Britain has lost half a million small businesses since its withdrawal from the European Union and the start of the pandemic, official figures show.
The total number of private sector companies fell by 56,000 to 5.5 million in the year to early 2024, the Department of Business and Trade said in its official annual estimate. This brings the total decline to around 500,000 since the number of companies peaked at six million in early 2020.
an exodus of self-employed and sole proprietorshipsCompanies, usually consultancies, were largely responsible for the declines: their numbers plummeted 11 percent over the five-year period.
The fall coincided with the initially slow introduction of support for the self-employed during the first Covid lockdown. the increase in remote and flexible working for employees, and the crackdown on consultants by HM Revenue & Customs under covert IR35 employment tax tax avoidance rules.
Despite the impact of the pandemic and high levels of insolvencies over the past 18 months, businesses with employees increased in number between 2020 and 2024, with those paying the salaries of more than 250 people recording the fastest growth rate.
Tina McKenzie, policy chair at the Federation of Small Businesses, said the “disappointing” figures highlighted in “stark terms the need for a renewed focus on economic growth and business culture”.
“There are currently more than half a million missing small business owners. “That means half a million wealth creation units are missing, which means jobs and local businesses are also missing,” he said.
The British Chambers of Commerce said the decline in private businesses “underlines the difficult economic conditions that many businesses still face.”
Jonny Haseldine, director of policy, said: “The Chancellor’s first budget in just a few weeks is an opportunity to outline action on business rates reform, expanding overall spending. [capital allowances] and address the skills crisis. “Thriving businesses must be at the center of the sustained economic growth we all want to see.”
Between 2010 and 2020 there was a rise in self-employment and one-person consultancies, accounting for 80 per cent of the increase in the total business population from 4.5 million to six million during the period, the Department of Business and Economy said. Trade.
Small business owners increasingly prefer incorporation over other legal forms of trading, such as being a sole trader or operating through a company. The former provides directors with protection against the company’s debts, while with the latter the individual’s liability is unlimited. The department said that between 2010 and this year the number of sole traders increased by 323,000, or 12 percent, and that of companies by 793,000, or 62 percent. By contrast, partnerships shrank by 100,000, or 22 percent.
The commercial department was contacted for comment.