The claim:
“Last year the rate of new business creation was faster than any other year in our history. Let me repeat that: the rate at which new businesses started – faster than any year on record.”
– David Cameron, Tory Conference 10 October 2012.
The background
At the Tory party conference on Wednesday, the prime minister said that despite the recession, “we’re getting our entrepreneurial streak back”.
The good news, he claimed, was that “last year the rate of new business creation was faster than any other year in our history.”
He’s previously claimed that businesses can help to “smash poverty”, and has styled himself as being the best leader for business.
FactCheck’s had a look back to see whether his government really did preside over the fastest rate of business creation in the history of Britain.
The analysis
We asked the department for Business, Innovation and Skills (BIS) how many new businesses were created last year.
They came back and said that there were 94,000 more businesses last year than in the previous year – a rise of 2.1 per cent.
That’s good, but not the answer we were looking for: we don’t know how many of these were new. It might be that less businesses folded in that year than in the previous year.
When we went back to BIS asking for the information that had led Mr Cameron to make his claim during his speech, they directed us towards Companies House records.
They show that during 2011/12, 426,500 companies were incorporated – a rise of 14 per cent on the previous year.
But when we went back a few years, we saw the increase wasn’t actually that dramatic: if we’re talking a rise in the number of companies created, then 2002/3 was a bumper year. That year, there was an increase of 45 per cent compared with the previous year.
In any case, when speaking to Companies House about this, we were specifically told not to read this data as any kind of indication into how many businesses were set up. Businesses and companies are not the same thing.
People can set up businesses without registering as a company, and operate perfectly legally, paying taxes, paying employees and so on. And not all companies actually do business.
“People register companies for any number of reasons,” a spokesman told us. “The obvious hope and calculation is that business is being conducted, and transasctions are taking place. But there are companies which sit there, and do not trade, and will be a dormant company filing dormant accounts each year, and that’s fine.”
Likewise, the Global Entrepreneurship Monitor, in their report, collected information on how many people started up businesses last year.
They said that in 2011, 7.6 per cent of working-age individuals had made moves to start up a business, and that from 2002 to 2010, the trend was closer to 6 per cent – so it was higher.
Again, however, although it’s encouraging reading, one of the authors of that report, Professor Jonthan Levie of the University of Strathclyde, told us: “We’re not measuring the number of businesses. We’re measuring how many people are engaging in business start-up activity.”
The verdict
FactCheck couldn’t find anything to stand up Mr Cameron’s claim.
So we went back to Tory HQ, and they came back with the companies data and the Entrepreneurship report.
We explained our issues with that information – that even if you were to take a rise in companies as telling us how many new businesses were started, last year wasn’t the fastest growing year.
Neither they, nor Downing Street, offered any comment.
By Fariha Karim
