- The explosion of business creation in several major economies, which began last summer, has continued. But what sort of businesses are starting up?
- In the US, the share of business start-ups that are very small businesses has increased. The UK, Japan and Singapore hint at similar patterns in their data. The retail sector is leading new business creation. Retail leapt from around 15% of US business applications to over 20%. Wholesale trade and transport are other growth areas, with some signs of strength in hospitality.
- This is all consistent with the idea that as technology makes finding customers easier, people are more willing to set up “side hustles” to supplement their employment income.
- There are several implications from this. For those worried about inflation, there is an increase in capacity in parts of the economy – but it is not capacity you will necessarily see walking along a high street. Headline economic statistics, which tend to assume stable business formation, may underreport economic activity. Employment income may become less important to consumers, as they build up portfolios of income streams.
- The data seems to be telling a pretty clear story. People were bored at home during the pandemic. They decided to become entrepreneurs.