Knowing where businesses are located and how they are developing is a key component in understanding economic growth and enterprise. Colleagues have often asked whether growth in new businesses occurs as a response to rising unemployment. By collecting start-up data directly from banks, the BankSearch database (funded by One NorthEast and made available to Local Authority partners) provides the most complete, localised information on business start-ups available to NERIP. This exercise looks at the relationship between growth in new businesses and growth in the numbers of JSA claimants. Whilst not establishing a causal relationship, it is interesting to note where unemployment and new businesses grew at the same time, during the recession and where this was less likely to occur.

The expected effect is that job losses, combined with redundancy payments, plus opportunities for entrepreneurial activity enhance the number of business starts in an area. That is, a ‘push’ factor, such as redundancy or unemployment may encourage people to regard going into business more seriously as an option.

Both the number of business starts and JSA claimants have increased in the North East showing a positive relationship (i.e. as JSA claimant numbers increase, so do the number of business starts).

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Article by North East Research & Information Partnership.
Data is partially sourced from BankSearch’s Business Start Up database.