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From Lemons To Lemonade

With the risk of the world slipping into another recession mounting, it's a great time to look at how the lemons of past downturns have been turned into lemonade.

Let’s see how many companies were founded during the height of the last great recession, the Global Financial Crisis (GFC, from June 2007 through June 2009), across two of our larger customer markets, Australia and the UK, as well as the U.S. where a lot of our customers invest.

For a list of the best performing industries on Wall St and in Australia during the GFC, check out our previous edition of The Wrap: Bear Market Winners.

Start-Ups Down Under

Starting with Australia, the GFC hit businesses hard, with more than 638,000 giving up the ghost. In other words, approximately 30% of Australia’s 2.1m pre-GFC enterprises failed. But in spite of the hard times, many Australians saw opportunities ripe for the taking. Between June 2007 and June 2009, 615,000 new businesses were created. This brought the net loss down to only 23,000, or a 1.1% net decline.

Home Of The Brave Entrepreneur

In the U.S. the economic situation was far worse than in Australia during the GFC, as the country lacked the bedrock of the mining industry to fall back on. In 2006, the U.S. had 6m total businesses. By 2009, that number had declined to 5.8m – a net loss of 200,000 or 3.3%.

Still, enough new businesses were opened in 2009 to account for 2m jobs across the country. While this was a drop from the previous year, by 2010 there was net growth in two specific SME segments: those with 0–4 and 10–19 employees (according to the U.S. Federal Census). This shows the resilience of the American small business culture and its impact on job creation.

Surviving The Blitz

Europe wasn’t spared from the GFC’s devastation, but the UK’s entrepreneurial spirit endured. In 2009, the UK lost a total of 500,000 businesses, but the year was not as devastating as it might appear at first. Over 373,000 new businesses were started, which means the net loss was 127,000 companies. By 2011, the country experienced a net growth of 180,000 in the number of companies.

Silver Lining

For a crisis that knocked down the markets, dried up global capital and rocked every country around the world, the GFC did relatively little damage to the total number of businesses in Australia, the U.S. and the UK. Further proof that there’s always opportunity, no matter how bad the markets get.

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