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No, Covid has not had a positive impact on the creation of new businesses [research]

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What has been the impact of the Covid crisis on the creation of businesses in Europe? Some have seen in the Covid situation a catalyst of the will to undertake. In other words, Covid would have pushed project leaders to launch their companies, especially in France. In our article, we analyze the situation of 11 countries and show that this generalization is false. Generally speaking, the dynamics of company creation appears to be on the decline in 2020.

Statistics of business creation in 2020

For the countries that have already published their statistics of business creations for the 4th quarter of 2020 (Germany, France, Belgium, Norway, Portugal, Spain, Switzerland), we observe:

  • the creation of 1849000 businesses in 2020
  • a 0.49% increase in the number of businesses created in 2020 compared to 2019, representing approximately 10,000 more companies started in 2020
  • a 17.29% drop in the number of business creations in the second quarter of 2020
  • a 12.34% rebound in the third quarter of 2020
  • a rebound of 11.25% in the 4th quarter of 2020

Summary



Have there been a record number of company creations in Europe in 2020?

Generally speaking, the answer is no. On the one hand, because the increases in business creations only concern certain countries and specific periods of the year 2020, and on the other hand because the year 2020 nevertheless remains lower in terms of business creations than the situation may have been in previous years.

It is, therefore, more correct to speak of rebounds limited to temporal and geographical regions.

This is particularly visible for France, which experienced a very sharp decline in the 2nd quarter of 2020 (-18.13%) due to the Lockdown, followed in the 3rd quarter of 2020 by a very sharp rebound (+21.21%).

Furthermore, we can estimate that the Covid crisis has broken a sustained business creation dynamic since 2016. With Switzerland’s notable exception, all other countries show either a net decrease in the number of new companies than 2019 or a significant reduction in the increase that could have been expected if Covid had not hit.

Why are the statistics on business creations in 2020 not available in all countries?

In a large number of countries, the figures for 2020 are not available. Eurostat has a 2-year publication schedule followed by many national statistical institutes (Italy, Poland, Czech Republic, Ireland, …). Some countries such as Denmark only publish annual statistics and do not give details quarterly or monthly. Indeed, Denmark believes that there is no point in studying business creation on too fine a time scale as many companies only become active months after their creation.



In Europe, the year 2020 remains lower than previous years in terms of company creation.



What is the evolution of company creations in 2020?

We can only partially answer this question because not all data are yet available and differences in calculation exist between countries (see above).

However, based on about ten countries observed (including France), we can conclude that the number of new companies created has been negatively affected by the Covid crisis on an annual basis. If some countries (France, Belgium, Norway) have observed an increase in 2020, this is less than it would have been in the absence of Covid. It is, therefore, false to say that Covid has encouraged entrepreneurs to launch their businesses. This is true for some sectors but erroneous on the scale of all sectors of activity.

This evolution is apparent in the graph above. There were 17.05% and 15.75% fewer companies created in Portugal and Spain compared to 2019. If France is up (+4.04%), it is 4.5 times less than between 2018 and 2019 (+18.31%).

In the following section, we detail the effects of Covid on business creation for each of the countries for which we could collect data for the year 2020. For each country, we have created a summary table which is available here in the interactive version.



The impact of Covid on the creation of businesses in France

The number of businesses created in France plummeted in the second quarter of 2020, only to catch up afterward. According to INSEE, with 848200 companies formed in 2020, there have never been so many businesses in France. However, we must realize that the increase observed in the second half of 2020 benefits mainly micro-enterprises, which represented, in June 2020, 47.6% of new registrations.

As noted above, the contribution of self-entrepreneurs to the country’s economy is relatively small concerning the average income generated. Some countries, such as Denmark, have chosen not to include micro-enterprise creation in their statistics.

As in 2019, the increase observed in 2020 is mainly due to the rise in micro-enterprises (“auto-entrepreneurs”).  Companies adopting this simplified scheme increased by 9% in 2020, which corresponds to 45,900 additional registrations for 547,900.

In 2020, the share of micro-entrepreneurs in the total number of creations continued to increase. It now represents 65%, up 3 points compared to 2019 (62%). This increase is to the detriment of traditional sole proprietorships (down 2 points to 10%) and genuine businesses, representing 26% (-1 point compared to 2019) of registrations in France. Simplified joint-stock companies (SAS) now account for 67% of creations and limited liability companies (SARL) 31%.

To go deeper into the subject and explore company creations by department, we refer you to this article.



The impact of Covid on the creation of businesses in Germany

There is no positive Covid effect in Germany on business creation.

Since 2010 the creations are in constant decline, and 2020 should be no exception.

