A record number of new businesses started in 2023. Which sectors and regions saw the most growth?

Last year saw the foundation of a record number of new start-ups. Swoop asks: what will the government do to keep them afloat?

While news that the UK has gone into a recession has made for bleak reading, there are positive signs for the UK economy as the number of small and medium-sized enterprises (SMEs) has boomed in the last year. 

A recent report from NatWest and Beauhurst reveals a record-breaking 5.31 million active companies currently operating within the UK, with an impressive 900,000 businesses established in 2023 alone.

As SMEs make up the majority of job creation, innovation and economic growth, the boom in numbers will be seen as great news at a time of high inflation and interest rates remaining well above where they had been for years. 

The top three new types of business 

The number of online retailers grew by 82,000 in 2023, continuing a trend to meet consumer demand for friction-free shopping from home. These new online retailers have become the single largest contributor to new businesses in the UK. With easy-to-set-up stores on Amazon, Etsy, Shopify and Facebook, it’s not just customers shopping from home – many of these new businesses will be selling from their founders’ homes too. 

The property letting sector also saw a significant surge, with 49,000 new businesses entering the scene. Again, a look at the big trends explains why: remote working has created a demand for flexible housing options; owning a home is becoming increasingly out of reach for many, leading to an increase in renters; and platforms such as Airbnb have opened up new avenues for property owners to generate income.

And in third place, 21,000 new street food stalls and takeaways set up shop in 2023. The UK is enjoying a culinary boom, thanks to the growing popularity of diverse cuisines, the rise of food festivals and markets which provide a platform for street food vendors to showcase their offerings; and a shift towards casual and at-home dining.

Where are these businesses and who is starting them?

Looking at where these new businesses are based, Northern Ireland saw the largest boom in start-ups with 14,000 new businesses starting up in 2023, a massive 59 percent increase on the previous year which may reflect the country’s unique status of keeping one foot in the EU.

London benefitted from a 20 percent increase, while Scotland came in third with 11 percent; clearly there are still regions of the UK where new businesses are lagging behind.  

The growth in female-founded businesses also continues to increase year on year, with a record 164,000 companies incorporated by women in 2023, up 4 percent on 2022 and taking growth in the five years between 2019 and 2023 to 26 percent overall.

Why are so many new businesses being founded?

There has been a big shift in the economic landscape, thanks to digital innovation transforming how customers behave and lowering the barriers to entry for entrepreneurs. For example, setting up a shop on an online marketplace takes just a few minutes – and you’re in business. Bootstrapping a small business into existence is not difficult and there are plenty of podcasts, TV shows, books and free online content to help anyone who wants to get started. With wages stagnating, many people are asking themselves whether it makes more sense for them to become self-employed. 

At Swoop, we are delighted to see the entrepreneurial spirit alive and thriving in the UK. The UK’s flourishing business landscape presents a promising outlook for the country’s economic future, but it should not be taken for granted: research by Avid Panda suggests a 28.67% closure rate for new UK businesses within the last five years, so governments – both local and national – should pull the levers available to them to support new businesses. 

SMEs have the ability to deliver enhanced products and services that cater to diverse needs and preferences; increase competition in the market, driving innovation, improved quality and efficiency; plus increased employment opportunities, higher GDP, and potential for further economic growth.

With an impending budget, we hope that SMEs will be given due consideration for the positive things they bring to the economy. Budgets are often written with the hope of attracting positive headlines about how they will help individuals and families. With so many new businesses springing into existence, the divide that once existed between family finances and business finances is becoming more blurred: most people know someone who works for themselves or in an SME; the fate of these businesses matters both personally and as part of the wider economic story. 

Swoop will be commenting on the Spring ‘24 budget and taking questions – Join us in an insightful webinar.