Business failure statistics UK

How many businesses fail in the first year?

Not all new businesses formed in the UK succeed – an unfortunate truth – although small businesses can improve their chance of survival with a solid strategy, financing options and a competitive business bank account. We look at business survival rates, how it varies between industries and some of the reasons businesses stop trading.

Business failure statistics: Highlights

  • 3 in 5 businesses (60%) started in 2017 failed within the first 5 years.
  • 1 in 14 new businesses (7%) started in 2021 failed within the first year.
  • 345,000 businesses stopped trading in 2022, up 5% from 328,000 the previous year.
  • In 2022, the business death rate (11.8%) was higher than the business birth rate (11.5%) for the first time since 2010.

How many businesses fail within the first year?

The latest official figures show that 1 in 14 new businesses (7%) formed in 2021 failed within the first year. This is up slightly from 2019 when only 1 in 20 (5%) of UK businesses formed failed within the first year.

How many businesses fail in the first 5 years?

Around 3 in 5 new UK businesses (60%) fail within the first 5 years according to government figures, meaning it is more likely for a business to fail in 5 years than to succeed. In fact, more than half of new businesses (54%) will have failed within the first 4 years of trading.

The likelihood of business failure increases year-on-year up to five years as shown by statistics on businesses formed in 2017:

  • 1 year: 6% have failed
  • 2 years: 27% have failed
  • 3 years: 44% have failed
  • 4 years: 54% have failed
  • 5 years: 60% have failed
Chance of business failure year 1 - year 5
Year Businesses survived Businesses failed
Year 1 94% 6%
Year 2 73% 27%
Year 3 56% 44%
Year 4 46% 54%
Year 5 40% 60%

Business failure statistics by industry

The chance of business survival varies depending on the industry. According data from 2022, the transport and storage industry had the highest proportion of businesses failures, with a death rate of 23.8%. It also had the highest proportion of new business formed, however, with a birth rate of 21.2%.

The second highest proportion of business failures was seen in the information and communication industry, with a death rate of 13.6% and a total of 30,000 businesses that ceased trading.

At the other end of the spectrum, the property sector had the lowest business death rate at just 7.1% – with a total of 9,000 businesses that ceased trading.

Business death rate by industry
Industry Business death rate Number
Transport and storage 23.80% 41,000
Information and communication 13.60% 30,000
Retail 12.80% 32,000
Accommodation and food services 12.80% 26,000
Business administration and support services 12.60% 34,000
Professional, scientific and technical 12.20% 59,000
Wholesale 10.90% 13,000
Construction 10.20% 43,000
Production 9.60% 16,000
Education 9.30% 4,000
Arts, entertainment, recreation and other services 9.30% 19,000
Motor trades 8.80% 8,000
Finance and insurance 8.50% 3,000
Health 7.30% 9,000
Property 7.10% 9,000

Business failure statistics by region

The East Midlands had the highest rate of business failures in 2022, with 13.2% of businesses that ceased trading – or a total of 26,000. The rate of businesses failure was next highest for London and the West Midlands, with a death rate of 12.7% in each region – 30,000 businesses in the West Midlands and an impressive 77,000 in London. Meanwhile, Northern Ireland had the lowest rate of business deaths at 8.2%, a total of 5,000.

While there were a total of 345,000 businesses deaths in 2022, there were also many new businesses formed! Altogether, 337,000 new businesses began trading in 2022. However, the business death rate (11.8%) was higher than the business birth rate (11.5%) for the first time since 2010.

Region Business death rate Number of failed business
East Midlands 13.2% 26,000
West Midlands 12.7% 30,000
London 12.7% 77,000
North West 12.6% 37,000
North East 12.1% 9,000
Yorkshire and The Humber 11.5% 24,000
Scotland 11.3% 20,000
East 11.2% 33,000
Wales 11.2% 12,000
South East 11.1% 49,000
South West 10.4% 25,000
Northern Ireland 8.2% 5,000

What reasons to startups give for failure?

Startups fail for multiple reasons, but we’ve listed the most commonly given reasons below, as found by an external survey. The top reason for business failure is running out of cash or failing to raise enough new capital when needed, with 38% of failed businesses giving this as a reason. Other common reasons included a lack of market need (35%) and tough competition (20%).

Business death rate by region
Reason for startup failure Percentage giving reason
Ran out of cash/failed to raise new capital 38%
No market need 35%
Got out competed 20%
Flawed business model 19%
Regulatory/legal challenges 19%
Pricing/cost issues 15%
Not the right team 14%
Product mistimed 10%
Poor product 8%
Disharmony among team/investors 7%
Pivot gone bad 6%
Burned out/ lacked passion 5%

Click here for more research. For all media enquiries, please contact

Matt Mckenna
UK Communications Manager
T: +44 20 8191 8806
matt.mckenna@finder.com@MichHutchison/in/matthewmckenna2

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