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More businesses are shutting down than starting up for the first time in 12 years, official data shows.
The number of businesses closing down jumped by 5 per cent year-on-year to hit 345,000 last year, pushing the so-called “business death rate” to a 12-year high.
11.8 per cent of all active businesses closed down in 2022, according to the Office for National Statistics (ONS). The rate was up from 11.2pc in 2021 and the highest since 2009, when businesses were hammered by the global financial crisis. Then, the death rate was also 11.8 per cent.
Transport and storage businesses were the worst hit, with nearly a quarter of all companies in the sector closing down. 13.6 per cent of tech businesses shut down as rising interest rates made it harder for many start-ups to raise money.
The number of new businesses created fell by 7 per cent to 337,000 last year, meaning more businesses were shut down than were created. It marked the first time this has happened since 2010.
The business birth rate across 2022 equaled the low seen in 2020, when the country was grappling with the worst of the pandemic and its successive lockdowns. Before 2020, the last time the birth rate was so low was in 2012 during the eurozone debt crisis and the aftermath of the global financial crisis.
Soaring energy prices last year meant businesses were hammered by high power bills last year, just as high inflation hit consumer spending and prompted slower sales for many companies.
At the same time, many businesses were forced to put up their wages to attract workers in a tight labour market.
The combined increase in costs at a time of squeezed demand proved too much for many businesses.
Challenges have remained this year. While energy costs have eased, the Bank of England has increased interest rates to 5.25 per cent, meaning the cost of servicing debt has soared.
In some sectors, high interest rates have also impacted customer demand. Housebuilders, for example, have been hammered by plunging demand for new homes following massive jumps in mortgage rates.
In April this year, the government also raised the headline corporation tax rate from 19 per cent to 2 per cent.