Dr Anthony Savagar has collaborated with Saleem Bahaj from the Bank of England’s Research Hub and Sophie Piton who works in the Bank of England’s Monetary Analysis, Structural Economics Division on a Bank Underground piece on firms dynamics during the Covid 19 pandemic.
‘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.’
Research investigating who started firms during the pandemic shows that there was a start-up boom in online retail and first-time entrepreneurs; that firms adjusted quickly to the collapse in retail footfall and firms created during the pandemic were more likely to hire workers but also to dissolve later.
It concludes ‘These results provide initial evidence that booming firm creation has helped the rapid recovery in the UK economy in the short run, but in the long run the implications are less clear. A rising number of dissolutions and entry concentrated among solo entrepreneurs who tend to dissolve more could negate the impact of the Covid-19 surge in firm creation.’