Start-up Company Rate Seems Unaffected by Brexit
If you are thinking about going through the company formations process, but were wondering if the Brexit process has been having an impact on the number of new companies being formed in the UK, then you may be surprised to hear the news.
A new report has shown that so far, there has been no major impact in both the numbers of new start-ups or the rate of company closures since the Brexit vote. The figures account for both England and Wales and were taken by company information provider CheckCompany. They looked at the number of new companies registered each month with Companies House since 2014 to look for changing patterns since the Brexit vote was held last year.
Company Formations Study Results
According to the results of the study, some 583,000 new companies have been formed since the vote took place in June 2016, a figure that is very slightly down by just over 2% on the previous year but is actually up by 6% on the same period for 2014-15. This means that taking into account normal fluctuations in this figure, the Brexit vote appears to have had no substantial impact on the number of people starting a new company whatsoever.
The study also looked at the average company size, based on the number of company officers appointed and registered with Companies House. This again found a slight decrease, but nothing too substantial – companies were around 5% smaller than previously. But it is too early to tell if this relates to the vote or is just a natural part of the cycle that is prone to some degree of fluctuation anyway.
At the other end of the scale, CheckCompany looked at the number of company dissolutions on a month by month basis both before and following the Brexit vote. In the ten months following the vote, there were 255,000 companies dissolved. This is compared to 357,000 for the same period in 2015-16, which is a decrease in the number of dissolutions of around 1%. Again, natural changes in figures would seem to indicate that the Brexit vote has had no major impact in this area either.
Over the long term, both the number of new companies formed and those being dissolved continues to progressively increase and have done for the last six years, regardless of the Brexit vote. And these figures seem to indicate that the pattern being seen over recent years remains unchanged after the vote to leave the EU.
It is worth taking into consideration that there are other factors that can have some influence these figures. For example, a reduction in interest rates that took place after the vote can affect both companies starting and dissolving as can a change in the legislature that affects some types of business, such as the ones passed in the first quarter of 2016. Changes to tax rates and policies that affect corporate incentives can also influence these rates, so will have no direct link to the Brexit vote.
So far, the true effect of Brexit may not have yet been felt and may be hard to predict until maybe two or three years’ time, when the separation finally takes place and the immediate aftermath effects are felt. At the moment, the vote doesn’t seem to have had any major impact on the number of people who are going through with their plans to start up a new company. And at the same time, it doesn’t seem to have increased the number of companies failing or being dissolved for one reason or another.
The long term positive or negative effect of the Brexit vote may take some time to show in the statistics around the companies formed here in the UK.
Further reading: If you are still unsure about forming your own company at this time, then read our article: Post-Brexit: Will it be worth forming and running a UK company? For more useful advice.