Macroeconomic Factors in the Birth and Death of Uk. Firms: Evidence From Quarterly Vat Registrations*

Quarterly data on VAT registrations and deregistrations is used to investigate the influence of macroeconomic factors on rates of business formation and dissolution in the United Kingdom over the period 1980-90. Evidence is found in support of the proposition that rising levels of housing wealth may be an important source of collateral for individuals seeking to raise the finances necessary to start up in business. In addition, the paper finds evidence against the 'recession-push' theory of business formations, suggesting instead that high rates of unemployment may lead to fewer business formations and more business closures.