Latest ONS report: Education has the highest rate of business failure

Business, industry and trade. Change in the number of UK businesses broken down by sector of the economy.

Business Demography: 2017

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.

Businesses that have ceased to trade (identified through de-registration of the administrative units, that is, Value Added Tax (VAT) and Pay as You Earn (PAYE)) are referred to as business deaths. The death rate is calculated using the number of deaths as a proportion of the active businesses.

The Eurostat and Organisation for Economic Co-operation and Development (OECD) manual on business demography recommends waiting for two years after the reference period to allow for reactivations before deaths figures are calculated. In this release, we estimated the number of reactivations and adjusted the data accordingly. This adjustment has been applied to all industries, by removing units from the death data. 

The number of UK business births has decreased for the first time since 2010, from 414,000 to 382,000 between 2016 and 2017, a birth rate of 13.1% compared with a rate of 14.6% in 2016.

The number of UK business deaths increased from 288,000 to 357,000 between 2016 and 2017, a death rate of 12.2% compared with a rate of 10.2% in 2016.

The North West was the region with the highest business birth rate at 15.9%, whereas London had the highest death rate at 14.2%.

The highest rate of business deaths was observed in the education sector at 18.8%, compared with a rate of 9.1% in 2016.

In the previous period, this industry showed a spike in the number of single employee limited companies. In 2012, these made up 56% of the overall births in education, which grew to 83% in 2016 and decreased to 63% in 2017.