2 in 5 new UK businesses close within 5 years
New analysis of Companies House data highlights the tough environment confronting UK entrepreneurs. It’s been revealed that 2 in 5 businesses launched since 2021 have already shut their doors for good.
The research, conducted by Birmingham-based marketing agency Avid Panda, looked at Companies House data and uncovered the number of businesses incorporated between January 2021 and December 2025 that had since closed, gone into administration, been liquidated, or been dissolved.
Since January 2021, 2,131,947 businesses have opened across the UK, and of those, 879,991 have already closed. This means that around 40% of UK businesses fail before making it to the 5-year mark.
The study also examined the business failure rates of the 50 most populous UK cities to find the best and worst places to start a new business.
The cities with the highest business mortality rates are:
- Wolverhampton (49%)
- Mansfield (48%)
- Luton (46%)
- Birmingham (45%)
- Dudley (44%)
The cities with the lowest business mortality rates, where it’s best to open a new business, are:
- Norwich (33%)
- Cambridge (34%)
- Reading (34.6%)
- Oxford (34.8%)
- Swansea (35%)
In response to the findings, a spokesperson for Avid Panda said: “These figures don’t come as a surprise when you look at how tough the current environment is for business owners. Costs are rising across the board, and things like increases to employer National Insurance contributions and the national minimum wage are adding even more pressure, particularly for smaller or newer businesses that are already working with tight margins.
“For a lot of startups, there just isn’t much room for error. Generally, cashflow is limited in those early years, so when overheads suddenly increase, it can be incredibly difficult to absorb those costs and keep things running.
“That’s why it’s so important that new and small businesses are properly supported. They’re a huge part of the UK economy, but they’re also the most vulnerable when conditions get tougher. Without the right support, we risk losing a lot of good businesses before they’ve really had a chance to grow.
“Location still plays an important role, with some cities simply providing better conditions, whether that’s lower costs, stronger demand, or more opportunities in certain industries. When margins are already under pressure, this can make a real impact on whether a business makes it past the five-year mark
“Ultimately, starting a business has never been easy, but right now it feels especially challenging. These numbers highlight just how important it is for founders to plan carefully, and for communities to do more to help them succeed.”