Nearly 17,000 consultancies launched in the UK over 2020

Amid the sustained crises of the last 12 months, entrepreneurs across the UK saw opportunity as well as challenges. According to a new study of start-ups registered in 2020, close to 17,000 professionals decided the time was right to launch a new consulting firm.

Data sourced from a new report by The Accountancy Partnership shows that consulting was UK's second most popular industry for entrepreneurs last year. The sector ranked behind retail, but ahead of real estate and construction.

Consulting has always been one of UK's most popular industry for starters, with the large majority of start-ups sole proprietorships – experienced professionals that enter the consulting world to work as an independent consultant. According to the data, more than 10,000 consulting start-ups were launched by individuals above the age of 30.

Transitioning into consulting is a common career move for consultants working at consulting firms or experienced professionals in industry seeking to go solo. Life as an independent consultant is appreciated most for the flexibility it offers, potentially high fees and autonomy in work.

Notably, The Accountancy Partnership's report shows that out of the 16,869 management consultancy start-ups registered in 2020, more than 6,500 were started by individuals under 30s.

This signals the growing entrepreneurial spirit of young, talented people, but at the same time it also reflects the chaotic year many youngsters have faced amid the Covid-19 pandemic. Compared to the figures from 2017, the number of businesses launched by under 30s is more than 10% higher.

Overall, around 23% of new businesses in 2020 were started by people who had been made redundant or furloughed, and the consulting industry was no exception to this huge influx of young, independently minded entrepreneurs.

This compliments the latest data from the ONS, which found that the number of total business creations in the UK stands at between 370,000 and 390,000, a creation rate of 13.0% on the total number of entities. The number of businesses which have expired is estimated to be slightly lower, suggesting that when one firm collapses, it prompts a number of former employees to go into business for themselves rather than seek new employment from existing companies.

Impressive as the figures are as an indicator of the UK’s entrepreneurial zeal, they should be taken with a pinch of salt. The data sourced from The Accountancy Partnership includes sole proprietorships – or independent consultants that enter management consultancy world alone – and is based on the registrations of new firms, depends on people correctly defining their company for themselves. At the same time, it is sum of all new start-ups in consulting, and in the competitive environment of the UK consulting industry, some may have been unsuccessful over the course of 2020, and either had no revenue or stopped. Just a very few grow to become fast growing consultancies by contrast.

However, taken broadly as an indicator of labour market trends, the seeming shift in younger workers from looking to employers to going it alone to make a living merits further examination. While high employment figures had kept the UK’s economy growing in recent years, wages remained lower in real terms than before the 2008 economic crisis. With the prospect of earning materially less than the generation before them, while being expected to take on massive workloads that have repeatedly been the source of negative headlines in the UK press, it is perhaps less surprising to find that young workers in the consulting industry are favouring becoming their own bosses.

This is not just a trend within consulting, either. Since 2017, there has been a 206% increase in the registration of sole traders between 16 and 20 years old, alongside a 72% increase in those aged between 21 and 30. Thanks to the tool-kit of digitally native younger workers, many now look to be putting the social media at their fingertips to reach a customer audience which has not been so easily accessible in the past without being part of something bigger.

Lee Murphy, Managing Director at The Accountancy Partnership, said, “The barriers to starting a business are lower than ever, with the ease of selling services online with little to no initial costs. From our data it is clear to see how each age group has been affected by the pandemic in relation to entrepreneurialism, turning to enterprise because their other options are so limited.”

Previous research has found that London is a long way from being the easiest city to establish a new online business from. However, in spite of this, the capital’s size, clout, and logistical links mean it remains the biggest hub for the launch of new businesses in the UK. The Accountancy Partnership found that it hosted more than 100,000 more start-ups than its nearest rivals of Birmingham and Manchester in 2020.