The second quarter of 2020 recorded the largest decline since 2014 (-9.54% compared to the comparable quarter of 2013). Quarterly, company creations in Germany were below average from Q2 to Q4.

 



The impact of Covid on the creation of businesses in Switzerland

Switzerland is a UFO in the European landscape, as business creation statistics show an apparent increase in business creations in 2020. I want to thank Douglas Finazzi of the IFJ for the figures shown below and for enriching discussions. You will find the sources used here.

While in France the increase is mainly due to micro-enterprises (auto-entrepreneurs), in Switzerland all legal forms benefit from the increase.

Legal Forms 2020 Difference (%) 2019
SàRL (the equivalent of LLC) 18 288 +6,4% 17 194
Sole entrepreneurship 14 858 +4,3% 14 245
General partnership 1 383 +6,2% 1 302
Other 2 987 +7,5% 2 779
Total 46 842 +5,3% 44 482

Source : IFJ



The impact of Covid on the creation of businesses in Belgium

In Belgium as a whole, entrepreneurs founded a total of 99,914 new businesses in 2020, a slight increase compared to the -already – excellent figures of 2019 (93,341 created companies).

The north of the country was responsible for 65.3% of the total number of creations, Wallonia for 23.5%, and Brussels for 11.2%.

The figures published in the coming weeks and months will allow us to refine this analysis further and determine, among other things, which sectors have resisted best and have suffered most from the crisis.



The impact of Covid on the creation of businesses in Portugal

Portugal is paying a heavy price for the Covid crisis. In addition to the human damage, the business ecosystem has also suffered. The rate of business creation collapsed by 17.05% between 2019 and 2020.

On the annual graph, it is clear that the positive dynamics initiated since 2012 have been brutally broken.

The most noticeable drop is felt in the 2nd quarter of 2020 (-46.07% compared to the same quarter in 2013), even though the 1st quarter is already far below expectations.

 



The impact of Covid on the creation of businesses in Spain

Spain, like Portugal, has also seen its business creations decline very significantly. In 2020 they were 15.75% lower than in 2019.

This decline is evident in the 2nd quarter (-48.05% compared to the 2nd quarter of 2013).

At an annual rate (green graph opposite), we also clearly see a decline despite Spanish entrepreneurship’s resilience in the 1st quarter of 2020.

 




The impact of Covid on the creation of businesses in Norway

In 2020, the number of businesses created in Norway had increased significantly. Remarkably enough, in the second trimester of 2020, the number of businesses started did not collapse (a decrease of 6.91%). It is somewhat in line with previous years.



The impact of Covid on the creation of businesses in Finland

Final figures for the whole year 2020 are not yet available in Finland, but the Finnish Statistical Institute has already announced fewer business creations for the year 2020 (source). This decline is visible on the quarterly graph. The dynamics of business creation are broken from the second quarter of 2020 (-0.92% against +12.35% in the previous quarter), especially in the third quarter (-7.04%).



The impact of Covid on the creation of businesses in Denmark

Denmark has not yet published its official statistics and does not publish monthly or quarterly figures. However, an internal contact redirected me to this publication which details the first research results.

The blue curve represents micro-enterprise creation dynamics; the green curve represents the dynamics of limited liability businesses (Srl, Llc, sprl, sarl, … according to national terminology).

As in all European countries, we can see a slackening of business creation rate in April 2020, followed by a rebound and then a seasonal decrease at the end of the year. We cannot, therefore, conclude to an increase of business creations following Covid.



The impact of Covid on the creation of businesses in the United States

The figures for business creations in the United States are taken into account up to week 40/2021. This explains the year-on-year decline visible below. We can bet that 2021 in the United States will be a good vintage in creation, as the quarterly figures show a powerful acceleration. If the 1st quarter was half-tone compared to 2013 (-4.44%), the 3rd quarter is exceptional (+64.51%), the best in recent years.


Sources

https://www.ifj.ch/Analyse-annuelle-nationale-des-fondations-dentreprises-suisses-2020

https://www.portail-autoentrepreneur.fr/actualites/nombre-creation-auto-entreprise-2019

https://www.insee.fr/fr/statistiques/5012095#tableau-creations-g1-fr

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Author: Pierre-Nicolas Schwab

Pierre-Nicolas est Docteur en Marketing et dirige l'agence d'études de marché IntoTheMinds. Ses domaines de prédilection sont le BigData l'e-commerce, le commerce de proximité, l'HoReCa et la logistique. Il est également chercheur en marketing à l'Université Libre de Bruxelles et sert de coach et formateur à plusieurs organisations et institutions publiques. Il peut être contacté par email, Linkedin ou par téléphone (+32 486 42 79 42)

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