Business Demography, UK: 2012

• The number of business births increased by 8,000 (3.1%) between 2011 and 2012

• The number of business deaths increased by 25,000 (11.0%) between 2011 and 2012

• In 2012 the births of new businesses (270,000) was greater than business deaths (255,000)

• The move towards economic recovery has seen birth rates being higher than death rates from 2011, but the gap has narrowed in 2012

• London had the highest business birth rate at 14.8% and the highest death rate at 11.7%. Apart from London the number of birth and deaths by region were similar

• In broad industry terms, accommodation and food services had the highest death rate, at 13.3%

Business Demography mainly focuses on changes in the registered business population. Data are produced on births, deaths and survival of businesses. Business births and deaths are presented by industry and geography. In addition, a series on business survival is also presented, with 1 to 5 year survival rates by industry and geography.

In 2012 there were 270,000 business births i.e. new registrations, in the UK, a birth rate of 11.4%. This was compared with 261,000 births in 2011, a birth rate of 11.2%. In 2012 there was also a 3.1 % increase in the number of business births. The number of business births was the highest since 2007 (when there were 281,000 births).

Provisionally for 2012 there were 255,000 business deaths i.e. business de-registrations, a death rate of 10.7%. This compares with 230,000 business deaths in 2011 and a death rate of 9.8 %. In 2012 there was an 11.0% increase in the number of business deaths.

Figure 1 shows that in recent years the rate of business births per year has usually been higher than the rate of business deaths. This was the case leading up to the 2007 global financial market shock and subsequent economic downturn in 2008/09. GDP grew by 3.4% in 2007, before falling by 0.8% in 2008 and by 5.2% in 2009. The rate of business births fell in 2008 and 2009 as economic conditions deteriorated. This is likely to reflect uncertainty around the economic outlook at that time and constrained access to finance as the financial sector adjusted to the global shock.

The death rate of businesses in the UK fell in 2008 before increasing sharply in 2009, rising above the birth rate. One factor behind this could be that a number of businesses continued to trade in the expectation that economic growth would resume quickly and benefiting from lower interest rates during this period. However, GDP growth did not return until 2010, by which time some of those businesses had ceased trading.

The rate of business births once again became higher than the rate of business deaths from 2011. GDP grew by 1.2% in 2011 and by 0.1% in 2012, with positive quarterly growth in four of the eight quarters of these years. While GDP growth resumed, the economic outlook remained unusually uncertain, with output moving between expansion and contraction. The rising rate of business births and the falling rate of business deaths may reflect the economy’s emergence from the downturn, and the usual trend between 2003 and 2007 re-asserting itself. While the rate of business deaths increased in 2012, it remained below the rate in 2004.

There were approximately 2.37 million active businesses in the UK during 2012, an increase of 30,000 on 2011. Estimates for 2012 are available in greater geographical and industrial detail from the tables (1.88 Mb Excel sheet) published on the Office for National Statistics website.

In 2012 the highest rate of business births occurred in business administration and support with 15.0%. This was followed by professional, scientific & technical with a birth rate of 14.4% and information & communication with a birth rate of 13.7%. In terms of the overall number of births, professional, scientific & technical created the highest number of businesses at 61,000. Within professional, scientific and technical the largest contributing industry was management consultancy, with 21,000 births and 16,000 deaths.

The highest business death rate, at 13.3%, was in accommodation and food services. This was followed by business administration and support services at 13.1%. In terms of the overall number of deaths, professional, scientific & technical had the highest at 44,000 followed by construction at 37,000 and business administration and support services at 26,000.

Within the regions, London had the highest business birth rate at 14.8% followed by the North East (11.4%) and North West (11.4%). The region with the highest business death rate was London at 11.7%, followed by the North West region at 11.4%. Northern Ireland had the lowest birth and death rates at 7.0% and 9.4% respectively. The highest number of births and deaths were seen in London, at 65,000 and 52,000 respectively.

London was the region with the biggest business churn rate (highest number of births and deaths) whereas Northern Ireland traditionally has a much more stable business population.

Apart from London, the balance between births and deaths were fairly similar. In terms of birth and death rates, Northern Ireland also had a large difference in rates.

The UK five-year survival rate for businesses born in 2007 and still active in 2012 was 44.6%. By region, the highest five-year survival rate was in the South West region at 48.1%, while the lowest was in London at 41.7% which mirrors the churn rate seen in the business birth and death data. By broad industry, some notably high five-year survival rates include health with a survival rate of 56.1% and education with a survival rate of 54.5%. Hotels & catering was the lowest with only 37.0% of businesses surviving for five years. There has been an increase in one - year survivals from 2011 births, compared with 2008-2010 births, which reflects improving economic conditions.

Survival rates are available from one-year to five-year in greater geographical and industrial detail via the tables (1.88 Mb Excel sheet) published on the Office for National Statistics website.