Britain’s business failures turn bigger, Start-ups can’t fill the gap
The businesses shutting down or leaving the UK are bigger, employ more people and generate more turnover than ever before, according to Cynergy Bank’s latest Business Births and Deaths Index, leaving start-ups unable to replace the jobs and economic value being lost.
Drawing on the latest ONS data for October to December 2025, the Index shows that while 285,245 businesses closed over the year (3.5% fewer than in 2024) the firms failing were larger than at any point since records began.
In 2025, the average turnover of companies that closed reached a record £315,000, rising sharply to £345,000 in the final quarter of the year. As recently as 2021, the equivalent figure stood at £205,000, underlining how far the scale of business failures has grown.
These firms also employ more people. Businesses that closed in 2025 had an average of 2.95 employees, the second-highest annual figure on record, exceeded only marginally in 2019 at 2.98, highlighting that on overage closures are increasingly affecting more substantial employers.
The impact intensified towards year-end. In Q4 2025, business closures wiped out 11,139 more jobs than were created by new start-ups, making it one of the most damaging quarters for net employment in recent years.
Start-ups too small to compensate
While new businesses continue to form, they are hiring fewer people.
Across 2025, start-ups created just 846,665 jobs, the lowest annual total since the start of the ONS data set in 2017. The average start-up employed only 2.7 people, again the lowest annual average and down from 3.5 in 2017, limiting their ability to offset rising job losses elsewhere in the economy.
In Q4 2025, the total turnover generated by new firms (£20.74 bn) was almost £2bn lower than the turnover of businesses that shut down (£22.66bn), marking a clear deterioration in the UK’s business dynamism.
Sector winners and losers
Despite the challenging backdrop, Cynergy Bank’s Business Health Score, which measures the ratio of new businesses created to those lost reveals sharp divergences between sectors.
- Health and Social Care was among the strongest performers of 2025, posting an annual score of 1.29. The private health and social care sector has expanded every year since 2019, consistently recording scores above 1 and delivering a net gain of 18,380 businesses over the past six years.
- Real Estate emerged as the strongest-performing sector overall, recording the highest annual Business Health Score of 1.46 and a net increase of 4,400 businesses in 2025, reflecting resilient demand and continued policy focus on housing supply
- Agriculture recorded the weakest performance of any sector, with a score of just 0.52, meaning only half of the farms closing are being replaced by new agricultural businesses. The sector saw 6,390 farms close during 2025 – the highest annual number since the dataset began in 2017 – underlining the mounting pressures facing UK agriculture.
Nick Fahy, chief executive of Cynergy Bank, said: “What this data shows is that pressure in the UK economy is moving up the size curve. Earlier in the cycle, it was smaller and more fragile businesses that fell away. Now, we’re seeing larger, more established firms coming under strain as they refinance debt at rates well above those they expanded under, while continuing to absorb higher employment and operating costs.
“At the other end of the market, start-ups are continuing to form, but many are being forced to stay smaller for longer as the cost and risk of hiring has increased. Founders are more cautious about taking on permanent staff, with higher National Insurance contributions, increases in the minimum wage, and changes to employment rights making each hire a more significant long-term commitment at a time when demand remains uncertain. As a result, many new businesses are prioritising flexibility – relying more on technology, AI and contract labour rather than building headcount in the early stages.
“All this is contributing to the higher unemployment rates we’ve seen recently. The government needs to ease the cost of hiring, improve access to growth capital, and provide greater stability and clarity in the policy environment so firms have the confidence to invest and take on staff.”