The Global Payroll Association reports a significant decrease in UK small business numbers, with new startups at a five-year low.
New research from The Global Payroll Association (GPA) shows a steady decline in UK business numbers, particularly among small enterprises, due to a drop in new startups. According to GPA’s data, the UK now has 5.49 million active businesses, reflecting an annual decrease of 1 percent and a 6.3 percent decline over five years from 2019, when there were 5.87 million businesses in operation. The decrease is driven by a reduction in small businesses, especially those with one to 19 employees.
The most notable decline has been among businesses with just one employee, down by 5.2 percent since 2023. Businesses with five to nine employees have fallen by 2.3 percent, while those with 10 to 19 employees are down by 1.7 percent. These trends show shift in the UK’s business landscape, as the number of new businesses established annually has dropped by an average of 1 percent over the last five years.
Financial Pressures on Small Businesses
The recent Autumn Budget from the Labour government has raised concerns among small businesses about their financial sustainability. In April 2025, employer National Insurance contributions and the National Living Wage are set to rise, adding financial strain that many smaller enterprises may struggle to manage. The GPA warns that these increases could accelerate the decline of small businesses, paving the way for larger firms to dominate the UK’s business landscape.
This trend toward fewer small businesses and more large entities has already been noticeable. Over the past year, as small business numbers have declined, the presence of larger businesses has grown. For instance, the number of businesses with between 200 and 249 employees increased by 4.8 percent, while those with 50 to 99 employees saw a 3.7 percent rise. This shift suggests that smaller enterprises are finding it increasingly difficult to compete, both financially and structurally, in the evolving economic environment.
‘Short-term thinking’
Melanie Pizzey, CEO and Founder of the Global Payroll Association, said, “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.”
The GPA’s analysis suggests that as financial pressures mount, the UK’s small business sector may continue to contract, creating a market dominated by larger businesses. With fewer new startups and an environment less conducive to small business growth, GPA says, the long-term impact on the UK’s economy could be significant.
