INTRODUCTION

From the very limited evidence available, it appears that the number of new firms started each year in the UK has been rising since 1974, and has continued to rise during the present recession (Bannock, 1981; Binks and Coyne, 1983). This fact has been cited as evidence of success by a Conservative Government seeking to promote the creation of a new ‘climate of enterprise’ in order to ‘encourage people who would like to have a go and build up their own business’ (John MacGregor, Under Secretary of State for Industry, Daily Telegraph, 5.10.81). In reality, however, such statistics present a picture of trends in the new firm sector which at best is deficient and which may even be seriously misleading. The increasing number of new firms has, for example, been accompanied by a sharp rise in numbers of company deaths (Bannock, 1981; Woods, 1982; British Business, 1983). While total numbers of company registrations have been slowly increasing in recent years, the rate of registration has been virtually constant (Woods, 1982). A large proportion of the new firms started in recent years have been in the volatile service sector. Government statistics indicate, for example, that in the period 1980–2 inclusive new manufacturing firms accounted for only 10% of all new businesses started during these years (Ganguly, 1983). While not regarding companies created in one sector as in any way inferior to those created in any other sector, it is nevertheless likely that the proportion of new businesses that are simply replacements rather than genuine additions is larger in the service sector than in manufacturing.