UK now boasts a record number of businesses, but can they survive?

The UK business population has reached a new high. The harder question is what happens next.

The headline figure is encouraging. As of January 2025, there were 5.7 million private sector businesses in the UK, according to the Department for Business and Trade’s Business Population Estimates 2025. Merchant Savvy reports that represents a 3.5% increase from January 2024, the strongest year-on-year growth since before the pandemic. And yet beneath that number lies a more complicated story about survival, pressure and the cost of doing business in modern Britain.

SMEs account for 99.85% of the UK business population. At the start of 2025, total employment in SMEs stood at 16.9 million, accounting for 60% of all private sector employment, while SME turnover was estimated at £2.8 trillion, representing 51% of the total. (Source: Department for Business and Trade, Business Population Estimates 2025)

The scale of that contribution is hard to fully appreciate: SMEs are not footnotes to the economy, they are the economy, the builders, consultants, retailers, technologists, and sole traders who between them underpin more than half of the country’s private sector output.

The business birth rate has stabilised and the death rate is at its lowest since 2016

There were 317,000 business births in 2024, similar to 2023, with the birth rate ticking up slightly from 11.0% to 11.1%. Business deaths fell from 310,000 in 2023 to 280,000 in 2024, with the death rate dropping to 9.8% — its lowest level since 2016. (Source: ONS, Business Demography UK: 2024, November 2025)

That widening gap between births and deaths, up from 0.2 percentage points in 2023 to 1.3 percentage points in 2024, is a meaningful positive signal. More businesses are being created than are closing and fewer are failing than at any point in nearly a decade.

But the aggregate figures mask significant variation by sector. The transport and storage industry recorded both the highest birth rate (15.6%) and the highest death rate (16.5%) in 2024, continuing a trend that has persisted since 2018. High-growth businesses numbered 14,330 in 2024 (this figure was 13,750 in 2023) with a high-growth rate of 4.9%, the highest since 2018. The information and communication sector had the highest proportion of high-growth businesses at 9.2%. (Source: ONS, Business Demography UK: 2024)

Key sectors driving new business formation

The NatWest and Beauhurst New Startup Index, published in February 2025, offered a more granular picture of where new businesses are being created. A record 5.63 million active companies were registered with Companies House at the end of 2024, an increase of 3% on the previous year, with almost 850,000 businesses joining the corporate register during the year.

The fastest-growing sectors by new formations tell a clear story about where entrepreneurial energy is flowing, highlighted by Enterprise Nation. The property sector saw the largest percentage increase in new business formations, rising 38% year-on-year to 44,000. In food, 22,000 new takeaway shops and food stands were registered (a 14% increase on 2023) while nearly 38,000 management consultancy businesses were formed, a 10.7% rise. Although new incorporations in online retail declined slightly by 1.46%, this category remained the single most popular for new business registrations, reflecting the enduring importance of e-commerce to UK entrepreneurship.

Looking at sectoral growth in business numbers more broadly, Human Health grew by 11.9%, Accommodation and Food Services by 9.9%, and Real Estate by 8.3% in 2025. (Source: Merchant Savvy, UK Business Statistics, January 2026)

The scaling problem has not gone away

New business creation is only part of the picture. The Enterprise Research Centre’s State of Small Business Britain 2024 report provides a counterpoint to the positive figures. Of the 325,811 start-ups registered in 2020, only 47% survived to 2023. Of those survivors, 3,049 businesses (just 2% of the total) had reached the milestone of £1 million in turnover after three years. Meanwhile, although there are 400,000 more established SMEs than in 2010, the proportion registering any employment growth has fallen from 20% to just 13%. (Source: Enterprise Research Centre, State of Small Business Britain 2024)

Survival is one challenge. Scaling is another entirely. The conveyor belt of new business creation is healthy. The infrastructure to help those businesses grow remains inadequate.

The cost burden is intensifying

The single greatest near-term threat to SME viability is the rising cost of employment, compounded by a series of fiscal changes introduced in the 2024 Autumn Budget and implemented from April 2025.

Employer National Insurance Contributions rose from 13.8% to 15% in April 2025, adding an estimated £770 annually for each minimum wage worker and approximately £900 for a median wage worker. (Source: Firestarter Solutions, citing government Budget documents, 2025)

As new Employment Rights legislation takes effect, 63% of SME bosses report they will be disproportionately impacted by the costs of implementing the changes. (Source: Breathe HR, citing British Chambers of Commerce Quarterly Economic Survey, 2025)

A survey by IWOCA found that 42% of SME leaders cite rising business costs as their biggest concern, while only 36% of SME leaders believe there are enough skilled professionals in their local area. Despite this, some resilience is evident: a report by Aviva found that 71% of SMEs expect turnover growth in 2025. (Source: BizEquals, citing IWOCA and Aviva surveys, 2025)

In October 2025, the most commonly reported challenge facing turnover growth was the broader economic environment, cited by 28% of businesses. For businesses with ten or more employees, the cost of labour remained the top concern, reported by 33%. (Source: Merchant Savvy / BVA BDRC SME Finance Monitor Q4 2024)

Early 2025: cautious optimism in the numbers

The most recent quarterly data offers tentative grounds for optimism. Business creations in Q1 2025 totalled 89,515, representing a rise of 2.8% on Q1 2024. Business closures in the same period stood at 83,425, a fall of 4.4% compared to Q1 2024, with the most significant decrease coming from the business administration and support services sector, down 20.2%. (Source: ONS, Business Demography Quarterly, UK: January to March 2025, April 2025)

The headline is that more businesses are opening and fewer are closing. The direction of travel is positive, even if the road remains difficult.

The case for SME support has never been stronger

The entrepreneurial conditions that existed have not fundamentally changed over the last 12 months. Barriers to entry remain low, digital infrastructure continues to make it easier to start a business and a growing ecosystem of tools, platforms, and communities supports aspiring founders. What has changed is the fiscal and regulatory environment in which those businesses must survive once they exist.

For professional services specifically, UK consulting sector leaders are projecting growth of 5.7% in 2026, comfortably outpacing the wider economy. In 2024 alone, revenue for the consulting sector reached £91.9 billion, with £46.8 billion in exports. (Source: House of Commons Library, cited in Create Sales, 2025)

The case for sustained, targeted SME support, including funding, guidance and policy, is as strong as it has ever been. The numbers being created are impressive. The challenge, as it has always been, is helping them last.

Primary sources: Department for Business and Trade, Business Population Estimates 2025 (gov.uk); ONS, Business Demography UK: 2024 (November 2025); ONS, Business Demography Quarterly, UK: Q1 2025 (April 2025); NatWest/Beauhurst New Startup Index (February 2025); Enterprise Research Centre, State of Small Business Britain 2024; House of Commons Library Business Statistics Briefing (March 2026); BVA BDRC SME Finance Monitor Q4 2024.