UK business creation plummets to 8-year low
The dynamism of the UK’s private sector has plunged to its lowest ebb for eight years as bigger firms hit the rocks and new company creation slows. Cynergy Bank’s new Business Births and Deaths Index, released today, draws on latest ONS data to paint a sobering picture of the nation’s economic health.
In 2024, new company formations plummeted to 306,995, the lowest since at least 2017. Meanwhile, the average turnover of failing businesses reached its highest level in the same period, indicating that even well-established, bigger firms are not immune to the current economic turbulence.
The employment outlook is equally concerning as new businesses aren’t hiring as many people as they used to. Job creation through new businesses barely outpaced losses from closures, with a net gain of only 13,754 jobs in 2024. This figure pales in comparison to the 348,845 net jobs created in 2017.
Winners and losers
Cynergy Bank’s Business Health Score, which measures the ratio of new businesses created to those lost, reveals a stark divide across industries:
- Agriculture: With a score of 0.52, the UK’s farming sector has been hardest hit, with only half of the closing businesses being replaced.
- Manufacturing and Production: These sectors are barely treading water with a score of 0.88.
- Wholesale Trade and Transportation: Both industries are struggling, scoring 0.89 and 0.86 respectively.
However, amidst the gloom, some sectors are flourishing:
- Health and Social Care: Boasting a score of 1.34, this sector is thriving, possibly due to more private companies stepping in where the NHS is struggling.
- Education: the sector has a robust score of 1.31 and includes all types of education businesses from pre-primary to tertiary, special needs, sports and even driving schools
- Real Estate: With a score of 1.30, property-related businesses are showing remarkable resilience.
Regional disparities
London continues to outperform the rest of the country with a score of 1.12, compared to the national average of 1.03. In contrast, the East Midlands and Wales are experiencing the most significant business closures, with scores of 0.94 and 0.95 respectively.
Nick Fahy, chief executive of Cynergy Bank commented, “These figures present a sobering picture of the UK business environment and with the National Insurance increase looming in April, it’s hard to see it improving in the immediate future.