With news graduate recruiters are reducing recruitment targets 17 per cent this year, an increasing number of enterprising students and graduates are deciding to abandon the traditional job hunt and set up their own businesses.
According to a poll of graduate recruiters conducted last month by High Fliers Research, most graduate traineeships this summer are filled and the top 100 recruiters, including Marks & Spencer, British Airways and HSBC, have cut the number of new graduates they will employ by 17 per cent.
Dan Corlett, entrepreneurship development manager at the University of Birmingham Business School, said: “The recession will certainly demand a more entrepreneurial spirit among today’s graduates. There will be many who cannot get suitable employment and who turn to self-employment, freelancing and entrepreneurship out of need.”
According to the Birmingham-based National Council for Graduate Entrepreneurship (NCGE), three per cent of recent graduates opted to become self-employed on leaving university and they report “anecdotal evidence more graduates are being drawn to entrepreneurship.”
Student Steve Barnes, who set up an online takeaway in his second year at Warwick Business School, said: “The number of graduate start-ups will definitely increase because of the recession. With the graduate job market as it is, anyone who’s got a business idea will be more incentivised to go and implement it. As there are less safe jobs out there it’s a good time to take that risk.”
Graduate, Patrick Garratt, who set up letting agency Purple Frog in his final year at the University of Birmingham, added: “I think there will be more graduate entrepreneurs starting up in business during the recession if they can’t find jobs elsewhere. Starting a business when you’re young is also the best time to do it. It’s lower risk than waiting until later in life, as if you start a graduate job you’ll end up with a mortgage and a family, so why not start it now?”
Young start-ups have a competitive edge, according to Mr Corlett: “Young people have the specific advantage of low overheads as they generally don’t have kids and have the possibility of living with parents or in shared accommodation, plus they have not yet established an expensive lifestyle.”
The economic climate may look bleak for new start-ups, but columnist and enterprise expert Mike Southon argues: “Now is the perfect time to start a business. Recessions come in cycles. During a recession people and things are cheap, so it’s a good time to get deals on office space and suppliers, then you’re in a good position when the economy picks up again.”
A business model which both Patrick and Steve subscribe to: “A recession is always an opportunity – there’s potential for people who can innovate and be dynamic. I’m quite excited by the opportunity of growth during the recession.” said Patrick.
Steve added: “We’ve been trying to expand and position ourselves so we’re established for when the economy does come back up again”
Steve’s business e-resistible (www.e-resistible.co.uk), which he runs with management students Stephen Leguillon and Velin Djidjev, was set up in 2007 after being inspired by taking part in an enterprise module in his first year at university. The website allows people to order food online from over 150 restaurants in different cities across the Midlands to be delivered to their doors.
Patrick, who studied business management, set up Purple Frog (www.purplefrogproperty.com) in 2006 with his friend Greg White and was also inspired by his university to start a business. They have 500 properties on their books, let to students and professionals.
While initial investment would at first appear to be a problem for businesses such as Steve and Patrick’s, it seems that the credit crunch has thrown up opportunities for start-ups and investors alike.
“With the recent rate cut, the returns investors can get on low-risk investments are very low, so if investors are looking for businesses they can get a good return from, young start-ups are a good bet.” Steve said.
Mr Corlett added: “Personal or ‘Angel’ investors are still keen to invest in new businesses, especially as their funds may not be doing so well elsewhere.”
“Money hasn’t disappeared.” agreed Mr Southon, “If you attract customers to your business investors will be knocking down your door.”
And it appears those young people who have managed to find funding to start up their own businesses are enjoying considerable success. NCGE research from last year shows that 70 per cent of the UK’s top 200 fastest growing businesses were founded by graduates.
“We’re currently growing at a rate of five per cent per week,” said Steve, “the only thing limiting us at the minute is the number of hours in the day.”
Patrick added: “There’s definitely a financial incentive to running your own business – if you’re successful you can earn a lot more money than you would in a graduate job.”
It is not for the faint-hearted though: “It is incredibly difficult to balancing our degree commitments and managing the business.” Steve said. “We work from eight in the morning to one in the morning every day, but it is do-able – we just have to fit our lectures around the needs of our business.”