Nearly 400,000 UK businesses disappear in one year of the pandemic with London and the West Midlands worst hit
- BEIS Department figures show the impact of Covid-19 on UK businesses
- The number of private sector businesses in the UK fell by 389,600 in 2020
- Decline was largely driven by the disappearance of ‘unregistered’ businesses
The number of private sector businesses in the UK fell by 389,600 in 2020, bringing the total number of British firms at the start of 2021 to its lowest level since 2016.
Figures published today by the Department for Business, Energy & Industrial Strategy show there were 5.6million private sector businesses at the start of the year, some 6.5 per cent less than the previous year. Total employment within these businesses fell by 13 per cent.
Most sectors saw a decline in the number of businesses in operation, with the broad mining and utilities sector seeing the largest decline of 26 per cent.
The total number of British private sector firms fell to its lowest level since 2016
Construction saw the biggest numerical decline, with 79,000 businesses closing, merging or taken over by another business.
However, real estate added 7,000 new business in 2020, and financial and insurance businesses saw a 7 per cent increase.
The number of businesses declined across all countries and English regions, with Northern Ireland taking the greatest hit of 17 per cent, followed by Scotland, England and Wales with declines of 8 per cent, 6 per cent and less than 1 per cent respectively.
London and the West Midlands were the worse affected regions, with a decline of 8 per cent each, while Yorkshire and the Humber saw the smallest decline of 2 per cent.
However, the decline was largely driven by the disappearance of ‘unregistered’ businesses, meaning those that are not registered for VAT or PAYE.
Unregistered businesses, which typically do not employee staff, declined by 397,000 – a dip of 11.9 per cent – for the year.
The UK private sector comprises largely of non-employing businesses and small employers, which account for 99.9 per cent of the business population.
In fact, there were 393,000 fewer non-employing businesses but the number of employing businesses rose by 3,000.
Of the 5.6 million UK private sector businesses, 1.4 million of these had employees and 4.2 million had no employees.
Therefore, 75 per cent of businesses did not employ anyone aside from the owner or owners at the start of 2021.
The decline was driven by businesses unregistered for VAT or PAYE
The 7,700 large businesses in the UK make a major contribution to employment and turnover, but SMEs account for three-fifths of the employment and around half of turnover in the UK private sector.
As coronavirus wreaked havoc on the UK economy, smaller businesses saw debts mount
Business conditions have rapidly improved since the end of most Covid-19 restrictions with 90 per cent of firms currently trading as of late September, up from 71 per cent at the start of the year, according to the BEIS.
Of those trading, 27 per cent report a decrease in turnover compared with normal expectations for this time of year, while just 7 per cent reported an increase.
An ONS Business Impacts of Coronavirus Survey at the beginning of 2021 estimated that 15 per cent of UK businesses were at-risk of permanently closing by the start of April.