Business entry and exit in the time of Covid-19

In a typical year, around 3,000 private sector employers go out of business.  This means that every year around 12% of all businesses go under (and again these are employer businesses so they must have staff).  Nearly 13% of restaurants and accommodation providers go out of business.

I thought it was important to remind people that a lot of businesses go under every year anyway.  This is part of a dynamic economy – firms enter, firms exit. This encourages innovation and successful firms are rewarded by customers.

Covid-19 threw this process into a mess – because government shut down most industries by fiat and then began pumping in cash to help many keep afloat.  They are now controlling what firms open and under which conditions.

But we shouldn’t forget the basic facts.