2022 UK Small Business Statistics You Need to Know for 2023

At Pearl Lemon Accountants, we are all about small businesses. They are who we exist to serve, after all, whether they are established family businesses with decades of existence under their belts or scrappy new start-ups. So the fact that we are very interested in UK small business statistics should come as no surprise.

For small firms, the last few years have been among the most turbulent ever. The effects of the pandemic and Russia’s invasion of Ukraine have been felt all around the world.

And as a result, some intriguing UK small business statistics have emerged. Both the number of new businesses starting up and the number of failed businesses have changed. How people are earning money for business, their structure, employee count, revenues and avenues of revenue generation have all changed too. And that’s just the tip of the iceberg.

If you have ever wondered how your UK small business stacks up against your peers and competition, or what the future might have in store for you in these uncertain economic times, then these UK small business statistics are for you.

Top UK Small Business Statistics

• There are 5.6 million private sector firms in the United Kingdom.
• Employees: 75% of businesses only have the owner as an employee (s)
• Formation of new businesses: In 2021/22, 753,168 new businesses were established in the UK.
• Age of the company: The average UK company was 8.6 years old as of the end of March 2022.
• 99.2% of all enterprises are small businesses, according to government statistics (0 to 49 employees)
• Most common business structure: Private LTD corporations have continuously made up more than 96% of all corporate body types since 2004.
• Small business failure rate: In the UK, over 1 in 5 new firms fail every year.
• Registration for VAT: As of March 2021, there were 2.77 million Value Added Tax (VAT) and/or Pay As You Earn (PAYE) registrations among firms in the UK.
• Average turnover: When just examining enterprises with no employees, the average turnover of a small business (0-49 people) in the UK is £72,461, down from £286,482.
• Growth Rate: Companies that claim they have a formal financial business strategy expand 30% more quickly on average than those without one.

UK Small Business Population Statistics

There are some noteworthy statistics that really stand out when examining the composition of UK businesses overall.

• In the UK, there are estimated to be 5.6 million private sector companies.
• Almost all of them are small and medium-sized firms (99.9%), and 75% of them only have owners as employees.
• The total number of businesses declined by 6.5% between 2020 and 2021. This may be an indication of the significant price that businesses have paid to deal with COVID-19’s effects. And a sad reminder that many of them simply have not survived.

Here is a look at UK businesses by the numbers in terms of size:

According to the most recent government statistics (primarily provided by HMRC):

• In the UK, there are 5.3 million micro-enterprises with 0–9 employees, making up 95% of all businesses. In the UK, a microbusiness’s average annual revenue is £176,016.
• 99.2% of all firms in the UK are small businesses or 5.5 million of them with 0 to 49 employees. As a result, small businesses are by far the most prevalent kind of firm in the nation.
• The average turnover of a small business in the UK is £286,482, however, when only considering companies with no employees, this figure falls to £72,461.
• With 50 to 249 employees, there are 35,600 medium-sized firms or 0.6% of all businesses. This indicates that the proportion of medium-sized businesses in the UK is still quite low.
• In the UK, a medium-sized company’s average annual revenue is £20,228,523.
• Large businesses (defined as those with 250 or more employees) made up 7,700 businesses or 0.1% of all businesses. Due to this, large businesses are by far the least prevalent type of company in the nation.
• In the UK, a large business’s average annual revenue is £279,468,844.

UK Business Statistics and Ethnic Diversity

Diversity is something we hear a lot about too. But the UK business world is not as diverse as you might think, especially when it comes to successful small business ownership.

In the UK, there are about 250,000 businesses with ethnic minority leadership. This represents about 4.5 percent of all businesses that are registered here. All non-white ethnic groups are included in these figures.

Given that ethnic minorities makeup, up roughly 14% of the total population in the UK and the latest census statistics predict that this figure will continue to increase significantly over the next decade, it is clear that more has to be done to promote ethnic minorities as entrepreneurs in the nation.

How Many New UK Businesses Got Started in 2022?

A LOT of new businesses are started every year in the UK. However, after a near record-setting level of new business incorporation in the 2020/21 fiscal year the number of new businesses formed in 2022 has fallen by 7%.

That record level came, of course, at the height of the pandemic, when those left without employment thanks to lockdowns and other similar measures often felt they had little choice but to try and make money for themselves.

Year by year new company incorporations:

Year New Incorporations Y/Y % Change

2021/22 753,168 -7.1%

2020/21 810,316 +21.8%

2019/20 665,495 -1.1%

2018/19 672,890 +8.5%

2017/18 620,285 -3.8%

2016/17 644,750 +5.9%

How Many UK Businesses Failed in 2022?

Almost anyone who even considers starting their own business has heard about the high business failure rates that have long been associated with doing so. But just how badly have things like the pandemic, and the much touted by the media ‘cost of living crisis’ really affected UK businesses in terms of failure, at least as far as the statistics show?

Each year, 20% of newly established businesses in the UK fail. Only about 33% of new businesses survive into their first decade, with 60% failing within the first three years. This illustrates how difficult it is to launch, expand, and run a profitable firm.

In the UK, there were 581,824 dissolutions from 2021 to 2022, a rise of 32.9% year over year.

