Half a million small businesses are disappearing since the pandemic as the UK faces challenging economic conditions
The UK has seen half a million small businesses disappear since the start of the pandemic and its exit from the European Union, according to new data from the Department for Business and Trade.
The total number of private sector businesses fell by 56,000 million to 5.5 million in the year to 2024, marking a net decline of 500,000 businesses from a peak of six million in early 2020.
The biggest drop is largely due to the migration of self-employed people and sole proprietorships, especially consultants, whose numbers have fallen by 11% over the past five years. These cuts are due to a number of factors, including delays in government support for the self-employed during the initial Covid lockdown, the rise of remote and flexible working, and HM Revenue & Customs’ tightening of the IR35 tax rules.
Despite the challenging conditions, the number of businesses with employees actually increased between 2020 and 2024, with large businesses, especially those employing more than 250 people, recording the fastest growth rate.
Tina McKenzie, policy chair at the Federation of Small Businesses, expressed concern about the “disappointing” figures, calling for a renewed focus on encouraging economic growth and fostering an entrepreneurial culture. “Now there are more than half a million missing small business people,” said McKenzie. “That’s half a million dollars short of wealth creation, which means local jobs and local businesses are also missing.”
The British Chambers of Commerce echoed these concerns, noting the ongoing difficulties businesses are facing. Jonny Haseldine, the policy manager, emphasized that the upcoming Budget gives the government an opportunity to address important issues such as business standards reform, cash grants, and the skills crisis.
The decline in the small business sector is particularly notable in the context of rapid growth in self-employment and one-on-one consulting between 2010 and 2020. During this period, self-employment accounted for 80% of the growth in the number of entrepreneurs. , which increased from 4.5 million to 6 million.
Additionally, the data shows a trend towards incorporation, with many small business owners choosing to operate as corporations rather than sole traders or partnerships. While the number of sole traders increased by 323,000 over the past decade, the number of companies increased by 793,000. In contrast, the number of partnerships decreased by 100,000 during the same period.
The government spokesperson acknowledged the difficult conditions businesses have faced in the past few years but reiterated the government’s commitment to improving the overall business climate, especially for small businesses.
