Man in a suit with his hand on head

6 months ago

Closing Time for Record Number of British Businesses

In the face of unprecedented challenges, the UK experienced a record number of business closures in 2022. Official figures from the Office for National Statistics (ONS) reveal that the business ‘death’ rate surpassed the ‘birth’ rate for the first time since 2010, shining a light on the struggles faced by SMEs across the country.

Concerning Results

The data shows that over 345,000 businesses closed their doors for good in 2022, a 5% increase from the previous year and the highest number since records began in 2002. On the other hand, over 337,000 new businesses started trading, a decline from 364,000 in 2021.

Several factors contributed to the surge in closures. The Institute of Directors (IoD) pointed to the cost-of-living crisis, the economic aftermath of Russia's invasion of Ukraine and the fallout from the COVID-19 pandemic.

Director of Policy Roger Barker said: “2022 was a difficult year for UK businesses, as they emerged out of the restrictions of the pandemic and straight into the economic fallout from Russia’s invasion of Ukraine.”

Industries and Regions Hit Hardest

Certain industries took the brunt of the impact more than others. Transport and storage businesses faced a staggering death rate of 24%, almost double that of any other sector. Information and communication businesses also struggled, with the second-highest death rate at 14%.

The IoD’s Roger Barker put these concerning death rates down to high operating costs and a fast-declining disposable income.

The ONS data reveals also significant regional disparities with London benefitting from the highest birth rate at 13%. In contrast, the East Midlands faced the top death rate at 13%, underlining the difference in economic challenges across the UK.

Notably, Northern Ireland emerged as a ray of hope, with just 8% of businesses closing in 2022. NI also boasted the highest rate of businesses surviving beyond five years at 49%, highlighting the reslience of its business landscape.

Implications for SMEs

While the report does raise some concerning issues, it also highlights a silver lining. 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.”

In Summary

The challenging environment faced by SMEs demands a proactive approach to support their resilience and growth. As the UK emerges from the economic fallout of global events, policymakers, industry leaders and the business community should collaborate to provide solutions.

Only through a collective effort can the UK ensure a thriving business ecosystem that benefits all.

Slash Insurance Expenses

If you’re searching for business insurance policies that offer the right level of coverage and affordability, our team at BusinessComparison is ready to help you. We have experience securing insurance coverage for small businesses and larger companies.

Cut Energy Costs

With energy costs adding unwanted complications for all sectors, many business owners want to cut their bills. At BusinessComparison, we can help compare deals from energy providers, allowing you to find the best rates.

Let us Help Your Business

We help you compare essential business products and services, ensuring you get the best deal and helping you with your bottom line. Save time and money with us by comparing today.

Business Loans icon

Business Bank Accounts icon

Invoice Finance icon

Business Energy icon

Business Broadband icon

Card Machines icon

Business Credit Cards icon

Business Insurance icon

Leased Lines icon

Sam White