Why a recession can often create optimum conditions for entrepreneurs

The UK finds itself in one of the toughest economic periods in a decade, with unemployment creeping up and many a company facing the unthinkable. Yet, as recent data from Workthere suggests, it is often in these times of uncertainty when we see the biggest rise in the number of start up companies.

In fact, after the Global Financial Crisis (GFC), Venture Capital (VC) investment into smaller, start-up businesses did by no means grind to a halt. Uber, AirBnB and Groupon all raised capital in 2008-09 and the year after the recession ended in 2019, VC rebounded in full force, almost trebling.

Looking more closely at Google search terms and there was a clear increase in searches around “how to set up a business” just after the GFC in January 2010. Similarly, August 2020 saw the highest number of searches for that phrase in the UK on record, indicating a strong correlation with the sharp drop in economic activity compared to a slower decline 12 years ago.

The figures indicate that, presently – similar to the GFC, VC investment keeps the start-up scene buoyant and, while the economic downturn in 2020 is obviously the result of more macro social trends, it is clear that the spirit of entrepreneurship is very much present. Unlike the GFC, this is a recession we saw coming and as a result, it seems more people have bitten the bullet as a result of losing their jobs or as a back-up plan in case they do.

So what’s the correlation between VC investment into start-ups and flexible offices? Venture capital investment is a major facilitator of growth of start-up and small businesses. Historically, this has created a strong link between venture capital investment and demand for serviced and coworking office space, which is generally the preferred choice for these types of businesses due to the flexible terms and facilities that they offer.

Many flexible offices have essentially been empty for the past eight months and incorporating social distancing measures whilst maintaining profitability will be challenging for flexible offices in the short-term. However, it is comforting to know that whilst UK VC investment fell during the GFC, it did not fall off a cliff. There will still be start-ups that raise money and need office space for their workers (most likely flexible office space).

The global landscape will look very different post-COVID-19 and we will need a different mix of products and services to cater for it. Startups with great ideas and great leaders will raise money to grow and most will need office space to have a productive, collaborative and happy workforce. The GFC gave birth to a number of start-ups and scale-ups that changed the world and, similarly, the current situation could be an opportunity for innovation and change in which entrepreneurship will flourish.