UK small business statistics 2023

Small and medium-sized businesses or “SMEs” are the backbone of much of the UK economy. In 2021, there were 5.6 million private sector businesses in the UK, accounting for 99.9% of the firms operating here, with multiple new entrepreneurs joining the ranks every day. 

Between the 2008 financial crisis, Brexit, the COVID-19 pandemic, and the cost of living crisis, the 21st century has been tough for small business owners in the UK. So how has the market fared over the past century? Let’s delve deeper into the small business landscape and explore the SME market further with our comprehensive small business statistics and facts for 2023.

On this page, we’ll cover:

• Small business growth statistics

• Small business profits statistics

• Small business Covid statistics 

• Business births and deaths statistics

• Business failure statistics

Small business growth statistics

Growth in the register size

Between 1979 and 2021, the total business register has increased by 3.9 million companies, while the effective register (which does not include those in the process of dissolution or liquidation) has increased by 3.7 million companies.

During this time, the register has increased year-on-year 38 times, whereas the effective register has increased 36 times over the same period. Great Britain’s effective register saw a decline in 2008 to 2009 with a decrease of 157,700 companies, which is likely due to the 2008 Financial Crisis. The UK total register declined a year later in 2009 to 2010, with a decrease of 88,316 companies.

Since 2010 to 2011, both registers have continued to increase steadily in size. Between 2012 to 2013 and 2020 to 2021, the average growth rate for the total and effective registers was 5.7% and 6.0%, respectively. During 2020 to 2021, the growth rates increased to 8.4% for the total register and 8.5% for the effective register.

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A breakdown of UK total and effective register sizes from 1979 to 2021

How many SMEs reported growth in 2021?

In 2021, 18% of SMEs (excluding Starts) reported having grown, and 7% reported that they had grown by 20% or more, with limited variation by size (6-9%). Among these businesses, four in 10 (42%) reported achieving this growth level in 2019 and 2020. 

Overall, a quarter (25%) of SMEs had achieved a period of scale-up growth, either recently or in the past 10 years, in line with 23% in 2020 and up from 20% in 2019.

A breakdown of SMEs achieving scale up growth in the last 10 years

Which businesses saw high growth in the UK in 2020?

At UK level, out of 278,000 businesses in 2020 with 10 or more employees, 12,000 (or 4.3%) were classed as having “high growth”. This is when a business grows its employment by more than 20% a year between 2017 and 2020.

Region breakdown (2020)

London was the region with the largest number of businesses showing high growth, a count of 2,690 or 5.5%. Scotland had the lowest high-growth rate, at 3.7%.

Industry breakdown (2020)

The industry with the highest percentage of businesses in high growth was the information and communication sector, at a rate of 8.4%. This was followed by finance and insurance, at a rate of 7.7%. Comparatively, the industry with the smallest percentage of high-growth businesses was accommodation and food services, with a growth rate of 2.9%.

Small business profits statistics

Pre-pandemic, around eight in 10 SMEs reported making a profit each year. During 2020, as the impact of the pandemic was felt, this proportion started to decline (70% in Q4 2020). This decline continued into 2021 with 60% reporting a profit in Q2 2021, before increasing to 68% in Q4 2021.

A breakdown of UK SMEs that made a profit between 2019 and 2021

For the year as a whole, 65% reported a profit, increasing by size of SME from 64% with 0 employees to almost 8 in 10 of those with more than 10 employees. 

In the second half of 2021, more than a quarter (27%) of SMEs were planning to take action to reduce their carbon footprint, and almost as many (26%) were planning to take on staff. Both were more likely amongst larger SMEs, with four in 10 of those with 10-49 or 50-249 employees planning to tackle their carbon footprint and over five in 10 planning to recruit more staff. A further 20% of all SMEs were planning to invest in plant/machinery or premises, and 19% were looking to develop a new product or service. 

Overall, more than half of SMEs (57%) were planning one or more of the activities listed, increasing to 75% of those with 10-49 employees, 71% with 50- 249 employees, and 76% of those with plans to grow.

