Our latest study, carried out by our data specialists here at Koozai, shows that the number of new businesses in the UK has continued to grow so far this year, reaching (another) record high in the first quarter of 2023. This study centres around a comprehensive analysis of the latest Companies House data¹, released by the Office of National Statistics at the end of March.

These findings, which highlight the resilience of many UK businesses, come despite a very challenging economic climate. With the cost of living crisis nipping at consumers’ wallets, many businesses are also facing higher costs. Not only did inflation reach 9.2% in the 12 months to February 2023*, but UK interest rates (and therefore the cost of borrowing) also rose further to 4.25% in March³.

Five of the most significant takeaways from the study:

• 2023 started with a 19.5% rise in new businesses 

Key findings from our data analysis show that 202,130 new UK businesses were incorporated in the first 12 weeks of 2023. This is 19.5% (39,966) more new business incorporations than in the previous 12 weeks and 6.5% (12,379) more than in the first 12 weeks of 2022. The latest rise follows a smaller 2% year on year increase in new business incorporations last year, from 762,278 in 2021 to 778,219 in 2022.

Table 1: Number of new business incorporations quarter-on-quarter.

• Rising costs are not deterring new entrepreneurs from setting up shop

The number of UK entrepreneurs deciding to set up a new business has also grown significantly since the start of the Cost of Living crisis (in the past 64 weeks). To see how new businesses have been impacted by rising costs and the Covid-19 pandemic, we analysed data on the number of new company incorporations in specific time frames for:

• The ‘Cost of Living’ crisis. We looked at the 64 week period between the start of 2022 (including the first 12 weeks of 2023), which covers the majority of the UK’s ‘Cost of Living’ crisis (since late 2021) to date.
• Pre ‘Cost of Living’ crisis / Late Covid-19 period. This is the 64 week period directly before the onset of 2022, and includes the entirety of 2021 and the last 12 weeks of 2020. Covid-19 restrictions were still in place for much of this time period.
• Pre Covid-19 period. This is the 64 week period between the first week of 2019 to the end of the first 12 weeks of 2020. This time period ends just before the first UK Covid-19 lockdown came into force.

Table 2: Number of new business incorporations pre-Covid, pre-Cost of Living crisis, and during the Cost of Living crisis.

Despite the economic challenges, our analysis shows that 52,130 more new UK businesses were incorporated during the first 64 weeks of the ‘Cost of Living’ crisis period, compared to the pre ‘Cost of Living’ crisis / Late Covid-19 period directly before it. Compared to the Pre Covid-19 period, new business incorporations are up 18.23% so far in 2023.

• Number of businesses being ‘struck off’ the register is still on the rise

Despite many entrepreneurs’ generally optimistic outlook to date, our data analysis shows that more businesses than ever before are being struck off the Companies House register.

The number of UK businesses that were dissolved in the first 12 weeks of 2023 rose 4.7% (or by 9,789) YoY. 2022 was also a record year for UK business dissolutions, with 876,521 being struck off the Companies House register – a rise of 8.61% YoY.

Table 3: Number of business dissolutions quarter-on-quarter.

Table 4: Number of business dissolutions year-on-year.

• Compulsory businesses dissolutions (rather than voluntary) have risen by more than half since the onset of Covid-19.

Our analysis shows that a growing number of UK businesses are being forcibly struck off the Companies House register, rather than being voluntarily dissolved by their Directors. So far in 2023, there has been a record 143,154 compulsory dissolutions of UK businesses – 51.7% more than in the same period of 2019 (the year before the onset of Covid-19). 

This is also 7.2% more compulsory business dissolutions in the first 12 weeks of 2023 compared to the same period last year. Compulsory dissolutions made up nearly 2 in 3 (65.4%) of all businesses struck off in the 12 weeks of this year – up 7% since before the pandemic (Q1 2019).

Table 5: Number of compulsory business dissolutions quarter-on-quarter.

• The UK’s ‘most entrepreneurial’ city may surprise you

We also analysed the latest Companies House records⁷ to reveal the towns and cities in the UK that have played home to the largest number of new businesses during the ‘Cost of Living’ crisis (since January 2022) to date.

Based on the total number of new businesses incorporations, London is (perhaps unsurprisingly) the metropolitan area where most new UK businesses were set up during this period. 244,331 businesses (that are still active today) have been registered there in the past 15 months. The below table shows that Birmingham comes in second place for the highest number of new UK business incorporations, followed by Manchester, Glasgow, Leeds, Liverpool, and then Cardiff.

League Table 1: Postal Towns with the highest number of new business incorporations (January 2022 – March 2023).

We also compared the number of new business incorporations to the size of the local population. This helped us to understand the estimated proportion of people in each area that took the plunge to start a new business.

League Table 2: Postal Towns with the highest number of new business incorporations as a percentage of the local populations (January 2022 – March 2023).

Viewed like this, Manchester is the clear winner, with enough people deciding to a start a new business there during the Cost of Living crisis to make up roughly 5.37% of the local population. This was followed by Borehamwood in Hertfordshire, Dartford and Gravesend in Kent, and Doncaster in South Yorkshire.

Study summary 

With the UK economy forecast to contract slightly by around 0.5% in 2023 before returning to growth⁴, there’s no doubt that many businesses face further challenges over the coming months. Year-on-year, our analysis of the Companies House data shows that business dissolutions have been rising. Given high inflation, rising interest rates, this may be unlikely to change in the immediate future. 

However, it is positive that these challenges are seemingly not putting UK entrepreneurs off, and while business dissolutions continue to rise, so too are the number of new businesses being set up. The UK is also forecast to avoid a full technical recession this year with growth expected to return in 2024, according to the Office of Budget Responsibility⁵. 

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Study data resources:

• ¹Company incorporations, voluntary dissolutions and compulsory dissolutions – Office for National Statistics

• ²Consumer price inflation, UK – Office for National Statistics

• ³UK interest rates: What the rise means for you – BBC News

• ⁴Forecomp_March_2023.pdf (publishing.service.gov.uk)

• ⁵Hunt: UK expected to avoid a recession in 2023 – BBC News

• ⁶Business insights and impact on the UK economy – Office for National Statistics (ons.gov.uk)

• ⁷Companies House

Data notes: The raw data on Companies House records (Company incorporations, voluntary dissolutions and compulsory dissolutions, Release date: 30 March 2023) was obtained from the Office of National Statistics. Records for the weeks between January 2022 and March 2023 (covering the majority of the ‘Cost of Living’ crisis to date) were included in our analysis. These records were then compared to previous time periods of the same length to calculate our findings. We also analysed the records of businesses currently on the Companies House register as recorded in the Companies House data product (accessed 3 April 2023). These were sorted and analysed by Postal Town to identify locations. The number of records for active businesses in each Postal Town, which were also incorporated between January 2022 to March 2023, were included in the study. Where there was no clear or legible Postal Town, these entries were excluded from our analysis. Towns located solely within larger cities were also excluded to avoid artificially skewing the figures. Locations outside of mainland UK were also excluded from study. The data on the number of new businesses in each area was then compared against city/town population figures obtained from: https://worldpopulationreview.com/countries/cities/united-kingdom to produce estimates.