For the first time in 13 years, there are more businesses closing in the UK than being opened.

New data released by the Office for National Statistics shows that 337,000 businesses were created in 2022 which was a 7% reduction on the total for 2021. 

The sectors that saw the largest reductions were retail, construction, real estate and courier services. 

Construction saw new businesses fall by 8% with closures increasing by 41% over 12 months. 

Similarly the number of new retailers dropped from 38,900 in 2021 to 29,420 in 2022 which is the lowest since the data became available in 2017. At the same time retail closures climbed to their highest level in the same time period, rising 30%. 

Combined with a 5% increase in the annual number of businesses closing – closures have now overtaken creation for the first time since 2010. 

Tina McKenzie, policy and advocacy chair at the Federation of Small Businesses, said: “The figures are a mirror to the economic challenges business faces today including rising costs, late payments and flagging consumer demand.”

Further details from the ONS Inter-Departmental Business Register (IDBR) also showed that the number of active businesses dropped in March 2023 which was the first recorded fall since 2011.  

The IDBR tracks all UK registered enterprises for VAT and PAYE payments so does not include some small, single trader, limited companies or non-profit organisations along with unregistered or inactive businesses. 

As we wrote in our analysis of last months’ corporate insolvency figures, the number of businesses entering administration, liquidation or company voluntary arrangements (CVAs) are now at their highest level in the six months to September 2023 since the 2008 financial crisis. 

Chris Horner, insolvency director with BusinessRescueExpert said: “Larger businesses are generally more productive because of factors of scale but newer companies tend to be more creative, innovative and agile so reductions in their number will an another drag on a UK economy that is struggling to keep pace as it is. 

“Government support such as bounce back loans and the suspension of creditor actions such as winding up petitions and statutory demands helped some businesses survive the pandemic affected years for sure. 

Now a combination of higher borrowing costs, wage growth, high energy and materials prices along with weakening demand means that conditions have actually worsened since the end of 2021.

“The significant increase in energy prices, inflation and borrowing with interest rates at a 15-year-high mean it is increasingly harder to get the funding businesses need and which had previously flowed pretty freely in the previous decade.

Every new piece of evidence that becomes available points to the same conclusion – that it’s tough and there and it’s not getting any easier for business owners and directors. 

Whether a business has been trading for six months or sixty years, the fundamental factors facing the economy are not moving quickly enough, indicating that 2024 could continue to be as difficult as the past few years. 

This is why we offer a free initial consultation for any leader who wants some certainty and clarification on what options they and their business have.

Once they work with one of our expert advisors, they will know exactly where they stand and what they can do to improve their chances of eventually becoming a business recovery success story.