'Nightmare' of soaring unemployment if start-up rate doesn't bounce

Published on Wednesday 8 September 2010 22:19

A LACK of funding for start-ups could lead to a "nightmare" scenario of high unemployment, the Federation of Small Businesses (FSB) warned yesterday after figures showed an 8 per cent slump in the number of firms being launched.

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• Business start up rates Q2 2010 v Qs 2009

Andy Willox, FSB Scottish policy convenor, said the fall in Scottish start-ups was "worrying" for the economy, particularly with public sector redundancies looming.

According to the Committee of Scottish Clearing Bankers, the number of new businesses opening accounts fell by 8 per cent year-on-year between April and June to 4,029. The total was 7 per cent down from the first quarter of 2010.

Willox said: "The fact that fewer people seem to be taking the plunge is worrying.

"What isn't described in these statistics is how many people tried to start their own business but couldn't find appropriate funding for capital for equipment, premises or staff.

"With the prospect of large-scale public-sector redundancies, we need decisive action to ensure the private sector grows to avoid the nightmare of widespread high unemployment."

Figures from Bank of Scotland, Clydesdale Bank, Lloyds TSB Scotland and the Royal Bank of Scotland were used to compile the report, but not data from rivals Barclays or Santander, both of whom are courting Scottish businesses.

The worst-hit areas were Tayside - where start-ups plunged 25.7 per cent year-on-year - and Aberdeen city and shire, which suffered a 16 per cent fall.

Alan Mitchell, chief executive of Dundee and Angus Chamber of Commerce, said data had shown employment levels were holding up in Dundee during the recession and so fewer people were likely to be looking at starting their own businesses.

He said: "If unemployment rises then maybe we will see more people spending their redundancy money on starting their own companies."

Mitchell added the start-up rate had climbed before the recession but was starting from a lower level of entrepreneurship in the area.