UK Small Businesses Have Dropped by 6.6% Since 2020

Startups.co.uk have launched their statistical report looking at the UK Small Business landscape in 2022 and the impact of COVID, the rising cost of living, and Brexit.

Key insights: 

• The number of small businesses in the UK has dropped from 5.9 million in 2020 to 5.5 million in 2022 (6.6%) 
• Small businesses still make up 99.9% of the UK’s current business population
• 810,316 new businesses launched in 2021 – although almost 20% currently fail in first year
• 56% of SMEs have sought external finance in the last three years
• Minority-led businesses experience greater difficulty securing funding

Since COVID struck, it’s been a difficult time for many UK businesses, but none more so than small businesses. 45% of SMEs have seen their turnover fall by at least 20% post-COVID, and 41% reported losing a large client or experiencing adverse market conditions in 2021.

Initially the impact wasn’t felt due to the Government bailout schemes – in 2021, the most sought-after financial support for SMEs were Government or local government grants. The second-most popular was the Coronavirus Bounce Back Loan, designed to help smaller businesses access finance quickly.

However, 43% of these small businesses have already used up all of their funding, and a further 16% have already spent more than half. Almost one in five SMEs have since reported they are concerned about their ability to make full repayments when they become due.

The sectors that recorded the largest falls in revenue post-COVID were hospitality (54%) and the arts and recreation industries (41%). Redundancies were most often reported by Hospitality (30%) and Wholesale/Retail (21%) SMEs.

Brexit is also highlighted as an additional factor impacting small businesses. In November 2021, 64% of UK SMEs stated that Brexit has negatively influenced the UK economy, with 16% finding it harder to recruit staff due to stricter immigration laws. Two in five of the respondents also said their costs had increased since the referendum, particularly costs associated with importing goods.

That being said, Startups.co.uk spoke to 70 startup owners (who founded their businesses after May 2021), with the majority saying that Brexit has not been an obstacle. This suggests that entrepreneurs are adapting their business plans to accommodate for the disruption caused by Brexit.

Startups.co.uk writer and researcher Helena Young states: “Business failures might be increasing, but the number of new business launches also shows no sign of slowing down. UK entrepreneurial spirit clearly hasn’t slowed in the face of challenges like COVID-19 and Brexit.

Instead, a substantial number of new opportunities have been created for startups looking to enter growing markets like finance and real estate. Additionally – with an ageing population, an increased focus on sustainability, and a valuable beauty industry – we believe health tech, sustainability, and wellbeing are three of the key business trends for 2022.”

The report also looks at discrepancies in funding for minority groups, finding that female entrepreneurs’ share of the UK’s VC funding market has stayed under 2% for the past 10 years. Startups.co.uk recent investigation into the gender funding gap discovered that, on average, businesses with just one male founder received seven times more investment than women-owned firms.

Racial bias is also a factor in new business success. 18% of external finance applications from ethnic-minority-led businesses were turned down, compared to 10% of white-led business applications. Additionally, only 43% of black entrepreneurs surveyed said they’d trust banks to support them with the capital to grow their businesses.

Please see the full Startups.co.uk Small Business Study here: https://startups.co.uk/analysis/small-business-statistics/ – we kindly ask for a link back to the source page if you do use the information and/or graphics.

Access all the guide graphics here – as well as mini-infographics with the key insights of each section and a full infographic of the whole guide.