The Effect of the Current Economic Climate on a Start Up Venture in the Uk

How the current economic climate in the UK may affect a start-up venture

In this essay the author will examine the positive and negative effects, opportunities and threats that the current economic conditions might have on a start-up business venture.

A start-up venture is a business in its earliest stages of development, typically before it has an established revenue stream (http://www.financenewmexico.org/glossary.html [Accessed 10th December 2010]). The founder of the business must decide what form and structure the business will take and there will be variation in the effects of the economy on the business depending on whether the founder sets up as a sole trader, in partnership or as a limited company. For example, the grant funding available to each type of venture differs. Businesses can be defined as small, medium or large; the vast majority of new business ventures are small or medium in size and can be referred to as a small or medium sized enterprise (SME). The importance of SME’s to the economy is substantial, at present 99.3% of all private enterprises in the UK are classified as small in size, small businesses employ 47.5% of the estimated 22.7 million people working in the private sector, this equates to approximately 10.8 million staff. In addition, turnover in small businesses is estimated at 1,046 billion per annum. These figures clearly evidence the importance of private enterprise and in particular small businesses, including new ventures, to the economy (http://www.statistics.gov.uk [Accessed 10th December 2010]).

These conditions have had an adverse effect on the number of new business ventures. According to the leading insurance broker for small businesses, ‘Simply Business’, 55.7% of their applications in 2007 were from businesses less than one year old, in 2009 this figure was significantly lower at 45.7% (http://www.simplybisiness.co.uk/about-us/press-releases/press-release-UK-business-start-up-growth-rate-returns-to-2007-levels...