London becomes home to over 16,000 new businesses – the highest recorded compared to the rest of the UK

London becomes home to over 16,000 new businesses – the highest recorded compared to the rest of the UK

24 Aug    Finance News, News

The business experts at Forbes Advisor have conducted an analysis of the most recent UK business demography statistics report from the Office for National Statistics.

Findings indicate a significant decline in the number of businesses added to the Inter-Departmental Business Register (IDBR) in Quarter 2 (Apr to June) 2023, compared to the same period in the previous year (14% decrease).

Overall, 77,095 new businesses were registered during this quarter, compared with 89,875 registered in Q2 2022.

London saw the highest number of ‘births’ compared to any other region in the UK, with 16,260 new businesses registered in Q2 2023. Wales had the most significant decrease, with 2,580 businesses born in Q2 2023 compared to 3,465 in Q2 2022 (-34%)

Further analysis reveals a drop in business creations across 14 out of 16 main industrial groups in Q2 2023, year-on-year. The transport and storage sector experienced the most substantial decrease, recording a 59% fall in the number of business ‘births’.

The analysis highlights an improvement in business survival rates during the period. The data shows a 15% decrease in business closures year-on-year during Q2 2023. In total 84,150 businesses were removed from the IDBR, as opposed to the 99,440 closures recorded in Q2 2022.

Sectors experiencing the greatest growth and decline in business ‘births’

All but two of the sixteen sectors analysed experienced a decline in business births. The largest number of business birth rates was recorded in the Health and Social Care sector with 3,400 business births in Q2 2023 vs 3,125 in Q2 2022 (+8%).

The Real Estate sector witnessed a modest rise in new business establishments, marking a slight increase (+0.6%) from 3,090 businesses registered in Q2 2022, compared with 3,110 in Q2 2023.

Following that, the Professional, Scientific, and Technical industries experienced a small decline compared to the previous year, with a marginal decrease (-0.7%) from 12,455 in Q2 2022 to 12,360 in Q2 2023 .

The sectors which recorded the greatest decrease in business births were those in Transportation and storage, which saw a 59% plummet from 8,950 in Q2 2022, to 3,665 in Q2 2023. This was followed by agriculture, forestry and fishing, which saw a 23% decrease from 1,030 in Q2 2022 to just 785 in Q2 2023. Finance and insurance, saw a 12% fall from 1,015 in Q2 2022, vs 885 in Q2 2023.

Kevin Pratt, business commentator at Forbes Advisor, says: “It is extremely challenging to launch a new business in an era of climbing interest rates on borrowing, stubbornly high inflation and a general cost of living squeeze. Little surprise, then, that we’ve seen a significant drop in the number of new firms being added to the ONS register in recent months.

“The fact that 14 out of 16 sectors have seen a decline is an indication of how widespread the problem is across UK plc. Entrepreneurial activity is the bedrock of the country’s economic success, and a sustained downturn would have far-reaching consequences.

“Businesses are battling high input costs, supply chain snags and reduced consumer demand in many sectors. There are glimmers of hope from the recent drop in the inflation rate and the possibility that the expected rise in the Bank of England Bank Rate next week might be the last of the current cycle. Falling wholesale energy prices will also boost confidence. We certainly need some good news to help arrest the decline in new business activity.”

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