The number of new businesses created across the UK in the final quarter of 2024 fell to its lowest level since records began, according to the Office for National Statistics (ONS). Data revealed that 65,450 new firms were registered between October and December, representing an 8.5% year-on-year decline.
The figures have raised concerns among business leaders, with the Institute of Directors (IoD) warning that rising costs and regulatory burdens are dampening entrepreneurial activity. The decline comes amid broader economic uncertainty, with analysts forecasting a slower-than-expected recovery for the UK economy.
New Registrations Fall Across Key Industries
The ONS figures indicate that 13 of the 16 main industrial groups recorded a drop in new enterprise formations over the past year. The most pronounced declines were seen in the transport and storage sector, followed by the administration and support services industry.
Despite the downturn in business creation, the total number of active firms in the UK remains at record levels. Data from NatWest suggests that by the end of 2024, there were approximately 5.6 million businesses in operation, underscoring a degree of resilience within the private sector.
However, groups have expressed concern that government policies, including increases in national insurance contributions and the minimum wage, are discouraging new enterprises. Anna Leach, chief economist at the IoD, argued that the rising tax burden and employment law reforms have “cooled business dynamism” in the UK.
Calls for Policy Changes to Support Entrepreneurship
Experts warn that without decisive action, the UK risks further stagnation in business creation. Pranesh Narayanan, research fellow at the Institute for Public Policy Research (IPPR), emphasised the importance of both business births and closures in maintaining a healthy economic cycle. He pointed to low investment levels and strained public services as key barriers to new enterprise.
“The Government has started to take steps in the right direction, such as recent announcements on infrastructure development, which should help innovators,” Narayanan said. “But, to go further, they should make sure that the upcoming industrial strategy prioritises support for new companies and a level playing field for them to compete against existing large players.”
In response, a Government spokesperson defended current measures, stating: “We’re backing British business through our Plan for Change, which includes tackling the scourge of late payments and introducing a fairer business rates system which incentivises investment.” Officials also confirmed that a small business growth plan will be published later this year.
