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Record number of companies launched as COVID drives contractors, entrepreneurs
A record number of new companies were registered last month, with experts saying the tens of thousands of extra businesses launched in 2021 is due to a boom of entrepreneurs and contractors spurred on by the coronavirus crisis.
There were 34,868 new businesses formally signed up with the Australian Securities and Investments Commission nationally in June, including 11,373 in NSW, 10,053 in Victoria and 7206 in Queensland. In the first six months of 2021 about 152,000 companies were registered, compared to almost 110,000 for the same period in 2020 and 113,000 in 2019.
Contracting from home and a boom in entrepreneurs is expected to have led to a jump in company registrations.Credit: iStock
An analysis of the publicly available ASIC data by The Sydney Morning Herald and The Age shows June had the most new business registrations than at any other point in two decades of available records. June is typically the busiest month for registrations, marking the end of the financial year, and it was the busiest month of 2021 in line with this historical trend.
Registrations slumped modestly in the wake of the coronavirus pandemic but have been steadily improving since mid-2020. In June last year there were 26,804 new businesses registered, including 8863 in NSW, 7873 in Victoria and 5545 in Queensland.
ASIC was unable to provide further data as it does not collect information about the types of businesses being launched. Small Business Ombudsman Bruce Billson, a former Liberal MP and ex-Franchise Council of Australia chairman, said the increase in business registrations aligned with online search trends from people looking into starting franchises or launching their own companies.
Australian Small Business and Family Enterprise Ombudsman Bruce Billson says workers have re-examined their priorities during COVID and many have chosen entrepreneurship.Credit: Dominic Lorrimer
“Our theory is that COVID has really caused people to re-evaluate what’s important to them and their priorities and a good number have arrived at self-employment and running their own business [as the answer],” he said.
While some are likely to have launched businesses willingly, he said others may have been pushed when companies trimmed workforces during the uncertain earlier days of the pandemic.
“Specialist staff may have moved into contracting and getting a roster of clients,” Mr Billson said. More working from home and flexible hours may have encouraged workers to be comfortable moving into entrepreneurship, as may have the rapid rises in property prices.
“Access to finance is a challenge for enterprising men and women and the property market has wind in its sails … all of a sudden you have greater equity in your home which can help fund a business but also buttress your financial circumstances during a scale-up,” he said. Some may have sold up and moved to regional areas and used the extra capital to start a business, including those with a significant online presence.
Households and businesses collectively amassed billions of dollars more on their balance sheets on the back of federal government support payments during the pandemic.
But Council of Small Business Organisations of Australia interim chief executive Alexi Boyd said her members did not think it reflected a sudden jump in economic conditions or necessarily people becoming entrepreneurs. Data on sole traders and business exits and entrants from the Australian Bureau of Statistics for the 2020-2021 financial year is due in August.
“A large number of people are turning to contract work because their full-time or part-time work has stopped,” Ms Boyd said.
“It’s the gig economy and that’s where these contractors are heading,” she said.
“It’s also reflective of the fact a lot of people when they’ve been stood down have been studying and the increase could be those finishing courses and moving from one industry to another,” Ms Boyd said, noting there had been a rise in people joining professional associations.
“People often work for themselves in times of economic crisis and there has been a rise in working from home and perhaps people becoming more comfortable with working for themselves and picking their own hours,” she said.
“The move into running your own business is not as big and scary as it was a generation ago. People are no longer tied to [employers] for 30 years and recently - unemployed people are often those that can see the opportunities of running their own business.”
Australian Bureau of Statistics data released this week found a smaller number of workers than normal quit their job by choice – including for the purpose of launching a business – in the 12 months to February 2021. There was, however, a rise in the number of people who were retrenched.
Treasurer Josh Frydenberg said the economy was recovering strongly from the coronavirus recession, despite outbreaks such as the current NSW situation.
“Following three quarters of strong GDP growth, the Australian economy is now larger than it was pre-pandemic and there are now more Australians in work than ever before,” Mr Frydenberg said, adding the government had provided record business investment incentives, small business tax cuts and other forms of support.
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