Year by year company dissolutions:

Year Dissolutions Y/Y % Change

2021/22 581,824 +32.9%

2020/21 437,790 -18.5%

2019/20 536,934 +5.5%

2018/19 508,865 +3.7%

2017/18 490,738 +12.4%

2016/17 436,526 +9.2%

UK Business Lifespan Statistics

At the end of March 2022, the average age of a firm on the entire UK registry was 8.6 years. The average age of a UK business has steadily decreased from 10.7 years at the end of March 2000.

What Kinds of Businesses Exist in the UK?

There are many distinct kinds of businesses in the UK. Here, we explore some of the most prevalent and the statistics behind them:

Hospitality

As of 1 January 2020, there were 223,045 hospitality enterprises in the UK or 3.7% of all businesses nationwide. The gross value added to the UK economy by the hospitality sector in 2020 was £59.3 billion, or roughly 3.0% of the country’s overall production.

2.38 million people were employed in the hospitality industry in the UK in the three months leading up to September 2020, which accounted for 6.9% of all occupations in the country.

More recent figures are not as clear, as many hospitality businesses have restructured or report being ‘on pause’ in the aftermath of the pandemic. One thing is certain, for a hospitality business to survive and thrive in 2022 is perfectly possible, but those in the industry have to be far more resilient, open to change and have a specific financial plan in place.

Retail

In the UK, there are more than 300,000 registered enterprises that are categorised as retail businesses.

Over 3 million people are employed by retail businesses or over 8% of all jobs in the UK. Retail sales in the UK totalled £439 billion in 2020.

There are 120,375 e-commerce businesses in the UK. This represents about 2.2% of all enterprises in the UK.

The percentage of e-commerce enterprises in the UK has increased dramatically over the past several years as a result of the growing popularity of online shopping, which was in part driven by the COVID-19 pandemic.

A peak of over 38% of all retail sales was made online in January 2021, up from 8% at the beginning of 2011 and 19% in February 2020. Since then, it has declined, although the most recent period still has it at over 28%. (February 2022).

What do the other small businesses in the UK do? In 2022, Sixteen percent of all SMEs were operating in construction, and professional, scientific and technical activities accounted for 15% of all SMEs.

Where are UK Businesses Located?

Although the nature of business is becoming increasingly global thanks to the rise of cloud computing and internet connectivity, it is interesting, to say the least, to take a look at where in the country the most (and least) businesses are based and how that might affect their viability and profitability. The following UK business statistics do just that:

London (1 million) and the South East (875,000) had the most private sector businesses, accounting for 34% of the UK business population, while the North East had 154,000 private sector businesses, the least of any English region.

Between 2020 and 2021 the number of private sector businesses decreased by 336,000 (6%) in England, compared to 28,000 (8%) in Scotland, 25,000 (17%) in Northern Ireland and 1,000 (1%) in Wales.

London was the English region with the largest numeric decrease (90,000), followed by the South East (57,000). The English regions with the largest decrease, in percentage terms, were London and the West Midlands (both 8%); the smallest decrease was in Yorkshire and the Humber (2%).

UK VAT and Tax Statistics

• In the UK, there are 2.77 million businesses that have registered for Pay As You Earn (PAYE) and/or Value Added Tax (VAT). Year over year, this has marginally increased.
• The total amount of VAT collected for the tax year that ended in March 2021 fell by 22% from the prior tax year.
• The largest contributor to net Home VAT liabilities remained the Wholesale and Retail industry.
• Traders with an annual turnover of more than £10 million paid 68% of the total net Home VAT recorded.
• Only 59,000 of the 2.77 million VAT and/or PAYE enterprises operate from multiple locations.

International Trade Statistics

The impact on companies that do business with the EU has drawn more attention since the UK left the EU.

Vote Leave estimated that some 324,000 UK companies traded with the EU during the EU referendum discussions. While everything was going on, Britain Stronger in Europe only reported that the number was “above 200,000.”

Regrettably, there are no official statistics on the number of UK companies doing business with the EU. However, we can still make an educated guess that the actual proportion is close to 5–6% of all UK enterprises.

The EU is reportedly the destination of over 82% of all SME exports. This leads to an estimate that approximately 8% of UK SME companies export to the EU. When taking into account all UK enterprises, regardless of size, this number decreases somewhat to 7%.

Despite the numerous difficulties faced by UK businesses over the past few years, the overall results and prognosis are quite positive.

According to the most recent data on small businesses in the UK, more new companies are being formed while fewer businesses are being dissolved. As a result, there are more firms in the UK overall.

Small businesses are still by far the most prevalent type of business, and a sizable fraction of them are run solely by the founders.

Only about a third of registered businesses reach the 10-year milestone, and the average age of registered businesses is declining. This figure, which shows that many new enterprises are being founded without a sound long-term strategy, is quite alarming.

This emphasises the need for enhanced entrepreneurship education to support entrepreneurs in realising their goals. This is especially true of their financial goals. Which is where Pearl Lemon Accountants can help.

For small businesses, we can offer to do a lot more than make sure that your taxes are correct and that your books are balanced. Our team is composed of financial experts who can guide businesses of any size, and in any sector in every aspect of their financial growth. Contact us to discuss how we can help you.

Data Sources: Business4Beginners, GOV.UK 1, GOV.UK 2, GOV.UK 3, GOV.UK 4, GOV.UK 5, GOV.UK 6, GOV.UK 7, ONS 1, ONS 2, CREME, UK Parliament 1, BRC, BBC