The number of new businesses established in the UK fell to its lowest point in over a decade, according to data from the Office for National Statistics (ONS). In 2023, 316,000 new businesses

were created, a decline from 337,000 the previous year. This represents an opening rate of 11% of all active firms, down from 11.5% in 2022, marking the lowest level since 2010.

Anna Leach, Chief Economist at the Institute of Directors, attributed the decline to tough post-pandemic financial conditions, weak economic growth, and ongoing skill shortages. She pointed out that recent government budget decisions have exacerbated these challenges, citing higher taxes and increased public spending as factors driving up business costs and the cost of finance.

“If the Government wants to achieve higher growth, it will need a vibrant business sector to deliver it,” Leach emphasized.

Despite the decline in openings, the business death rate fell to 10.8%, reversing a concerning trend from 2022 when closures outpaced new openings for the first time in over a decade. The survival of businesses also varied across sectors. While transport and storage experienced the highest birth (14.5%) and death rates (21.6%), the health sector showed resilience with a low 6.5% closure rate.

On a more positive note, the number of “high-growth” businesses—companies increasing their workforce by more than 20% annually for three consecutive years—rose significantly. In 2023, 13,750 such businesses were recorded, up from 11,480 the previous year.

Pranesh Narayanan, a research fellow at the Institute for Public Policy Research, welcomed this increase, highlighting its potential to create jobs and strengthen the economy. However, he cautioned that these businesses face challenges competing against larger, established firms. He urged the government to empower the Competition and Markets Authority to prevent anti-competitive practices by big corporations.

Regional disparities were stark. London accounted for nearly a quarter of all high-growth businesses with at least 10 employees, boasting 3,300 such firms and a birth rate of 6.3%. In contrast, Northern Ireland recorded just 240 high-growth businesses, with a birth rate of 3.1%.

Sector-wise, finance and insurance had the lowest proportion of new businesses (6.4%), while transport and storage saw the highest turnover, and the health sector recorded the best survival rate.

The figures paint a mixed picture of the UK’s business landscape. While the overall rate of new business creation is declining, the rise in high-growth companies offers a glimmer of hope for a dynamic and competitive economy. Photo by Phil Whitehouse, Wikimedia commons.