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Records broken as number of small firms tops 5 million

The number of UK businesses has reached a record 5.2m, with 330,000 new businesses formed over the past year alone, thanks mainly to record numbers of people leaving traditional employment and becoming self-employed.

Number Businesses UK
The increase marks a significant change in the way we work. In fact, since the start of the century, the number of businesses has increased by 1.8 million.

Questions remain over the usefulness of this data – i.e. do these self-employed figures include large numbers of low-paid workers, who cost firms less to hire than ’employees’? However, the number of new businesses which employ other people has also increased significantly – by 66,000 during 2013, and the number of limited companies has also increased.

How many businesses are there in the UK?

According to the latest Department of BIS business population data (PDF), which was published earlier this week, the total number of businesses operating in the UK past 5 million for the first time at the start of 2014 – and stands at 5.2m.

According to the Government definition, almost all (99.3%) of these businesses are ‘small’ (0-49 employees). 76% of all businesses don’t have any employees at all (apart from the owner).

The number of sole traders (the ‘self-employed’) now stands at 3.3m, compared to 1.6m limited companies and 460,000 partnerships.

SMEs account for 60% of all private sector employment, and generate 47% of all private sector turnover. In this case, an SME is defined as a business which has between 0 and 249 employees.

What accounts for the increase?

Since 2000, the total number of businesses has risen (or stayed the same) every year, from 3.5m in 2000 to the current level published this week. However, the increase of over 300,000 from Jan 2013 to Jan 2014 is by far the largest on record.

So, which type of business-types account for this increase?

When you look at the main trading types of these new businesses, both have witnessed significant growth; the number of limited companies (not typically associated with low-paid workers) increased by 115,000 during 2013, whereas the number of sole traders increased by 197,000.

Although number of incorporated businesses increased at a greater rate than unincorporated businesses during 2013, the report’s authors do point out that a fair proportion of limited companies formed aren’t necessarily actively trading.

And a fair number of new businesses are taking on staff, which will encourage the Government.

As we noted earlier, the number of employing businesses grew by 66,000 during the year, when it has fallen most years since 2008 – in the heart of the recession.

Government reaction

Unsurprisingly, Business Secretary Vince Cable said he was delighted by the news: “Despite a tough economic backdrop, today’s figures of an all-time high of more than five million businesses in the UK show that our talent for innovation and entrepreneurship is leading the way to recovery.”

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