Page last updated at 12:03 GMT, Wednesday, 13 January 2010

Global recession knocks start-ups

Dollar bills
The US saw a big fall in the number of new start ups

The number of new businesses being set up around the world has declined in the face of the global recession, a report has found.

New start-ups were down 10% last year in 20 of the world's richest nations, said the latest edition of the annual Global Entrepreneurship Monitor (GEM).

It found that the decline was the most severe in the US, where it fell 24%. By contrast, the UK only saw a 6% dip.

The United Arab Emirates saw the most start-up activity in 2009, up 38%.

'Greater difficulty'

Now in its 11th year, the 2009 GEM report was based on a study of 54 countries, and more than 180,00 interviews.

The study was established by London Business School and Babson College in the US.

"Throughout the world, would-be entrepreneurs reported greater difficulty in obtaining financial backing for their start-up activities, especially from informal investors - families, friends, and strangers," said Professor Bill Bygrave of Babson College, one of the founders of GEM.

He said this pool of money had declined from $400bn (£247bn) to $350bn, a 12.5% drop across the 33 countries that taken part in both the 2008 and the 2009 GEM surveys.

And it was not necessarily in developing countries that start ups found it difficult to secure financing in 2009.

Among wealthier nations a quarter of new entrepreneurs feel the prospects for their businesses are now more positive in 2010 than a year earlier.


"Clearly, the slowdown has led to changes in the environment for entrepreneurs with investors holding back financing and consumers buying less," said Kristie Seawright, executive director of GEM.

"What is needed is for entrepreneurs to feel comfortable venturing out again, because they are the real engine for creating new jobs.

"Unfortunately, there is not a silver bullet for entrepreneurs. Each country needs to develop the right formula to encourage business start-ups."

When comparing estimates on pre-recession results of 2006-2007 with 2008-2009, individuals starting new businesses dropped 24% in the US, 17% in Denmark, 12% in Spain and Belgium, 9% in Germany and Norway, 7% in Italy and 6% in the UK.

There was no change in France, Iceland, Japan, Netherlands, and Slovenia.

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