Latest Office for National Statistics (ONS) figures show that alarmingly, businesses closing has outpaced openings for the first time since 2010.
The ONS Inter-Departmental Business Register shows that there was a 7% year-on-year decline in new businesses in 2022, while business closures were up 5%, meaning it was the first time since 2010 that there is more businesses closing than opening in the UK.
The analysis shows that the number of businesses closing in the construction sector climbed by 41% whilst opening had dropped 8%, while in the retail sector, closures were up by almost 30%, the highest in at least six years.
The sectors that saw the largest reductions were retail, construction, real estate and courier services. 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.
Rise in UK Businesses closing
The rise in running costs has seen a surge of businesses closing across the UK. Running costs is cited as been a major cause but also a rise in late payment will also be affecting Small Businesses that are owed money hard.
Research by Simply Asset Finance in November revealed that 74 per cent of small businesses are worried about rising operational costs, while 70 per cent fear supply chain issues.
Furthermore, sales for small businesses fell by 20 per cent in the first half of 2023, according to data from accounting software provider Sage.
Small businesses will now be looking to the Bank of England’s final decision on interest rates for the year.
There are some positives…
While the report does raise some concerning issues regarding businesses closing, it also highlights a few positives.
Despite having a high death rate, information and communication businesses also showed a high percentage of high-growth firms.
Defined as companies with an average annual growth exceeding 20%, these SMEs are crucial for economic prosperity.
George Dibb of The Centre for Economic Justice said: “The data is a potential warning sign for the British economy with more companies going out of business than started up for the first time in 2022 since the tail end of the financial crisis
“Whilst this isn’t unexpected, high energy costs combined with the end of pandemic support schemes would always see a rise in company closures. It might signify that greater business support would have maintained higher economic activity.
“The only regions with above average high-growth firms are London and the South East. If we want to reduce regional economic inequality and ‘level up’, we need to see more of these booming companies in every part of the country.”