It’s no understatement to say that 2022 was a very difficult year for UK businesses. The combination of the cost of living and energy crises, alongside the looming threat of a recession, meant that many businesses were left struggling with higher operating costs and fewer consumers to offset these expenses.
As a result, over half a million businesses have sadly been forced to close across the country, according to new research conducted by financial comparison site NerdWallet. Their analysis of Companies House data from the 12 months of 2022 has revealed that, in total, 534,777 businesses were dissolved last year. NerdWallet also used data compiled from Companies House, alongside information from the Consumer Data Research Centre (CDRC), to calculate the ‘business lifespan’ of UK businesses during this timeframe, i.e. how long businesses have remained operating from the time they were first registered until the time of their dissolution.
Their research found that, in relation to data from the past decade, 2022 saw the second highest number of business closures in the last ten years, coming shortly behind the 601,773 dissolved companies in 2021 as a result of ongoing financial pressures originating from the pandemic.
Particularly, the retail industry took the biggest hit in terms of business closures, recording 58,330 company dissolutions. The sector shrank overall by 11.2% in 2022 alone.
While the UK as a whole saw an exponential number of dissolved businesses, certain areas were more affected than others. Interestingly, Northern Ireland saw the fewest closures (4,498) – equating to just 6.1% of their total registered businesses. NerdWallet theorised that this resilience may be, in part, due to their ability to effectively remain active in the EU trading markets.
In contrast, Wales lost 12.5% (18,236) of their businesses in 2022, an eighth of their company population. Additionally, Scotland fared reasonably well, seeing 25,459 (9.2%) of their total businesses dissolved.
However, it was London that was hit the hardest. The capital saw 174,910 businesses dissolved in 2022 – equating to 12.2% of their total population, and a staggering 32% of the total closures across the UK. Camden alone recorded 21,293 closures.
NerdWallet found that the average age of dissolved companies across the country was 2 years, meaning that they had only been in operation for a maximum of 2 years before they had to stop trading. In the Forest of Dean, however, the average age of dissolved businesses was a staggering 12 years, far higher than the median business lifespan.
Speaking on the data, NerdWallet’s business finance expert, Connor Campbell, commented: “The past year has been an extremely difficult time for many businesses across the UK, with business leaders having to find new ways to balance the books amidst increasing financial pressures. Sadly, however, not all are successful in their attempts to remain operational, as seen in the high numbers of dissolutions recorded throughout 2022.
“The data highlights that, for many businesses, these financial constraints were far too much to offset. With the cost of living crisis coinciding with the threat of a recession, many consumers are now having to be more careful with their spending habits, which is demonstrated in the data with the retail sector seeing the highest number of closures.
“Unfortunately, this issue doesn’t seem likely to resolve itself any time soon. With interest rates continuing to rise in an effort to combat inflation and prevent a recession, it’s likely that many more companies will be forced to dissolve in 2023.”