New business formations hit four-year high as economy fights back from pandemic

New company formations

The UK has recorded the biggest surge in business formations in over four years as the economy fights back from the pandemic, official figures have shown.

Experimental data for the first quarter of 2021 showed 136,765 births – a 14pc rise compared to a year earlier despite the country languishing in a third lockdown and the strongest start to a year since the Office for National Statistics began collecting figures in 2017.

The economic vibrancy, also underlined by record mortgage lending in Bank of England lending figures, painted a stark contrast with a eurozone economy whose slump into a double-dip recession was confirmed by official estimates last week.

Retail accounted for about a third of the new businesses created over the quarter while the average number of employees per new business dropped from 2.8 to 2.3 during the past three months as ventures move online.

“Businesses are being created to a greater extent than before in industries where only a small number of employees are required, for example, online retailing,” the ONS said.

The rise in births outstripped a 7pc slide in company deaths compared to last year. Insolvencies have slumped during the Covid crisis as firms enjoy tax deferrals and protection from creditors.

Other signs of economic life came in the Bank of England mortgage lending figures after households borrowed £11.8bn in March alone to take advantage of the Chancellor’s stamp duty holiday – the most since 1993.

Households saved another £16.2bn over the month but paid down only £500m in borrowing during March, marking the smallest repayment since last October as the focus returns to spending.

Ruth Gregory of Capital Economics said: “These figures provide another reason to think that consumer spending was starting to gather some momentum in March. With consumers in position to power the recovery, this should mark the start of a rapid recovery that will push GDP back to its pre-crisis level in early 2022.”

Workers are also returning to offices in growing numbers after investment bank Morgan Stanley’s latest survey found employees working from home for 2.7 days a week on average, the lowest since last autumn.

However, fears over the longer-term impact of the pandemic on the workforce remain after ONS figures found that almost a third of the 1.3m workers over 50 still on furlough feared redundancy when the scheme ends in September.

Three in every 10 older workers, who are more vulnerable to long-term unemployment, rated their chances being thrown out of work at 50pc or higher.