Has the UK startup bubble popped?

The latest insight from The Global Payroll Association (GPA), reveals that the number of UK businesses is on the decline, with small businesses seeing the sharpest drop over the past year, driven by a steady decline in the number of new startups being created.

GPA has analysed the total number of active businesses* in the UK alongside the number of new businesses being created* each year, and how these numbers have changed over the past 12 months and the past five years.

The data shows that there are currently a total of 5.49 million businesses operating in the UK. This marks an annual decline of -1% and a five-year decline of -6.3% since 2019’s total of 5.87 million businesses.

The largest annual declines have been recorded among the UK’s smallest businesses.

The number of businesses with just one employee has fallen by -5.2% since 2023; businesses with between five and nine employees have fallen by -2.3%; and the number of those with 10-19 employees is down -1.7%.

Additional data also shows that over the last five years the number of new businesses being created in the UK has fallen by an average rate of -1% a year.

Since the recent Autumn Budget from the Labour government, there are now concerns that the number of small businesses in the UK is going to decline even further. With both employer National Insurance contributions and the National Living Wage set to increase in April 2025, there is going to be a significantly increased financial burden on businesses which will be difficult for many small enterprises to shoulder. And as small businesses decline, it will leave an ecosystem in which larger organisations dominate the SME landscape.

Even before the Budget, this is a trend that has already been playing out. As the number of small businesses has dropped over the past 12 months, the number of larger businesses has grown.

For example, the number of UK businesses with a headcount of between 200–249 has seen an annual increase of 4.8%, and the number of businesses with between 50–99 employees is up 3.7%.

Melanie Pizzey, CEO and Founder of the Global Payroll Association, says:
“We need the government to do more to encourage entrepreneurship here in the UK. Our business landscape has long been famed for enabling the creation of a huge number of outstanding businesses with massive clout both here at home and around the world.

It’s vital that we don’t now start stamping small businesses out purely to stabilise public funding. This is short-term thinking which ignores the fact that, if you enable small businesses to thrive and grow, the mid-long-term economic benefits are extraordinary.”

5 key tips to starting a new business

Do something you love and that provides a needed solution
Enjoying what you do is a significant driver of success, so it’s important to start a business in an area you are passionate about. But it must also be a business that offers a solution or service that people actually want or need. If you’re fixing a problem that lots of people have, you’re sailing with the wind.

Write a thorough business plan
Without setting out a thorough business plan, you’re destined for failure. Most businesses fail because founders jump in head first without knowing what they’re letting themselves in for. Top tip – put market research at the heart of your business plan.

Never stop learning
You will not get everything right on the first try. Don’t get deterred by mistakes or bad fortune. Use it as a learning experience, dust yourself off, and keep going.

Don’t quit your day job…yet
It takes a long time for new businesses to become financially stable, so you’re going to need a reliable income to avoid being overwhelmed with stress and financial pressures in your personal life. Unless you have substantial savings to lean on, don’t quit your day job until you’re confident you can give yourself a steady income from your new business.

Invest back into the business
Put as much of your profit as possible back into the business. This will help you advance and grow much quicker. It’s tempting to keep profit for yourself – after all, you’ve earned it! – but if you invest back into your business, the rewards will be far greater down the line.