Business demography, UK: 2015

The number of UK business births increased by 9.3% from 351,000 to 383,000 between 2014 and 2015, a birth rate of 14.3% compared with a rate of 13.7% in 2014.

The 383,000 business births in 2015 were the highest recorded since comparable records began in 2000.

The number of UK business deaths increased by 2.1% from 247,000 to 252,000 between 2014 and 2015, a death rate of 9.4% compared with a rate of 9.7% in 2014.

London was the region with the highest birth rate at 18.6% and the highest death rate at 10.5%.

In broad industry terms, business administration and support services had the highest business birth rate at 20.4% and finance and insurance had the highest death rate at 13.3%.

The starting point for the calculation of business demography data is the concept of active businesses in a reference year. These are defined as businesses that had either turnover or employment at any time during the reference period. New business registrations are referred to as business births and the birth rate is calculated using the number of births as a proportion of the active businesses.

In 2015, there were 383,000 business births in the UK. The birth rate increased from 13.7% to 14.3% between 2014 and 2015.

Businesses that have ceased to trade (identified through de-registration of the administrative units, that is, VAT and Pay As You Earn (PAYE)) are referred to as business deaths and the death rate is calculated using the number of deaths as a proportion of the active businesses. The number of business deaths in the UK was 252,000. The death rate decreased from 9.7% to 9.4% between 2014 and 2015, the lowest death rate in the UK since 2006.

For the purpose of this release the term “business” is used to represent an enterprise. An enterprise can be defined as the smallest combination of legal units (generally based on VAT and/or PAYE records) that is an organisational unit producing goods or services, which benefits from a certain degree of autonomy in decision-making, especially for the allocation of its current resources. An enterprise carries out one or more activities at one or more locations. An enterprise may be a sole legal unit.

Please note that all data are rounded to protect confidentiality. The figures in the tables are rounded individually therefore the sum of component items may be slightly different to the totals shown.

Figure 1 shows that since 2011 the rate of business births has exceeded the rate of deaths. In recent years, the gap widened and in 2015, businesses were born at a rate which was 4.9 percentage points higher than the death rate. This reflects a continued turnaround from the economic downturn of 2008 and 2009 when businesses faced uncertainty around the economic outlook and constrained access to finance as the financial sector adjusted to the global shock.

The strengthening in the rate of business births is consistent with the strengthening of the labour market from an employment rate of 70.1% in September 2011 to 74.1% at the end of 2015. The March 2016 Economic Review highlighted the strength of the labour market and employment rate in 2015. As the labour market began to recover in 2012, job-to-job moves – an indicator of labour market confidence – rose sharply and this improvement may have given workers the confidence they need to move between employers and also the confidence to start new businesses.

The broader economic backdrop also likely supported business creation with growth in gross domestic product (GDP) continuing for a sixth successive year in 2015. The most recent data shows that the rate of business births has risen to 14.3% in 2015, its highest level since comparable records began in 2000. The rate of business deaths has fallen to 9.4%, down from 9.7%, the lowest level since 2006.

Alongside recent trends in economic growth and the strengthening in the labour market, the improvement in both survival and birth rates in recent years could be attributed to lower interest rates and the fall in oil prices which have reduced financing and input costs for businesses.

There were approximately 2.67 million active businesses in the UK during 2015, an increase of 121,000 on 2014. Estimates for 2015 are available in greater geographical and industrial detail from the tables published on our website.

In 2015, the highest rate of business births continued to occur in business administration and support, at 20.4%, compared with a rate of 20.7% in 2014. The second-highest rate occurred in transport and storage at 20.3%, compared with 17.5% in 2014.

Within the overall number of business births, professional, scientific and technical had the largest number of businesses at 81,000. Within professional, scientific and technical, the largest contributing industry was management consultancy activities, with 36,000 births (this was an increase of 6,000 on the 2014 figure).

The highest business death rate, at 13.3%, was finance and insurance. This was followed by business administration and support, at 10.8%, compared with 11.2% in 2014. Within the overall number of business deaths, professional, scientific and technical had the largest number, at 50,000 (of which 18,000 came from management consultancy activities) followed by construction, at 31,000.

Within the regions, London had the highest business birth rate at 18.6%, followed by the East Midlands (14.4%) and North West and West Midlands (14.1%). Northern Ireland had the lowest birth rate, at 9.7%.

The region with the highest business death rate was London at 10.5%, followed by the North West, at 9.9%. The highest number of births and deaths were in London, at 101,000 and 57,000 respectively. Northern Ireland had the lowest death rate, at 7.1%.

The UK 5-year survival rate for businesses born in 2010 and still active in 2015 was 41.4%.

By region, the highest 5-year survival rate was in the South West, at 44.2%, while the lowest was in London, at 39.3%.

By broad industry, some notably high 5-year survival rates include health, with a survival rate of 48.1% and property, with a survival rate of 47.7%. Business administration and support services were the lowest, with only 31.0% of businesses surviving for 5 years.

Survival rates are available from 1-year to 5-year in greater geographical and industrial detail via the tables published on our website.

An alternative measure of business demography uses “employer businesses” – businesses with at least 1 employee. This was introduced as a result of the joint Eurostat-OECD Entrepreneurship Indicators Programme (EIP).

The employer business demography data collection was set up to enable the collection of internationally comparable statistics. It is regulated by law in the European Statistical System and forms the most important data source for the entrepreneurial performance indicators.

The employer business birth rate, as a proportion of all active employer businesses, for 2015 was 15.2% and the employer business death rate for 2015 was 9.2%.

Breakdown by broad industry group

When looking at the breakdown by activity, the highest employer business birth rate for 2015 was recorded in transport and storage, at 22.5%, followed by business administration and support services at 21.6%.

The highest employer business death rate for 2015 was recorded by accommodation and food services, at 12.6%, followed by finance and insurance at 12.2%.

Breakdown by region

Within the regions, London had the highest employer business birth and death rate at 19.5% and 10.3% respectively, with Northern Ireland having the lowest birth and death rates, at 11.1% and 6.8% respectively.

The Business Demography Quality and Methodology Information document contains important information on:

• the strengths and limitations of the data and how it compares with related data

• users and uses of the data

• how the output was created

• the quality of the output including the accuracy of the data