as the government “tapers” the various business support programmes, especially CJRS and as cash reserves run dry.

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