Business closures surpass openings for the first time since 2010 as higher borrowing costs bite
Business closures have overtaken openings for the first time since 2010, a report in the Financial Times analysis has suggested today as weak demand and high borrowing costs take their toll on the economy.
The analysis follows figures published by the Office for National Statistics (ONS) last week, which highlighted a 7 per cent slump in the number of businesses established in 2022 compared to the previous year.
The ONS Inter-Departmental Business Register data also showed a 5 per cent rise in business closures, the paper said, meaning it was the first time since 2010 that closures overtook openings in the UK.
In October, the Insolvency Service suggested the number of firms going bust has risen to its highest level since 2009 — at the height of the financial crisis.
Some sectors are faring better than others, the FT analysis noted. In the construction sector, the number of business openings has dropped 8 per cent, while closures climbed 41 per cent.
For retail, the paper said closures soared nearly 30 per cent in 2022, the highest in at least six years.
According to insolvency practitioners Begbies, construction, real estate and property services companies now account for almost 30 per cent of all companies in critical financial distress.
“The construction industry, which has long been a bellwether for the health of the economy, looks particularly vulnerable with over 70,000 firms now in significant financial distress and circa 6,000 in much more serious critical financial distress – often a precursor to formal insolvency,” Julie Palmer, partner at Begbies, told City A.M last month.
“These businesses must now struggle through a period of inflation-eroded margins, weak demand and a looming recession. It is likely to be an insurmountable task for many.”