Business demography, UK: 2023

• Between 2022 and 2023, the number of UK business births decreased from 337,000 to 316,000; this has led to a fall in the business birth rate from 11.5% to 11.0%.
• The number of UK business deaths fell from 349,000 to 309,000 between 2022 and 2023; this has led to a decrease in the business death rate from 11.9% to 10.8%.
• The transport and storage (including postal) industry had the highest business birth rate, at 14.5%, and the highest death rate, at 21.6%.
• In 2023, there were 13,750 high-growth businesses in the UK, measured by employment, compared with 11,480 in 2022.

In 2022, business deaths exceeded the births for the first time since 2010. In 2023, there was a return to the birth rate (11.0%) exceeding the death rate (10.8%). This is mainly because the death rate decreased by more than one percentage point (11.9% to 10.8%). The birth rate, though higher than the death rate, is the lowest it has been since 2010.

There were approximately 2.9 million active businesses in the UK during 2023, a decrease of 54,000 from the number of active businesses in 2022 (Table 1). Estimates for 2023 are available in greater geographical and industrial detail in our Business demography, UK dataset.

There was a decrease in the business birth rate in 7 out of the 15 industry groups between 2022 and 2023. The largest fall came from transport and storage, which accounted for 70% of the fall in the overall birth rate.

Although transport and storage has the highest business birth rate of the industry groups since 2017 (at 14.5%), its business birth rate has seen a large decrease of 6.7 percentage points since 2022. The transport and storage death rate continues to be considerably higher than its birth rate for 2023, at 21.6% and 14.5%, respectively. This industry has shown volatility in the number of business births and deaths in recent years. Large increases in births between 2018 and 2021 have been replaced by decreases. The largest decrease in this industry since last year was in other postal and courier activities, where the number of births dropped by over one-half.

Over three-quarters of the businesses in other postal and courier activities are sole proprietors and, in 2023, 18% of the businesses in this industry were born and died within the same year. This industry also showed the largest decrease in the number of deaths, which was particularly high last year, when the death rate was 36.6% (compared with 27.8% in 2023) and 28% of the businesses born in 2022 died the same year.

Births and deaths of businesses can also be measured by employer business demography. This measure not only shows the number of new business births (with one or more employees) but also the existing businesses that have started to employ at least one person. Likewise, the deaths not only show the number of businesses with employees that cease to trade but also the number of businesses that have stopped employing staff.

Tables 3 and 4 show business births and deaths broken down by industry. They compare the total number of businesses, the businesses with at least one employee, and those businesses with two or more employees.

Most industries had a large proportion of business births that were either sole-proprietor or single-employee businesses in 2023. For example, nearly 85% of births in the transport and storage industry in 2023 were in one of these categories. Conversely, the accommodation and food services industry shows almost the opposite, with over 70% of businesses having two or more employees.

At a regional level, London had the highest business birth rate, at 12.6%. However, this is the lowest birth rate for London since 2009. The main industry contributing to the births in London was professional, scientific and technical, at 17.9%, with management consultancy businesses contributing to almost half of this increase.

The West Midlands was the region with the highest business death rate, at 12.4%. The biggest proportion of these deaths was in transport and storage, at 17.5%. Freight transport by road and removal services contributed to over half of this increase.

The region with the highest five-year survival rate was Northern Ireland, at 47.7%. The survival rates show the percentage of businesses that survived into 2023. Northern Ireland, for the third year running, has shown the highest five-year business survival rate. The largest proportion of these surviving businesses were in the construction industry.

The region with the lowest five-year survival rate was the West Midlands, at 34.7%.

At the UK level, out of 291,000 businesses that had 10 or more employees in 2023, 13,750 businesses (4.7%) are classed as high-growth. This is an increase of 0.8 percentage points compared with last year.

Breakdown by region

London was the region with the largest number of businesses showing high-growth, at 3,305 businesses, with a high-growth rate of 6.3%. Northern Ireland had the smallest high-growth rate, at 3.1%.

All regions saw an increase in high-growth in 2023. The region with the highest increase in growth rate was London, up 1 percentage point.

Breakdown by broad industry group

The industry with the highest percentage of businesses in high-growth was information and communication at 9.5%, followed by finance and insurance at 6.6%. The industry with the smallest percentage of high-growth businesses was motor trades, at 2.6%.

