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March 07, 2011

Comments

Grace

Thanks for such an interesting post.

Liberty4uk

Not all new businesses are necessarily enterprises in the way that we (and perhaps Cameron) are interested in: http://super-economy.blogspot.com/2010/06/entrepreneurship-and-self-employment.html

Cahal Moran

I think you've fallen into the same trap you did when you tried to find substance in one of George Osborne's letters to Mervyn King. If you want something else that barely makes sense, take a look at DC's speech at Davos!

Leftoutside

Perhaps the disappointing productivity growth of the last few years has been a result of not enough companies dying.

Perhaps regulation and tax has reduced competition a little so unproductive firms can limp along a little longer without losing market share.

We should be enemies (or neutral) of bad enterprises, and friendly of good ones. Perhaps the ratio of good/bad has changed, but that is obscured, not illiminated, by your graph.

Keith

Sneer away my friends.

Evidence free prejudice is characteristic of conservatism.

If any policies that are any good come from this bunch of trustifarians I will be very surprised.

Here comes the age of stagnation.

Shuggy

"It’s easy to sneer here"

Yeah - but that doesn't mean it isn't worth doing...

MUPPET

A small proportion of start-ups thrive and generate lots of jobs. A slightly larger proportion don't, but could have done with better luck. The vast majority are only ever going to be small, relatively unproductive "lifestyle" businesses - that is if they don't fail altogether.

The important question for any government is how to increase the first group. Answer: probably not simply by increasing the rate of business formation, especially not by persuading the unemployed etc to set up businesses.

Neil

Aye Muppet, but more hopeless business plans == more work for our friends at the bank.

Ever wonder who's pushing this rubbish?

Paul Swinney

We found a similar (stubborn) start up pattern across the UK's cities. And those areas that had stubbornly low business formation levels were current or former port cities:

http://www.centreforcities.org/assets/files/10-01-22%20Enterprise%20note.pdf

Glenn

I'd like to know just to what extent 'regulations' stifle business formation and gross business profits, and how many businesses the 'unleashing' of businesses from regulations would create? I'm pretty sceptical that de-regulation is going to be a major motor of growth (compared to say 'big push' policies in places like S. Korea).

And how much effort from govt to sort out all these wee regulations etc etc.

Perhaps the same effort could be deployed instead in, say, closing tax loopholes, investing in infrastructure, better regulation of financial services...!?

Some areas (such as financial services) need more regulation, not less!

Unicornhouse

A huge number of new businesses are IR35 related. If you are an IT consultant for instance, instead of being an employee you can be self-employed, but with new regulations and red tape it is much more tax efficient to become a small business. I know, I have been there. Therefore the changing of these rules may lead counter-intuitively to a large number of small companies shutting down because there is no need for them to be a company anymore.

MJW

As someone who works for a big, monolithic corporate I can tell you we love red tape and bureaucracy because we can play that game really well and rely on our sheer size to generate economies of scale that bring profits. We long since ceased to be innovative (we built our position prior to de-regulation of many of tha markets we operate in), we try to stifle innovation from smaller competitors, and we play regulatory games with our bigger rivals. We support the government's austerity drive because we know we can use our scale to shrug off the damage that will destroy smaller players if their public sector contracts gets canned.

rosscoe

If thats the longest period you have data for, then I'd say you don't have enough data to either prove or disprove whats being said!

A graph that shows only the last three years of Major and doesn't show the last three years of Labour misses some pretty important events...

chris

@Rosscoe - the last three years of the Major govt should show the startups encouraged by the "enterprise culture" built up under Thatcher as well. And we do have data for 2008-09, as I said - but we don't know how much that data reflects Labour's "anti-enterprise" policies or the effect of the recession. It's quite possible that the banks have done more to kill enterprise than the Labour govts did - I await better evidence.

tory burch uk

Looking at this chart, you’d struggle to identify a period when the “party of enterprise” was in office, or when the “enemies of enterprise” were.
There are (at least) two possible reasons for this. One is that New Labour was - until its later years - “micro bad but macro good” for business. Maybe red tape did deter business formation, but this was offset by favourable macroeconomic conditions.

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