UK business openings hit lowest level in more than a decade

The number of new business openings across the UK plunged to its lowest rate in over 10 years last year, with official figures revealing a significant decline.

The Office for National Statistics (ONS) reported that 2023 saw just 316,000 new businesses formed, down from 337,000 in the previous year. As a result, the opening rate dropped to its weakest since 2010, constituting only 11% of all active firms, a dip from the 11.5% seen the prior year.

Commenting on the statistics, Anna Leach, chief economist at the Institute of Directors, pointed to a post-pandemic economic hangover, a "relatively weak" growth environment and skill shortages as causes. She admonished recent budget decisions for weakening the UK’s business climate by deterring employment and decreasing investment due to heightened taxes impacting business costs.

READ MORE: Spate of burglaries in Low Fell reported as two men arrested

READ MORE: Woman assaulted by stranger while running in Gateshead as police appeal for information

"Recent budget decisions unfortunately undermine the UK’s business environment, disincentivising employment and reducing investment through the impact of higher taxes on business costs," Ms Leach stated. She further warned about spiralling finance costs stemming from increased public spending and suggested that a thriving business sector is essential for driving higher growth.

Despite the gloomy report on start-ups, overall there were marginally more openings than closures with the business mortality rate falling to 10.8%. This marks a shift from 2022 when business deaths outpaced births for the first time in more than ten years.

And on a brighter note, the record also displayed an uptick in "high-growth" firms – those experiencing employee expansion of beyond 20% consecutively over three years. There was a climb to 13,750 such businesses in 2023, up from 11,480 in the preceding year.

Pranesh Narayanan, a research fellow at the Institute for Public Policy Research, hailed the resurgence of high-growth businesses, predicting it would lead to "more jobs in dynamic and growing companies and a stronger economy overall". Nevertheless, he cautioned that these emerging businesses would face stiff competition from larger, more established firms.

Narayanan urged the Government to empower the Competition and Markets Authority to prevent big businesses from "throwing their weight around to stifle competition". The data also revealed significant regional disparities in the distribution of high-growth companies.

London dominated, with 3,300 high-growth businesses employing at least 10 people, accounting for nearly a quarter of the total and boasting a birth rate of 6.3%. In stark contrast, Northern Ireland had only 240, with a birth rate of 3.1%, less than half of London's.

The transport and storage sector had the highest business birth rate (14.5%) but also the highest death rate (21.6%). Conversely, the finance and insurance sector saw the lowest proportion of new businesses (6.4%), while the health sector had the best survival rate, with only 6.5% of firms failing.