07 Apr Business Start Ups during COVID-19

The creation of new businesses is an important indicator of future economic growth potential with many cities and regions recognising this and establishing business incubators, co-working spaces, entrepreneur support programs etc.

An analysis of private sector job creation in the US in 2019 was undertaken by the Congressional Research Service on behalf of the Small Business Administration.  This research, reported by Forbes[1], suggests that, over time, start-ups play an important role in job creation in America.

This finding is supported by a Kaufmann Foundation report in 2010[2] which found that again in the US, start-ups are a huge contributor to building employment and concluded,

“Start-ups create an average of 3 million new jobs annually”

With this in mind, what is happening in Australia with regard to enterprise creation and how are start-up rates tracking in the midst of the COVID-19 pandemic?

Working with our government clients REMPLAN has undertaken some analysis using data from the Australian Business Register. For January, February and March 2020, we reviewed the number of new ABNs registered in Australia that are also registered for GST.  We have compared these figures with data from the same period in 2017, 2018 and 2019 and the results are sobering.

Across the country, every State and Territory, with the exception of Tasmania has seen a fall of between 20-27% in these ABN registrations in January-March 2020 compared to the average for the last three years over that same timeframe.  The fall in Tasmania has been less pronounced but is still trending downwards.  For Australia as a whole, this is a drop of around 22% or over 10,000 fewer registrations.

The chart below illustrates these findings:

Existing local businesses will of course need a great deal of support as the responses to COVID-19 continue to develop but what this also points to is the need to keep supporting and encouraging entrepreneurs in these challenging times which will help with economic recovery longer term.  And, as the saying goes, ‘In the midst of every crisis there is opportunity’.

REMPLAN will continue to monitor these new registration trends and will be updating these monthly.  If you would like to receive these updates, please click here.

Existing REMPLAN Economy government clients who have access to ABR non-public data can use the Business Module to undertake the same analysis of their own local areas at a higher level of detail including the identification of those industry sectors that are being most impacted.

The ABR data is also useful for engaging with businesses to gauge how COVID-19 is impacting their operations, and therefore providing insights and guidance regarding how the businesses in your region can be supported throughout the current crisis.

Please encourage your local businesses to respond to the Australia Business Economic Impact Survey (ABEIS) as the insights will be provided to councils and the other government agencies providing this vital support to businesses.

Questions?  The REMPLAN team are always available to assist.  Call 1300 737 443.

www.remplan.com.au

Notes:

[1] https://www.forbes.com/sites/nishacharya/2019/05/05/who-is-creating-jobs-in-america/#313a74e597de

[2] https://www.kauffman.org/wp-content/uploads/2019/12/firm_formation_importance_of_startups.pdf