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Small business Covid statistics 

The impact of Covid-19 on SMEs

Inevitably, the social and trading restrictions put in place by the government in March 2020 impacted businesses in several different ways. In a Gov.uk survey, when SME employers were asked how their business adapted during the restrictions:

• 31% reported their business closed down completely (temporarily)

• 47% reported there had been a reduction in operations

• 6% reported an increase in operations

• 15% reported no impact on their business operations

Medium-sized businesses were more likely to stay open than small and micro businesses, with 18% closing temporarily versus 30% of small and 31% of micro-businesses. 

Sector breakdown

The sectors most likely to close temporarily were the following:

• Accommodation and food (75%)

• Arts and entertainment (46%)

• Education (45%)

• Constriction (44%)

• Other services (42%)

The sectors most likely to reduce business operations were the following:

• Transport (62%)

• Professional and scientific (57%)

• Administration (54%)

• Finance and real estate (53%)

• Manufacturing (52%)

On the other hand, one in 10 SME employers in the following sectors increased operations during the imposed lockdown measures:

• Wholesale

• Information and communication

• Health

• Other services

Business births and deaths statistics

Between 2019 and 2020, the number of UK business births decreased from 390,000 to 358,000 – a birth rate of 11.9% in 2020 compared with 13.0% in 2019. As a result, the business birth rate is the lowest it has been since 2012, with most industries showing lower birth rates in 2020 than in 2019. 

The Covid-19 pandemic has likely contributed to this; however, not all industries showed a lower birth rate in 2020. There was an increase of 80% in the number of new postal and courier businesses created as demand for online shopping increased.

A breakdown of business birth and death rates in the UK (2015 to 2020)

Industry breakdown

The transport and storage (including postal) industry had the highest business birth rate at 23.4%. This industry has had the highest business birth rate since 2017. There has been a significant rise in small courier businesses. This resulted from the rise in online shopping during 2020. 

Some of these single-employee limited companies tend to be registered for a short period of time, leading to large numbers of business births and deaths in the industry. This has contributed to the transport and storage (including postal) industry having the highest death rate, at 14.7%, as well as the highest birth rate.

A breakdown of business birth and death rates by industry in the UK (2020)

Businesses in the South West are most likely to survive compared to other English regions (9.1%), whereas London businesses are most likely to die (12.1%). This is mimicked when looking at the five-year survival rate for businesses born between 2015 and 2019. 

Regions and countries in the UK with the highest business births and deaths

In 2020, the business birth rate was 12%, and the business death rate was 11%. The birth rate remained above the death rate in 2020, despite the impact of Covid-19.

In 2020, the number of business births was greater than the number of business deaths in all regions and countries of the UK, except Scotland. The largest number of business births occurred in London (89,270). The largest number of business deaths also occurred in London (77,045).

At a regional level, London had the highest business birth rate at 14.0%. The main industry impacting the births in London was professional, scientific and technical at 17.4%, with the management consultancy activities industry contributing over a third of this increase.

London also had the highest business death rate at 12.1%. Again, the biggest proportion of these deaths was in the professional, scientific and technical industry at 21.9%. Within this figure, the management consultancy activities industry was the biggest contributor making up 42.4% of the business deaths.

A breakdown of business birth and death rates by region in the UK (2020)

Business failure statistics

Some 390,000 businesses failed between 2020 and 2021 (6.5% of the total population), a 23% increase in business failures from the previous year. 

2020 saw the lowest number of business failures since 2016. This was due to the large number of government support measures announced in response to Covid-19. However, since these measures have been phased out, business failures have increased. In fact, insurance company Euler Hermes has predicted UK insolvencies will be at least 20% higher in 2022 than in 2021. 

This seems to be an accurate prediction, given that The Insolvency Service reported 1,560 company insolvencies in England and Wales in January 2022 – double that of January 2021.

How many new businesses fail in the UK?

On average, almost 20% of new businesses fail in their first year. This isn’t exclusive to new business owners, as a report from The Insolvency Service revealed that only one in three small businesses last for more than 10 years. 

Business insolvency statistics 

In England and Wales, there were 4,896 registered company insolvencies in Q1 2022 – 6% higher than the number of company insolvencies registered in Q4 2021, and more than double the number in Q1 2021 (112% higher). In fact, the number of registered company insolvencies is the highest since Q2 2012. 

The most common insolvencies 

In Q1 2022, creditors’ voluntary liquidations (CVLs) were the most common company insolvency procedure (87% of cases), followed by compulsory liquidations (7% of cases), administrations (5% of cases), and company voluntary arrangements (CVAs; 1% of cases).

