Three facts about the rising number of UK business exits

Jelle Barkema, Maren Froemel and Sophie Piton

Record-high firm exits make headlines, but who are the firms going out of business? This post documents three facts about the rising number of corporations dissolving using granular data from Companies House and the Insolvency Service. We show that the increase in dissolutions that have already materialised reflected a catch-up following Covid and was concentrated among firms started during Covid. While these firms were small and had a limited macroeconomic impact, firms currently in the process of dissolving are larger. Their exit might therefore be more material from a macroeconomic perspective. We also discuss how the recent economic environment could contribute to further rises in dissolutions and particularly insolvencies in the future that could have more material macroeconomic impact.

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Shifting the composition of start-up cohorts can boost macroeconomic performance

Ralph de Haas, Vincent Sterk and Neeltje van Horen

Anaemic productivity growth and limited business dynamism remain key policy concerns in Europe and the US. Policies to improve macroeconomic performance often target existing firms. Examples include tax measures to stimulate firm-level Research & Development and structural reforms to eliminate distortions in labour, financial, and product markets. In a new paper we investigate an entirely different policy lever, one that has so far remained largely unexplored: influencing the types of firms that are being started in the first place. Using a comprehensive new data set on European start-ups, we show how tax policies that shift the composition of new start-up cohorts could deliver meaningful macroeconomic gains.

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Booming entrepreneurship during the Covid-19 pandemic

Saleem Bahaj, Sophie Piton and Anthony Savagar

Recessions typically discourage entrepreneurs from starting new businesses. During the Great Recession, a ‘generation’ of start-ups went missing which contributed to a slow recovery in employment. Two years after the pandemic started, evidence for the UK suggests a very different story: the pandemic inspired many entrepreneurs to start new businesses and this supported the recovery in employment.

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