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UK Firm Creation During the Covid-19 Pandemic

Alfred Duncan, Miguel León-Ledesma, Anthony Savagar

Main Messages

I Aim: Measure UK firm creation during Covid-19 pandemic to quantify supply-side disruption in real time.

I Firm creation fell sharply during March, April and May but recovered strongly during June and July.

I Firm creation is important for productivity, wages and employment in the long run.

Data

I The UK company register is available from Companies House. It records every company registered in the UK.

I The register is released monthly which allows us to record daily registrations over the previous month.

I We compare the monthly register release in 2020 with the equivalent monthly release in 2019.

I Advantages: Real-time; population-wide; detailed company location and sector; high-frequency (daily).

I Disadvantages: Few variables; short time series; death poorly measured; records all companies many will not produce.

Aggregate Plot

14/01 17/03 19/05 28/07

60

80

100

120

140

160

Region Plot

06/04 04/05 01/06 29/06 27/07

−50

−40

−30

−20

−10

0

10

Wal

N.Ir

Eng

Lon

Sco

Sector Plot

06/04 04/05 01/06 29/06 27/07

−40

−20

0

20

40

Construction

Info & Comms

Public ad; Def; Soc sec

Wholesale & Retail

Aggregate Comment

I Weekly business creation relative to 2019 (= 100).

I Timeline: 23/03 lockdown begins. 11/05 re-opening begins.

I There are three clear periods:

• Pre-lockdown: weekly firm creation is equal to 2019.

• Severe lockdown: Firm creation falls sharply in late March and

remains low until late May.

• Easing lockdown: Firm creation exceeds its 2019 level consistently

aer late May.

Region Comment

I Cumulative business creation from March 23 (lockdown

began) relative to the same period in 2019.

I Business creation between 23 Mar - 06 Apr was near 50%

less for all countries than over the same period in 2019.

I Business creation between 23 Mar - 27 Jul was 10% higher

in London, 5% lower in England (excl. Lon) and 20-30%

lower in Wales, Scotland and N Ireland.

Sector Comment

I Cumulative business creation from March 23 (lockdown

began) relative to the same period in 2019.

I Business creation between 23 Mar - 06 Apr was near 30%

less in most sectors and 50% less in construction than over

the same period in 2019.

I Business creation between 23 Mar - 27 Jul was 50% higher

in wholesale & retail and 20% lower in construction

relative to 2019.

Implications

I Firm creation has long-run eects on employment, productivity and growth.

I From US evidence we know:

• New firms are net job creators: they create more jobs than they destroy.

• New firms drive future productivity through their own innovation and through competitive eects on incumbents.

Anthony Savagar

a.savagar@kent.ac.uk

University of Kent