In a notable shift, Umbrella.UK Insolvency reveals that, for the first time in 13 years, business closures in the UK have surpassed business openings. The recently published data from the Office for National Statistics indicates that 337,000 businesses were established in 2022, reflecting a 7% decrease from the previous year’s total compared with 345,000 businesses closing in 2022, a 5% increase on the previous year.

According to Tom Fox, Head of Insolvency at Umbrella.UK, “The business landscape in the UK is undergoing a significant transformation, with closures now outpacing new establishments. This trend raises concerns about the overall economic health and resilience of businesses in various sectors.”

The sectors experiencing the most substantial declines include retail, construction, real estate, and courier services. Construction, in particular, witnessed an 8% decline in new businesses, accompanied by a staggering 41% increase in closures over the span of 12 months.

Fox further comments on this trend, stating, “The challenges faced by businesses in sectors like construction are indicative of broader economic issues, and these statistics underscore the need for a strategic approach to navigate these difficulties.”

In the retail sector, the number of new establishments plummeted from 38,900 in 2021 to 29,420 in 2022, reaching the lowest point since data collection began in 2017. Concurrently, retail closures rose by 30%, reaching their highest level within the same timeframe.

Fox emphasises the gravity of these developments: “The decline in new retailers and the surge in closures signal a fundamental shift in the dynamics of the retail sector, requiring businesses to adapt and innovate in response to changing consumer behaviours.”

Coupled with a 5% uptick in the annual number of business closures, this shift marks the first time since 2010 that closures have exceeded new business creations.

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

Additional insights from the Office for National Statistics Inter-Departmental Business Register (IDBR) reveal a recorded drop in the number of active businesses in March 2023—the first decline recorded since 2011. The IDBR, which tracks all UK registered enterprises for VAT and PAYE payments, excludes some small businesses, single traders, limited companies, non-profit organisations, unregistered businesses, or inactive businesses.

In light of these challenges, Umbrella.UK Insolvency points to a concerning rise in businesses entering administration, liquidation, or company voluntary arrangements (CVAs). Tom Fox, Head of Insolvency at Umbrella.UK Insolvency, comments on the impact of these trends: “Larger businesses are generally more productive due to factors of scale, but the reduction in newer, creative, and agile companies will pose an additional drag on the struggling UK economy.”

Tom Fox notes the role of government support in aiding businesses during the pandemic but highlights the current challenges: “A combination of higher borrowing costs, wage growth, high energy and materials prices, along with weakening demand, means that conditions have worsened since the end of 2021.”

Umbrella.UK Insolvency emphasises the growing difficulty for businesses to secure funding, with rising energy prices, inflation, and borrowing costs reaching a 15-year high. Fox concludes, “Every new piece of evidence points to the same conclusion – that it’s tough out there, and it’s not getting any easier for business owners and directors.”

Looking ahead, Fox suggests that the fundamental factors facing the economy are not moving quickly enough, indicating that 2024 could continue to be as challenging as the past few years. To support business leaders during these trying times, Umbrella.UK Insolvency offers a free initial consultation, providing certainty and clarification on available options for businesses.

Fox encourages business leaders to collaborate with Umbrella.UK’s expert advisors to understand their standing and explore strategies to improve their chances of eventual business recovery success. “Whether a business has been trading for six months or sixty years, our goal is to offer guidance and support in navigating the complexities of the current economic landscape,” Fox affirms.

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