A breakdown of the total number of registered company insolvencies in England and Wales, Q1 2021 to Q1 2022

In fact, the number of CVLs increased to the highest quarterly rate since records began in 1960.

One in 257 active companies (38.9 per 10,000 active companies) entered liquidation between April 2021 and March 2022. This was an increase from the 25.5 per 10,000 active companies that entered liquidation in the same period in April 2020 and March 2021.

Sector breakdown

All industries saw increased insolvency numbers in the 12 months ending Q1 2022 compared to the period ending Q1 2021. For larger sectors, which account for around 5% of all insolvencies, increases ranged from 28% in Manufacturing to 85% in Construction.

The three industries that experienced the highest number of insolvencies in the 12 months ending Q1 2022 were:

• Construction (3,213 insolvencies)

• Wholesale and retail trade and repair of vehicles (2,100 insolvencies)

• Accommodation and food services activities (1,977 insolvencies)

These sectors also had the most insolvencies in the 12 months ending Q1 2021. Although it’s worth noting that the construction industry tends to have the highest quarterly number of insolvencies of any industry.

A breakdown of the number of insolvencies in England and Wales, Q1 2020 to Q1 2022

Regions most affected by Covid-19

SME employers in Northern Ireland were more likely to have closed temporarily (43%) than those in Scotland (37%), Wales (32%), and England (30%). However, Northern Ireland was less likely to report reduced operations (38%), compared to 44% in Scotland, 47% in England, and 48% in Wales.

Covid had a considerable impact on Northern Irish businesses. The latest 2021 data shows 16.5% (24,600) fewer businesses in Northern Ireland compared to 2020. 

Average turnover by business in Wales increased by an impressive 8.83% from 2019 to £452,847 in 2020, which was up from a low base as it was the second-lowest after turnover in the South West at £412,941.

Average turnover by business dropped from the previous year in several regions. Northern Ireland saw a 9.61% decline in turnover by business – the largest drop of all regions. The East Midlands saw a drop of 8.8%, a 3.37% fall in the North East, and a 2.9% decline in Scotland.

The average turnover per business in the UK as a whole was £795,788 in 2021, an annual increase of 9.5%, but the total number of companies was down 6.5%.

How did Covid-19 affect the self-employed

Covid has the biggest negative impact on the self-employed workforce.

The number of people registered as self-employed dropped by a huge 8.6% in 2021 compared to 2020 after increasing 93.9% in the previous 20 years.

Within the non-employers category, those classed as ‘unregistered’ accounted for all of this reduction. There were 397, 200 (11.9%) fewer businesses in the category in 2021, including companies that are not registered for either VAT or PAYE.

 Micro businesses (1-9 employees) were the only category that saw numbers grow during the 12 months until the start of 2021, with a further 5,300 added. 

How SMEs mitigated the impact of Covid-19

In a government survey, SME employers were asked about other measures they had taken to mitigate the impact of the pandemic and associated trading restrictions. These included:

• Changing processes/ways of working (59%) – 71% of small and 74% of medium-sized businesses, compared with 57% of micro-businesses.

• Drawing on reserves (45%) – cited by 63% of accommodation and food and 60% of arts and entertainment businesses.

• Increasing borrowing (36%) – cited by 44% of construction and administration businesses and 42% of arts and entertainment businesses.

• Postponing investment (31%) – cited by 38% of medium-sized, 35% of small and 30% of micro-businesses, 45% of accommodation and food, and 41% of arts and entertainment businesses.

• Changing methods of selling (27%) – cited by 33% of small, 31% of medium-sized and 25% of micro-businesses; 43% of accommodation and food, and 39% of retail and wholesale businesses.

• Changing services/products provided (20%) – cited by 39% within arts and entertainment, 37% within accommodation and food, 35% within education and 33% within health sectors.

• Building up stocks of supplies (17%) – cited by 27% of medium-sized, 24% of small and 15% of micro-businesses; 30% of health and 29% of retail and wholesale businesses.

Want to read more general business statistics? We’ve collated all the latest UK business facts and stats for 2022 including; sectors, size, employment, type age, owners, location, performance and investment.

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