Caption: Brett Leppard
One of the main assumptions in an economic downturn is that people are reluctant to start businesses. But official figures show that the number of new companies opening yearly since 2009 has been increasing in Islington and the rest of the UK.
Does this mean that the economic situation is improving or are people being forced to open startups in the hope of making money as jobs are cut?
In 2008, 1,940 ventures opened in Islington. The following year, 1,665 enterprises were started, representing a 14 per cent decrease as the financial crisis set in. But since 2009, the number of startups has been on the rise.
Two years later, in 2010, 1,730 businesses opened, nearly a four per cent increase from the previous year and in 2011, 2,180 enterprises were born, representing a 26 per cent boost in comparison to 2010, according to figures from the Office for National Statistics (ONS).
This followed the trend across London and Islington has a consistently higher number of organisations opening between 2008 and 2011 than the capital’s average.
John Roe, vice president of the Islington Chamber of Commerce, said: “One of the things that is apparent from the borough is that there is a high levels of creative industries, like design, and it is well known for that.
“It’s all about risk. Basically, with kindred industries linked together it is great if it works. Then there is going to be a higher reward. But equally there is a high level of risk and there will be casualties along the way.”
The ONS figures also showed business survival rates. In 2008, out of the 1,940 business openings, 1,700 or 87.6 per cent survived their first year of trading. The figure increased marginally to 88 per cent in 2009 but took a plunge in 2010 to 85.5 per cent.
In 2006 and 2007, the borough’s percentage of businesses surviving their first year was slightly above the London average, but in 2008 the number dropped below the average by four per cent. Islington startups’ first year survival rate was 3.1 per cent below the London average in 2009 and nearly 10 per cent below in 2010.
Mohamed Hammoudan, neighbourhood coordinator of community group Team Cally, said high business rates were partly to blame for businesses going bust. He said: “Business rates are high so a lot people struggle to meet the rates.
“People see Islington as a cheaper option than central London, that’s why there are a lot of startups. It is far enough from the City to have cheaper rates. But the organisations that survive are all the blue chip, high tech companies.
“The ones that tend to struggle are the small independent businesses. They are the ones that will open and close pretty quickly.”
Lending to companies in the UK fell by £2.4bn in the fourth quarter of 2012, according to figures from the Bank of England. Mr Roe feels this is the key for the economic situation in Islington to improve.
He said: “When credit gets under control and economy seems manageable again, then it makes the banking community more inclined to take risks and there is likely to be greater support for businesses from banks and other lenders.”
The ONS figures also reveal a six per cent jump in the number of active enterprises – those organisations that had employment and turnover – between 2008 and 2011. This was lower than the London average of a seven percent increase.
Debbie So, co-manager at The Hub Islington, thinks new ways of employing people had an impact on this. She said there is a “shift to more contract and freelance work” that could distort the picture of employment.
While the overall economic picture in Islington, in comparison to the rest of the country, looks promising, there are still concerns that the recovery is fragile. It is clear the ability for lenders to free up money, flexible employment and lowering business rates will have a big role to play in the future of the economic recovery.
