When it comes to starting a business, the UK was a very busy place last year. Companies House, the UK government’s company registrar, reported that 900,006 companies were formed in 2023; the highest number ever incorporated in a single calendar year.
The landmark figure and achievement represents a 12% year-on-year increase in UK company formations. This brings the number of active companies operating across the country to 5.31 million, another nationwide record, according to the New Startup Index from NatWest and Beauhurst. The index found that online retailers lead the charge, with 82,000 new businesses registered, followed by 49,000 new companies in the property letting space and 21,000 in the takeaway and street food sector.
“It’s fantastic to see that despite the challenging economic conditions, the number of incorporations in the UK is on an upward trend,” says John Carpenter, Chief of Staff at 1st Formations. “There has no doubt been a major shift in the way that people are thinking about their working lives, and this, combined with new technology in relation to automation, is encouraging potential entrepreneurs to bring new and exciting business ideas to life.”
Women founders on the rise
In other positive news, the growth in female-founded businesses continued in 2023, with a record 164,000 companies incorporated by women: up 4% on 2022 and 13% on 2021. In fact, 2023’s figures are more than twice as high as those from 2018 – a veritable boom.
“The rise in the number of female start-up founders as a significant driver in the overall increase of incorporations is an indication that more women are finding the space to bring their innovation skills to the table; an important first step in increasing diversity in the SME market,” says Freddie-Nicolle Brace, Head of Legal at 1st Formations.
“The hope is that this trend continues to increase, but we must be mindful that incorporation is only the beginning. For startup businesses to succeed, they need continued support and commitment from the government. This is even more true of businesses founded by underrepresented groups. Now is the time for the government to reflect on the current status of the market and put in place much-needed support for females and minorities, not just because they are striving for diversity (although this is important), but because the figures now demand it,” added Brace.
Meanwhile, when breaking down 2023’s figures by UK region, England dominated as the top location for company formations, accounting for some 80% of all new businesses registered in 2023. Of these, a whopping 70% were located in London.
Nonetheless, 2023 remained a strong year for regions outside England. Northern Ireland saw the largest boom in start-ups year-on-year, with 14,000 new companies incorporated. This represents a 59% increase on the previous year, according to Inform Direct. Meanwhile, London saw a 20% increase, and Scotland came in third with an 11% rise in new businesses.
It would be remiss to ignore the fact that, as new companies are formed, existing companies are closed down. In keeping with the long-term trend, 2023 saw more companies formed (900,006) than dissolved (662,915) across the UK, representing a 35% gap between new incorporations and dissolutions, a deterioration on the last decade’s average gap of 44%.
One possible reason for this high level of company dissolutions is the repayment of Covid loans, explains Carpenter, who also highlighted a plethora of other economic headwinds. In fact, almost 50,000 UK businesses entered 2023 on the edge of financial collapse, due to a combination of high interest rates, rampant inflation, weak consumer confidence and rising and unpredictable input costs.
Ready to form your own company in 2024?
If you’ve been inspired to add your company name to the fast-growing list of companies being formed this year, we at 1st Formations would love to help. We offer a range of company formation packages – all designed to get your limited company up and running in just a matter of hours.
Whether you need to form a private company limited by shares, private company limited by guarantee, public limited company or limited liability partnership – we can assist you.
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