Brexit vote shows little effect on rate of company start-ups

New research looks at the impact of the Brexit vote on company formation and dissolution activity in the UK.

A new study shows that there is, as yet, no major impact on new company formations, or company closures, in England and Wales since the Brexit vote.

The study, undertaken by company information provider checkcompany.co.uk, looked at the monthly number of new company formations at Companies House, (the company register for England and Wales) since 2014 to see whether the Brexit vote had impacted startup activity.

The survey showed that approximately 583,000 new companies were formed in the 11 months since the Brexit vote at the end of June 2016, a figure that is down just over 2 per cent on the year before, but up 6 per cent on the equivalent period in 2014-15. Allowing for some natural fluctuation the numbers, this so far indicates that Brexit is yet to make a serious impact on new company startup activity.

Check company also looked at the average company size, as indicated by the number of company officers appointed. Here, checkcompany finds that companies incorporated since the Brexit vote were on average five per cent smaller – although it is probably too early to draw firm conclusions from this.

Separately, checkcompany.co.uk also looked at the rate of company dissolutions on a monthly basis both before and after the Brexit vote. The overall number of dissolutions in the ten months following the vote was approximately 355,000 versus 357,000 in the equivalent period in 2015-16, a decrease of around -one per cent. Given the fluctuations in these numbers, this suggests that the Brexit decision has not yet made a discernible impact on company liquidations.

The long range trend also shows that, while activity – both new formations and dissolutions – have increased progressively over the last six years – there is no obvious impact from Brexit as yet.

However, while the impact of the vote so far is limited, it is important to keep the figures in perspective. A number of other factors would have affected company formations and dissolutions over this period.

These include a reduction in interest rates following the vote, legislative changes in the company dissolution process (which resulted in an increase in dissolutions in the first quarter of 2016), and various tax and other changes affecting the incentives to incorporate.

Brexit itself – and the effect it may have – also remains almost two years away. So while the early evidence indicates that the vote has not dramatically affected UK startup activity, it is too early to conclude that Brexit itself will not have a significant – negative or positive – effect.

Further reading on Brexit impact

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the Smallbusiness.co.uk and Growthbusiness.co.uk titles before moving on to be a Digital Technology reporter for the Express.co.uk.

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