Companies House register shrinks: is UK entrepreneurism at risk?

In what could be a warning for things to come, the Government has confirmed that the companies register has shrunk for the first time since quarterly reporting began.

More than this, the figures reveal that not only are less businesses being created, but increasing numbers are also shutting down.

Between October and December 2024, there were 181,261 incorporations in the UK, which is a decrease of 15.47% compared with the same period in 2023.

The statistics also reveal that there were 203,584 dissolutions in the UK between October and December 2024. This is an increase of 40,132 – or 24.55% – compared with the same period in 2023. The register does not include businesses in the process of dissolution and liquidation.

Steve Humphrey, Founder at The Mortgage Pod commented: “We knew the August 2024 Budget was a difficult one to swallow, but now, seeing the latest Companies House data, we have to assume there’s been a direct impact.”

Storm clouds ahead

The latest incorporation figures have been released just weeks before the Budget starts to bite.

There are mounting concerns that the planned employer National Insurance contributions (NICs) hike and increase in the National Minimum Wage (NMW) could stall growth.

Business leaders are issuing dire warnings of job stagnation or even job cuts. Just today, a survey of business owners revealed that over 300,000 SMEs may cut jobs due to the rising NICs.

The same survey also warned that nearly 60% of respondents are planning to increase prices for customers to cover this higher NICs burden.

This has resulted in some business leaders damning the upcoming budget as “anti-business”.

Will entrepreneurs look elsewhere?

Companies House has been implementing stricter policing of the register regarding registered office addresses. This has led to the dissolution of companies that fail to comply, which may have contributed to the decline.

But some business leaders are suggesting that the data does not bode well.  There are even those who suggest that the Chancellor’s changes could make entrepreneurs think twice about starting a business in the UK – or at all.

Riz Malik is an Independent Financial Adviser at R3 Wealth. He is damning. “Rachel Reeves effectively hung a giant “closed for new business” sign on the door of UK Plc in October 2024 Budget, and this data only reinforces that reality.

“If existing business owners are questioning their viability due to rising costs, why would new entrepreneurs take the risk? We risk losing a whole generation of innovators and entrepreneurs, leaving the UK trailing further behind on the global stage,” he says.

With the cost of living crisis still lingering, both businesses and consumers are facing tough times. Last year’s Autumn Budget set out to improve living standards and reduce inequality.

However, it has been met with consternation from some business owners. While it offers relief with an increase in the employment allowance; business rate cuts and a fuel duty freeze; many are saying the tax burden is already too high.

For startups, it will mean that growth plans – including hiring decisions – will have to be balanced with robust pricing strategies.  And all eyes will be on the next quarter of data from Companies House.