Young 'recession generation' entrepreneurs defy downturn

  • Three per cent rise in UK start-ups in 2012
  • UK’s youngest entrepreneurs increase by a third since 2008 as youth unemployment approaches one million*
  • ‘Bedroom business’: over half start on less than £1k capital
  • Entertainment trumps retail as high street struggles continue – rise in events, arts and music businesses

A new generation of young business owners are leading the way out of the downturn, according to the annual Simply Business Start-up Index, which reveals a 29 per cent rise in firms started by 18-25 year olds since the recession took hold in 2008.

Data from the UK’s largest business insurance provider, based on up to 750,000 individual quote requests annually, revealed that new businesses accounted for 38 per cent of all applications in 2012, representing a 3.4 per cent increase on the previous year. This compared to a decline of 8.7 per cent for all start-ups since 2008, making the big rise in younger entrepreneurs all the more significant.

As part of the annual report, Simply Business conducted a start-up capital poll on a cross-section of 500 customers, to review the current landscape of finance and lending. This revealed that the majority of businesses start on a shoestring, with 58 per cent raising less than £1,000 to get off the ground and 39 per cent managing on less than £500. Most start-ups are self-funded, relying on savings (84%) or family (12%), with just five per cent receiving bank funding to launch their enterprise.

“The start-up figures for 2012 are encouraging as they show that enterprise is not being unduly suppressed by ongoing negativity in the economy,” comments Jason Stockwood, Simply Business CEO. “This has been among the most difficult periods ever faced for young people, with many traditional routes to employment now closed, so it is especially pleasing to see a new generation of entrepreneurs emerging and hopefully building the household names of the future.”

‘Silver start-ups’ continue to look for ways to boost retirement income

At the opposite end of the scale to those at the start of their career, the trend for retiree-age entrepreneurs continued in 2012 with a 7.2 per cent increase in applications from those over the age of 65 – the biggest annual rise of all age groups. Over 65s now account for more than four per cent of all new business owners, gaining ground on the most prolific start-up age of 35-44 year olds (30%).

Need for cheer cuts through the gloom with rise in entertainment and arts

Sentiment played a key part in the start-up landscape in 2012, with entertainment and arts businesses such as event organisers and children’s entertainers proving the biggest growing trades, with the number of new businesses in the sector increasing by 10.8 per cent. Elsewhere however, the struggles of the high street continued, with restaurants (-24%), shops (-18%) and pubs (-16%) recording the biggest declines overall, revealing the ongoing squeeze on consumers’ disposable income.

Jason Stockwood continues: “The decline in retail trades is worrying as it suggests the government’s efforts to revive the high street are falling flat. This is clear evidence that a renewed focus is badly needed to help support local, independent businesses in particular. On the flipside, the rise in entertainment focused firms shows the enterprising spirit of UK entrepreneurs as they look to meet demand for some light relief in difficult times, as well as riding the wave of major, feel-good events such as London 2012 and the Diamond Jubilee.

“Overall, the start-up demographics we have recorded in recent years shed a lot of light on the environment we now live in. The meaning of retirement has altered for many, as people look to carry on earning in order to boost potentially reduced income. However, positives have also sprung from this with many now viewing this period as a genuine opportunity to make business dreams a reality.”

Case study

Ollie Rosenblatt, 25, founded the concert promoting company Senbla, in the summer of 2011. He runs the company with his university class-mate.

“I had been working as head of the live division at Jazz FM for a year after graduating university with a degree in Popular World Music, but I began to feel that I had enough experience and industry knowledge to start doing things for myself. It was daunting, but I gathered the confidence to break away and start my own business as I wanted to be in complete control of my career path, particularly with the on-going difficulties in the jobs market. It took some careful planning; I think you can find gaps in certain markets but you have to look hard and really examine the industry you're in to identify the genuine opportunities. I saved money myself from working and living at home, and I was given some capital from a successful art dealer who invested in Senbla from the offset.

“One of the challenges we face is competing with the biggest UK concert promoters for acts, but we’ve worked hard to show agents the benefits of our approach for artists. As a result, we’ve put on events for some major acts including Burt Bacharach, Nigel Kennedy, From the Jam and Finley Quaye. The economy has definitely had an impact on audience spending patterns in the concert market with people buying tickets last minute, always on the lookout for cheap deals. This is the culture now, which can be difficult to manage as a business owner, but we are constantly learning and looking for innovative ways to boost ticket sales. It’s clear that the small-mid market has suffered, however things are definitely on the up. We recently did a deal with Islington Council to put on a minimum of 60 shows this year at the Islington Assembly Hall. It is hard work, but the future looks good for Senbla and I’m happy to be my own boss at 25!”

Start-up success: Start-up strugglers:
Strongest growing sectors in 2012 % increase on 2011 Weakest growing sectors in 2012 % decrease on 2011
Entertainment & Arts +10.8% Restaurant -24.4%
Transport +10.4% Shops -18.5
Cleaning +3.8% Pubs -15.9%
Financial/Legal/Insurance +0.9% Architects/Surveyors -9.8%
Regional start-up hotspots: Regional start-up not-spots:
10 UK counties/boroughs where the start-up rate has increased most significantly in 2012 % increase compared to 2011 10 UK cities/counties where the start-up rate has declined most significantly in 2012 % increase compared to 2011
North Yorkshire +15.76% South Gloucestershire -54.51%
Scottish Borders +14.86% Newcastle Upon Tyne -18.07%
Cambridgeshire +10.63% Greater Manchester -16.95%
North Lanarkshire +9.07% North Lincolnshire -16.48%
County Durham +4.41% East Dunbartonshire -16.02%
Essex +4.17% West Sussex -13.74%
Monmouthshire +3.92% East Sussex -13.50%
Norfolk +2.95% Buckinghamshire -13.27%
Somerset +2.55% Staffordshire -11.76%
Cornwall +1.86% Fife -11.32%
Derbyshire +1.82% Bedfordshire -8.84%

* 993,000 people unemployed aged 16-24 - Institute for Public Policy Research, April 2013

For further information, please contact:

Ben Jenkins/Zuzana Bielikova
020 7009 3100
simplybusiness@3-monkeys.co.uk

About Simply Business

Simply Business is the UK’s biggest business insurance provider.

Launched in 2005, Simply Business provides an online brokerage service delivering policies tailored to individual business requirements. It has a team of UK based insurance specialists and employs almost 300 people across offices in London and Northampton.

Simply Business provides insurance to over 350,000 UK SMEs and landlords and owing to its internal underwriting capability can cover over 1,000 trade types. It has been a Sunday Times Tech Track 100 company for the past three years and was recently named in the Deloitte Technology Fast 500 EMEA. Revenues have grown from £4.2 million in 2006, to £25.4 million in 2014, and the company has been named 2015 and 2016 winners of The Sunday Times’ Best Company To Work For.