All industries showed an increase in the proportion of high-growth businesses in 2023 compared with 2022. The industries to show the largest increase in high-growth rate were information and communication and arts, entertainment, recreation and other services. The high-growth rate for both industries increased by 1.4 percentage points.

Active business

The starting point for the calculation of business demography data is the concept of active businesses in a reference year. These are defined as businesses that had either turnover or employment at any time during the reference period.

Business

For the purpose of this release, "business" is used to represent an enterprise. An enterprise is an organisational unit producing goods or services that has a certain degree of autonomy in decision-making.

Business birth

New business registrations (identified through registration of the administrative units, that is, VAT and PAYE) are referred to as business births. The birth rate is calculated using the number of births as a proportion of the active businesses.

Business death

Businesses that have ceased to trade (identified through de-registration of the administrative units) are referred to as business deaths. The death rate is calculated using the number of deaths as a proportion of the active businesses.

Employer business birth

Employer business births include new businesses with at least one employee, as well as existing non-employer businesses that have become employer businesses.

Employer business death

Employer business deaths are businesses that ceased to trade with at least one employee, as well as businesses that ceased to employ staff.

Employers’ demography

Employer business demography is an alternative measure of business demography based on businesses with at least one employee.

High growth

High growth, for the purpose of this publication, measures all businesses with an average growth in employment of greater than 20% per year, over a three-year period (between 2020 to 2023). The size threshold used to identify these businesses is that they have 10 or more employees.

Inter-Departmental Business Register

The Inter-Departmental Business Register (IDBR) is a database of all businesses in the UK registered for VAT and/or the PAYE income tax system. The IDBR is the register of UK businesses used as a sampling frame for Office of National Statistics (ONS) business surveys.

Survivals

A business is deemed to have survived if it was born in year t or has survived to year t, and it is active in terms of employment and/or turnover in any part of t plus 1.

Measuring the data

Business demography is an annual bulletin produced from the Inter-Departmental Business Register (IDBR). The bulletin focuses on changes to the registered business population, that is, those businesses registered at HM Revenue and Customs (HMRC) for Value Added Tax (VAT) and/or Pay As You Earn (PAYE), and at Companies House.

Quality

More quality and methodology information (QMI) on strengths, limitations, appropriate uses, and how the data were created is available in our Business demography QMI.

Strengths and limitations

The starting point for the calculation of business demography data is the concept of active businesses in a reference year. These are defined as businesses that had either turnover or employment at any time during the reference period. New business registrations (identified through registration of the administrative units, that is, Value Added Tax, (VAT) and Pay as You Earn, (PAYE)) are referred to as business births. The birth rate is calculated using the number of births as a proportion of the active businesses. Businesses that have ceased to trade (identified through de-registration of the administrative units) are referred to as business deaths. The death rate is calculated using the number of deaths as a proportion of the active businesses.

The Eurostat and Organisation for Economic Co-operation and Development (OECD) manual on business demography statistics recommends waiting for two years after the reference period to allow for reactivations before deaths figures are calculated. In this release, we estimated the number of reactivations and adjusted the data accordingly. This adjustment has been applied to all industries, by removing units from the death data. This can lead to different percentage adjustments at the lowest level of aggregation. As the level of reactivations is subject to some uncertainty, the latest two years in the publication are provisional and subject to revision. Table 9 of our Business demography dataset shows the adjustments made to the death data for reactivations.

In recent years, the number of multiple business registrations at a single postcode on the Inter-Departmental Business Register (IDBR) have increased. This has affected the number of births, deaths and survival rates. There are several reasons why these multiple registrations can occur, such as an increase in the use of management and personal service companies, virtual offices and foreign internet sellers. We have published our Multiple business registrations at a single postcode methodology to help users assess the effect of these registrations. The dataset accompanying this article gives rounded counts at district level for the births of these businesses.

From the 2021 publication onwards, we removed businesses that have neither VAT nor PAYE but that do have a live company number. They were removed from both our annual and quarterly demography releases because they can misrepresent business birth and death figures.

Industrial classification of businesses on the IDBR often comes from imperfect sources. We embarked on a programme of work to examine the quality of the industrial classification for businesses on the IDBR. More information on this is available in our Investigating the accuracy of Standard Industrial Classification (SIC) using the Business Register and Employment Survey (BRES) methodology, published in May 2023.