Iain Wright on how accountants are essential to entrepreneurialism, business survival and growth
You might be reading this lying on a beach somewhere (in which case, what on earth are you doing?!) or attempting some distraction tactics for the thousands of e-mails you may have arrived back from holiday to deal with. I don’t whether this is true, but apparently more businesses are started in September and January than at any other point in the year. These months make sense: it’s probably the two occasions in the year when there is time to reflect, mull over that embryonic business idea and ask your family and friends whether they think you should go for it.
We are third in the world for the ease of starting up businesses. This strength is reflected in the growth of number of businesses in the UK over the past twenty years: in 2000, the country had 3.5 million businesses; in every subsequent year up until 2017 business births have risen to reach 5.7 million businesses.
Recently, there is evidence that this long-term growth has stalled. In 2017, the number of business births fell by 32,000, the biggest fall since records began, even bigger than during the global financial crash of 2009. I suspect there are a number of reasons for this fall: Brexit, inevitably, will play a part – why take the risk of starting a business if you don’t know what the trading and regulatory arrangements with our biggest economic neighbours and partners will be? A slowing economy and reducing business confidence, as evidenced very clearly in ICAEW’s recent Business Confidence Monitor, might reduce the perceived opportunities in the market for new and emerging businesses. Lower business birth rates might also reflect an altogether more positive economic factor, that of the UK’s astonishingly good employment record. Figures announced recently showed that the UK employment rate was 76.1 per cent, the highest level since records began in 1971. Growth in average pay increased to 3.9 per cent. There may be a link between high employment levels, growing pay and falling business start-ups – why leave the safety and comfort of employment for greater uncertainty running your own business?
There is also the question of business survival. If a business had been set up set up in 2012, the likelihood is that that business has now died. There is obviously a myriad of reasons for businesses coming to an end, but it seems reasonable to assume that those enterprises have encountered difficulties in things like securing growth funding or failing to manage cash flow. Early engagement with a chartered accountant could help a new business avoid some initial mistakes and increase the chances of not only survival but growth, increased profitability and long-term survival.
Recently, ICAEW Manchester organised a meeting with the Lord Mayor of London at the Innospace Business Incubator space at Manchester Met University to meet with entrepreneurs in the North West. It was apt that the meeting was held in Manchester – there is currently a real “can do” buzz in the city and the North West is presently the region with the highest proportion of business start-ups in the country.
What was very clear from the meeting was two things that are vital to an entrepreneur embarking on a new business venture, certainly if she or he is setting up for the first time. First, the importance of good networking, especially with like-minded people who are not far removed from the start-up experience to be irrelevant but are perhaps five years on from the new entrepreneur and who can provide mentoring, signposting to new opportunities and advising on pitfalls. Secondly, the notion of a trusted advisor who can ensure that the new business doesn’t fall into bad habits which may compromise its chances of growth and survival.
Chartered accountants are vital to providing both of these roles. With national initiatives such as Enterprise Nation and the Business Advice Service the profession and ICAEW in particular are at the heart of proving value and advice for entrepreneurs, especially at those at the start of their journey. Chartered accountants are invariably at the heart of local business ecosystems which are essential to enterprise. Helping to nurture and support such ecosystems is at the heart of what I’d like the Business & Industrial Strategy Team to focus on, adding value both to our members and to the wealth creators of the future.