What really happens to small and medium-sized enterprises in a global economic recession? UK evidence on sales and job dynamics

We use UK data to consider how smaller firms coped during the financial crisis. This is important as smaller firms are major contributors to job creation, but are vulnerable to falling demand. We find that 4 in 10 smaller firms experienced a fall in employment during the recession, and 5 in 10 a fall in sales. Within 12 months of the recession, three-quarters of entrepreneurs had a desire to grow. This suggests that whilst the immediate effects of recession are severe, entrepreneurs recover quite quickly. Importantly, recessionary growth is hugely concentrated amongst entrepreneurs with the highest human capital.