8 in 10 companies fail within their first year, study reveals
Whilst the UK has become a harbour for embracing entrepreneurial flair and spirt, statistics show that eight out of 10 companies fail within their first year. Their failure can be attributed to a range of reasons from underestimating competition to a lack of financial planning.
Interested in company formation and failure, Turnerlittle.com scraped data from Company House to discover how many companies went into liquidation or administration or had a proposal to strike off (the removal of a company’s name from the official ‘Company House’ register) in the same year they were incorporated. An incorporated company is one that has been set up and registered with Company House. Turner Little, assessed data for the time period of 2007-2016.
The research revealed prior to the financial crash, which caused turbulence and calamity throughout the world, in 2007, 108,413 companies were incorporated. Out of those companies - 3,537 went into liquidation, 2,115 had a proposal to strike off and 324 in administration within the same year of being set up.
In the aftermath of the financial crisis, in 2009, 102,848 companies were incorporated. Out of those companies – 3,447 went into liquidation, 2,628 had a proposal to strike off and 112 in administration within the same year of being set up.
From 2010, the number of companies incorporated increased year on year. 2012 had 190,720 companies incorporated, but saw the highest number of companies go into administration within the same year in the time period from 2010 to 2016. Moreover, with 346,981 companies incorporated, 2015 saw the highest number of them go into liquidation within the same year in the time scale from 2010 to 2016.
With regards to the latest year included in the research, 2016, 422,480 companies were incorporated – the highest number out of all the years included. Out of those companies – 3,152 went into liquidation, 23,648 had a proposal to strike off and 75 in administration within the same year of starting their respective enterprise.
Providing an overall picture, between 2007-2016, a total of 39,674 companies went in liquidation the same year they were incorporated. Also between 2007-2016, a total of 1,401 companies went into administration within the same year they were incorporated.
Whilst the data did not provide any specific breakdowns, Turnerlittle.com analysed data from CreditHQ to find the first-year survival rates for companies in different industries. It was found that information and communication seems to be the best industry to start a business in, whilst those in finance and insurance find it the most challenging in their year first year of operations with a survival rate of 83.2%.
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