The Office for National Statistics today revealed that there are 2.73 million tax-registered businesses in the UK, as of March 2023. That is down by 1.5% from the same time in 2022.
It is the first decline in over a decade, with the number of businesses edging up even during the pandemic.
The most significant falls were among sole traders and partnerships, suggesting small business has been especially hard hit.
In terms of sectors, transport and storage, IT and communication and professional, scientific and technical businesses were among those seeing the sharpest declines.
The decline in the number of businesses in London was slightly sharper than the national average, at 1.9%.
The ONS noted that the number of businesses used to correlate with GDP, but this relationship had appeared to be weaker in recent years, which may be partly due to the pandemic.
While the official data only goes up to March, insolvency statistics suggest the number of businesses might have continued to decline further through 2023.
In the second quarter of the year, the number of insolvencies in England and Wales reached the highest level since 2009.
At the time that data was released, David Kelly, head of insolvency at PwC, said: “High inflation and the increasing cost base for firms is resulting in the erosion of both liquidity and shareholder value, thus reducing confidence in the ability to hit future forecasts. Coupled with rising interest rates, it is making for a very challenging environment for business.
“Like homeowners coming off fixed mortgage rates, many businesses have yet to refinance their debt, meaning the full impact of higher interest rates may yet to be felt.”
Among the high-profile businesses to go bust this year are Wilko, Paperchase and Hunter Boot.