Review of 2022 UK company formations

A new record for company formations

There were 805,141 new UK companies formed in 2022. That equates to a new company being formed every 39 seconds, or nearly 92 companies every hour.

Year on year, UK formations increased by 4.3%, up from 771,617 in 2021.

It was also an increase on the previous record, set in 2020, when 780,766 companies were started. It is possible, however, that the 2020 figures were skewed because of the early impact of the pandemic, with many taking advantage of online sales opportunities or setting up micro-businesses while furloughed from their main employment.

It is encouraging to see more new companies being formed than ever before, especially as company formations are often seen as a proxy measure of confidence among the UK business community. Many of these new businesses will be small, and the majority will remain so – if, indeed, they survive. But cumulatively they represent enormous activity across a range of sectors, a vast pool of entrepreneurialism and opportunity. A few of these new businesses, whether in existing or new markets, will find ways to grow and become major contributors to the economy – generating jobs, profit and wider economic benefit – in the future.

More UK companies stay the course

Unsurprisingly, given the record number of new companies formed, we also saw the total number of UK registered company reach an all-time high of 5,236,227 at the end of 2022.

That means the UK company population has increased:

• 4.6% in a year, from 5,005,147 at the end of 2021
• 27% in five years, from 4,120,349 at the end of 2017
• 70% in 10 years, from 3,088,390 at the end of 2012

Part of the foundation of such solid growth in company numbers is that the number of dissolutions has not increased by the same rate as formations. In 2022, 578,679 companies were dissolved, compared to 606,912 in 2021. Hopefully that is a good sign that most businesses are finding ways to navigate and succeed in the post-pandemic, post-Brexit economic climate.

However, it still means that for every seven new formations, five existing companies were dissolved. The number of dissolutions is also still much higher than in 2020, when only 418,427 existing companies were dissolved.

A diverse regional picture

There were positive stories across the UK, but also some marked regional differences.

Away from London, the most popular areas for company formations in England were the West Midlands (39,355), Greater Manchester (38,756), West Yorkshire (25,517) and Essex (18,955). Of these, all but Essex – and 13 other English counties – experienced a record year in forming new companies.

Across the whole of England, only three counties – Cheshire, East Sussex and Northamptonshire – saw a reduction in their corporate population.

The 35,158 new companies formed in Scotland set a new record, bringing the number of incorporated businesses based in the nation to an all-time high of 280,990. Glasgow again led the way in terms of new formations in 2022, although Edinburgh remains home to a higher overall number of companies.

However, we still see evidence of an ongoing trend of slower growth in Scotland than other areas of the UK. The number of companies based in Scotland increased 3% in a year, 18.1% across five years and 65.3% over 10 years, each of which was lower than the equivalent figures for England, Wales and Northern Ireland.

Wales also saw a record of 22,120 company formations in 2022, with 7,210 of these in Cardiff. The 6.6% annual growth in the company population was the highest of any of the nations in the UK, and growth over 10 years reached 76.5%.

Despite 20,052 companies based in Wales being dissolved in 2022, the number of companies based in the nation grew to 149,358, following a number of companies having their registered office address moved into the country.

Northern Ireland was the only nation of the UK to see a year-on-year fall in company formations, with 8,575 new companies in 2022 compared to 9,358 the year before. Despite that, however, the company population grew 4.6% to an all-time high of 77,432. Five-year growth of 31.8% and 10-year growth of 85.4% were respectively the highest growth rates achieved by any nation of the UK.

What’s the outlook for 2023?

The 2022 figures offer a lot of promise for 2023, showing renewed evidence of an entrepreneurial spirit that can help to drive economic growth.

In recent years, various threats have promised to derail the growth in UK company numbers. However, despite Brexit, the pandemic and an environment of high inflation and interest rates, the number of UK companies has continued to grow apace.

It is possible, however, that we may see longer-term effects from these factors, particularly if inflation continues to disrupt the UK economy and fuel the cost of business borrowing. It’s also possible that, while the negative effects on raw company numbers may be limited in 2023, we’ll see weaker growth in the size and economic contribution of those businesses.

Many of the 800,000 new companies in 2022 will have been formed by first-time directors, who will need to be aware of their statutory responsibilities. The threat of dissolution disproportionately hangs over new companies, especially where they fail promptly to file their first annual accounts or confirmation statement. For that reason, it’s sensible to seek the services of a good accountant, who can both help navigate the formal legal requirements and offer more strategic business advice to give your business the best opportunity to succeed.