Startup activity is sputtering as rising costs of doing business discourage entrepreneurs

New business formations fell 20 percent in the first half of the year as rising overheads and economic uncertainty dampened the enthusiasm of start-up founders, new data from CRIFVision-net shows.

Retail took the biggest hit of any sector, with 1,084 fewer new businesses launched in the first six months of the year compared to the same period in 2021 – a 51 percent drop.

January was the only month that recorded an increase compared to the previous year. It was all downhill from there, as each of the following five months produced consecutive contraction periods, CRIFVision-net said.

The number of dissolved companies also increased by 56 percent.

The slowdown in start-ups has been accompanied by rising input costs for businesses, which have started to hamper production in many sectors, most recently in construction.

March saw the most dramatic drop in new business creation as the Russian invasion of Ukraine caused a spike in energy prices and exacerbated post-pandemic supply chain problems, both of which have led to the highest inflation figures in four decades.

“Rising utility overheads caused by the cost of living crisis have visibly created hesitation and uncertainty in the market,” said Christine Cullen, Managing Director of CRIFVision-net.

“Declines in key industries for the Irish economy such as property, agriculture, manufacturing and construction suggest that this period of exacerbated cost increases is likely to continue through the end of the year and beyond into next year.”

Startup growth declined in all but three sectors, with only social and personal services seeing a small 3% increase in new businesses.

The automotive, manufacturing and IT sectors all saw double-digit falls in start-up activity, according to the data, although real estate and hospitality saw minimal declines of just 4 and 6 percent, respectively.

A few regions also did well, with Leitrim, Laois, Longford, Cavan and Mayo seeing growing numbers.

“Some bright sparks in the data can be seen in the growth picture outside of major urban centers…suggesting that rural locations are more attractive, where costs are more reasonable and housing may be more affordable,” Ms. Cullen said Startup activity is sputtering as rising costs of doing business discourage entrepreneurs

Fry Electronics Team

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